Economy

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Early Asia moves were slight, leaving the euro below $1.10 following its largest drop in nearly four months overnight.The bid for safety kept the yen broadly steady at 143.45 per dollar and the Swiss franc at 0.8463 per dollar. The New Zealand dollar was nursing a 1.1% overnight fall at $0.6283 and oil prices had jumped 2.5%.The U.S. dollar index rose about 0.5% overnight to 101.2, its largest rise since Sept. 25, which was also helped by a stronger-than-expected reading on U.S. job openings.Israel said Iran fired more than 180 ballistic missiles and Iran’s Revolutionary Guard Corps said the attack was retaliation for Israeli killings of militant leaders and aggression in Lebanon against the Iran-backed armed movement Hezbollah.No injuries were reported in Israel. Iran previously struck Israel in April, without causing major damage or a lasting reaction in financial markets. However, the beginning of an Israeli ground assault against Hezbollah inside Lebanon and Israel’s vow to respond opens the possibility of escalation.Markets’ response centres on oil prices and ANZ analysts noted further moves will likely be determined by Israel’s response and whether it attacks Iran’s military or oil industry.The mood has pushed the Australian dollar down to $0.6883 though losses there were limited by some upbeat retail sales data released on Tuesday. Sterling fell 0.7% overnight and was steady at $1.3278 in early Asia trade.Westpac strategist Imre Speizer said the Middle East was unpredictable but that in the absence of escalation market sentiment could recover and focus return to economics.In New Zealand, a business survey showing a fast cooling in price pressures has raised the odds that New Zealand’s central bank cuts rates by 50 basis points next week. Westpac and BNZ revised their forecasts to expect a 50 bp cut and markets price about a 77% chance of a 50 bp cut. Later in the day, Democrat Tim Walz and Republican JD (NASDAQ:JD) Vance go head to head in a vice presidential debate and U.S. private payrolls data is due.Traders are also keeping a wary eye on an employment dispute on the U.S. dockside.East and Gulf Coast dockworkers began their first large-scale strike in nearly 50 years on Tuesday, halting the flow of about half the country’s ocean shipping. More

Incomes Data Research said on Wednesday that the median pay settlement awarded by major employers held at 4.0% for the second month in a row.Median pay awards in the public sector stood at 4.5%, above those in the private sector which slowed to 4.1%. “The differing outcomes in the private and public sectors reflect the cycle of pay between the two, with the public sector currently in the ‘catching-up’ phase, after a lengthy period in which pay awards lagged behind those in the private sector,” Zoe Woolacott, senior researcher at IDR, said.Finance minister Rachel Reeves announced above-inflation pay increases worth 9.4 billion pounds ($12.53 billion) for public sector workers including teachers and doctors shortly after the Labour Party won a parliamentary election in July. Official figures last month showed British private sector wage growth cooled to a more than two-year low of 4.9% in the three months to July.The BoE is monitoring wage growth, and expects private-sector pay to slow to 3% in late 2025.The central bank, which cut its key Bank Rate in August for the first time since 2020 but kept it at 5% on Sept. 19, is expected to lower borrowing costs by a further quarter point at its November meeting. The IDR analysis was based on 39 pay deals which covered more than 740,000 workers between June 1 and Aug. 31. ($1 = 0.7505 pounds) More

A strike hitting ports along the East and Gulf coasts could stoke prices for food, autos and a host of other consumer goods but is expected to cause only modest broader impacts.
Some of the main industries facing challenges include coal, energy and agricultural products.
There are potential buffers, though, to the damage a strike could cause.
West Coast ports are expected to take on some of the freight business that would normally go to the eastern ports. Also, some companies had been anticipating the stoppage and stockpiled ahead of time.

A strike hitting ports along the East and Gulf coasts could stoke prices for food, autos and a host of other consumer goods but is expected to cause only modest broader impacts — so long as it doesn’t drag on for too long.
Manufacturers of everything from trucks to toys to artificial Christmas trees face obstacles now that the International Longshoremen’s Association has called a stoppage at major Eastern container and cargo ports.

From a macro perspective, the impact will depend on duration. President Joe Biden, under powers granted by the Taft-Hartley Act, could step in and order an 80-day cooling off period that would at least temporarily halt the stoppage, though there’s little indication he will do so.
That will leave hopes in the hands of negotiators for the union and the U.S. Maritime Alliance that the strike won’t drag on and cause greater hardship for a U.S. economy heading into the critical holiday shipping season.
“Labor action by port workers along the East and Gulf coast of the United States will provide a modest hit to GDP,” said RSM’s chief economist, Joseph Brusuelas, who put the weekly impact at a bit more than 0.1 percentage point of gross domestic product and $4.3 billion in lost imports and exports.
“Given that the American economy is on a 3% growth path at this time we do not expect the strike to derail the trajectory of the domestic economy or present a risk to an early and unnecessary end to the current economic expansion,” he added.

Indeed, the $29 trillion U.S. economy has dodged multiple land mines and has been in growth mode for the past two years. The Atlanta Federal Reserve is tracking third-quarter growth of 2.5%, boosted by an acceleration in net exports.

A prolonged work stoppage, though, could threaten that.

Impacted areas

Some of the main industries facing challenges include coal, energy and agricultural products. One rule of thumb is that for each strike day, it takes nearly a week to get ports operating at normal levels.
“The costs of the strike would escalate over time as backlogs of exports and imports grow,” Citigroup economist Andrew Hollenhorst said in a client note. “Perishable products like imported fresh fruit might be first to come into short supply. If the strike extends beyond a few days, shortages of certain production inputs could eventually slow production and raise prices for manufactured goods like autos.”
There are potential buffers, though, to the damage a strike could cause.
For one, West Coast ports are expected to take on some of the freight business that would normally go to the eastern ports. Also, some companies had been anticipating the stoppage and stockpiled ahead of time.
Moreover, pressure on supply chains, exacerbated sharply during the pandemic, has largely eased and is in fact below pre-Covid levels, according to a New York Fed measure.

“We think fears around the potential economic impacts are overdone,” wrote Bradley Saunders, North America economist at Capital Economics. “Frequent shocks to supply chains in recent years have left producers more attuned to the risks of running low inventories. It is therefore likely that firms will have taken precautionary measures in case of a strike – not least because the possibility has been touted by the ILA for months.”
Saunders added that he thinks there’s a strong possibility that the White House could step in to the fray and invoke a cooling-off period, despite the administration’s strongly pro-union leanings.
“There is little chance that the administration would risk jeopardizing its recent economic successes less than two months before a tightly-contested election,” he said.

Inflation threat

In the meantime, there are a slew of other issues that could complicate things.
Snags in the supply chain could exacerbate inflation just as it appears price pressures have cooled from their mid-2022 peak that sent the annual rate to its highest level in more than 40 years. The maritime association is proposing raises approaching 50%, another factor that could reignite inflation just as wage pressures also have receded. The union is looking for larger increases plus guarantees against automation.
“This is clearly transitory. They will have some resolution,” said Christopher Ball, economics professor at Quinnipiac University. “That being said, in the short run, if it lasts more than a few days, if it lasts more than a week … that will certainly push up the prices of a lot of those goods and services now. It could cause price spikes in the short run during the strike, and I can easily see that pushing up prices of certain goods a lot.”
Ball expects the main areas to be impacted will be food and vehicles, both of which have exerted either disinflationary or deflationary pressures in recent months. Small businesses near the ports also could feel adverse impacts, he added.
“If it goes a week or two, you’re running into businesses that have real shortages and, yeah, they’ll absolutely have to raise those prices just to prevent broad shortages of those goods,” Ball said.
That all comes at an inopportune time for the Federal Reserve. The central bank last month cut its benchmark borrowing rate by half a percentage point and indicated more trimming is to come as it gains confidence that inflation is easing.
However, the strike could complicate decision-making. The October jobs report, which is the last one the Fed will see before its Nov. 6-7 policy meeting, will be influenced both by strike-impacted layoffs as well as those from Hurricane Helene.
It coincides with a looming presidential election on Nov. 5, and the economy as a pivotal issue.
“This would just completely complicate everything that the Fed is trying to do because they’re not getting a read to what the economy is actually performing,” Jim Bianco, head of Bianco Research, told CNBC.
Fed Chair Jerome Powell on Monday said he expects the central bank to lower rates by another half percentage point by the end of the year, somewhat slower than markets had been anticipating.
Correction: The International Longshoremen’s Association has called a stoppage at major Eastern container and cargo ports. An earlier version misstated the name of the organization.

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WASHINGTON (Reuters) – The International Monetary Fund is “too polite” when it comes to criticizing China’s economic policies and should more fully disclose financing assurances given by China and some other countries to support IMF loan programs, a senior U.S. Treasury official said on Tuesday.Brent Neiman, the Treasury’s deputy undersecretary for international finance, said the IMF has failed to apply enough analytical rigor to China’s industrial policies.WHY IT’S IMPORTANTSpeaking at an event hosted by the OMFIF financial think tank, Neiman offered unusually pointed criticism of the IMF’s approach to China ahead of IMF and World Bank annual meetings later this month.The Treasury manages the dominant U.S. shareholding in the IMF and has repeatedly warned China about its industrial overcapacity, technology transfer and currency practices over the past year, including during a trip to China by Treasury Secretary Janet Yellen that laid groundwork for higher U.S. tariffs that took effect last week. KEY QUOTES: Neiman said the IMF needed to be a “ruthless truth teller,” but that its annual economic assessment on China do not give adequate attention to exchange rate and industrial policies.”The IMF does not publicly comment on the role of state-owned banks in managing China’s exchange rate or on why changes in the People’s Bank of China’s balance sheet don’t line up with reserve transactions in China’s balance of payments data,” Neiman said.An IMF spokesperson could not immediately be reached for comment. The IMF and World Bank will assess a number of policies during the week of Oct. 21 at their annual meetings in Washington.CONTEXTNeiman also criticized the IMF’s lack of transparency in disclosing external financing assurances given by China and other countries to supplement IMF loan programs. Such assurances were given in recent programs for Argentina, Ecuador and Suriname, that were not delivered or significantly delayed, he said.The IMF last week approved a $7 billion program for Pakistan that included financing assurances from China, Saudi Arabia and the United Arab Emirates, but declined to provide details on the assurances.Neiman said the IMF also only referred to China as Ecuador’s “main bilateral creditor” in its program documents adding that such “politeness” can reduce incentives for creditors to honor their assurances in a timely manner. More