Investing.com – The U.S. economic recovery remains on track supported by stronger consumer spending amid a pickup in the labor market and inflation that is expected to pick up pace as the economy reopens, according to the Fed’s Beige Book released Wednesday.The central bank’s Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through April 5, showed the U.S. economy continued to recovery at a modest pace amid easing pandemic restrictions. “National economic activity accelerated to a moderate pace from late February to early April. Consumer spending strengthened,” the Biege book said. Inflation, meanwhile, appears to be on the move, driven by input costs that will likely continued to push up prices in the near term. “Prices accelerated slightly since the last report, with many Districts reporting moderate price increases and some saying prices rose more robustly,” according to the report. “Cost increases were partly attributed to ongoing supply chain disruptions, temporarily exacerbated in some cases by winter weather events.”Federal Reserve Chairman Jay Powell continued to downplay the prospect of sustained inflation pressures and continued to suggest there was a still a ways to go until the economy is back at pre-pandemic levels.”We’ve said we expect to keep rates where they are until meet three-part test,” Powell said Wednesday at a virtual event organized by the Economic Club of Washington. The three part test includes maximum employment, inflation reaching 2%, and on track to run moderately above 2% for some time. Still, the release of the Beige Book weighed on sentiment amid signs businesses continue to see a pickup in inflation. The S&P 500 eased further below record highs, down 0.2%. More
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HAVANA (Reuters) – Retiring Cuban Communist Party leader Raul Castro promised a decade ago he would transform the Soviet-style command economy into a more mixed and market-driven one “without haste and without pause.”Now, with the Caribbean country in crisis and even the most basic goods in short supply, the party is under pressure to act faster as it convenes this weekend for its eighth congress since the 1959 Revolution.The April 16-19 congress comes as Cubans battle worsening shortages of basic goods, including food and medicine. An economic crisis has been exacerbated by a tightening of decades-old U.S. sanctions and the coronavirus pandemic. “I hope that the congress will take a deep look at our internal problems, not to reiterate promises but to quickly solve them,” said Julian Valdes, a government accountant in Havana.Most experts say reform has been undermined by vested bureaucratic interests and ideologues within the party. They will be reading the tea leaves as new leaders emerge in the all powerful politburo at the summit. The congress will mark the end of the Castro era as the 89-year-old Raul Castro – the brother of late revolutionary leader Fidel – resigns as party secretary, the most powerful position in Cuba. President Miguel Diaz-Canel is widely expected to replace him.”If President Miguel Diaz-Canel is given the post of party secretary, it would strengthen his ability to take decisions and it might augur well for more expansive reforms,” said Carlos Saladrigas, president of the Cuba Study Group, composed of Cuban-American business people in favor of engagement with their homeland.”If, however, someone else is appointed, especially from the ‘old guard’, it would possibly indicate… continuing economic stagnation,” he added.A long-time European investor in Cuba agreed, saying the government needed to push ahead with reforms to improve competitiveness, including further devaluation of the peso currency, liberalization of agriculture, and greater incorporation of small- and medium-sized companies into the economy. The pace of that would be dictated by personnel changes announced at the congress, he said, requesting anonymity.Diaz-Canel, 60, said at a meeting last week on agriculture that “everything that stimulates production, eliminates red tape and benefits producers is favorable.” That captures the essence of reforms adopted by the party at its sixth congress in 2011 and again five years ago at the seventh congress, but which have stalled amid resistance from some party members and ideological infighting.The party has previously pledged to regulate and tax, not administer state-owned businesses; allow markets more sway over the central planning system and agriculture; do more to attract foreign investment; and support private initiative.PEOPLE DO NOT EAT PLANSJohn Kirk, a Cuba expert at Dalhousie University in Nova Scotia, said there was much more to be done to free up the private sector, agriculture and foreign investment.”The Cuban government has taken only baby steps in all of these areas, and needs to show greater initiative,” he said.Over the last nine months, following four years of stagnation and in 2020 an 11% contraction of the economy, the government has made more forceful changes.It has granted more autonomy to state businesses to earn and spend hard currency and loosened regulations on small private ones. It has also unified its two currencies and devalued the remaining peso, cut utility and other subsidies, and decentralized the pricing and sale of some farm products. “People do not eat plans,” Prime Minister Manuel Marrero said this month, expressing the new sense of urgency. That will be the underlying theme of the economic debate at the congress, according to Cuban economist Omar Everleny.Everleny said Cubans understood U.S. sanctions and the pandemic were partly to blame for the hardships they faced, but also were tired of excuses and foot-dragging by authorities.”The people demand more concrete actions and results from the party,” he said, using agriculture as an example.”It is not enough to make an effort: there must be results. Thousands of measures have been taken in agriculture, but the results are not yet on the shelves of the average Cuban,” he said. More
Eurozone countries should increase government spending by an extra 3 per cent of gross domestic product over the next year to mitigate the economic impact of the coronavirus pandemic, the IMF said on Wednesday.The 19-country bloc is forecast to recover more slowly than its main trading partners, the IMF has warned, held back by vaccination rollout delays, extended coronavirus lockdowns and a smaller fiscal stimulus than the US is implementing.Advanced European economies are expected to cut their extra fiscal support from 7.5 per cent of GDP in 2020 to about 6.5 per cent this year, the IMF said.A further increase in public spending would boost the bloc’s growth by 2 per cent and reduce the permanent loss of jobs, investment and output due to the crisis, according to the fund.“The faster the recovery, the less scarring people and businesses will suffer from unemployment, lost human capital and lower investment and research and development,” the IMF said in its latest European regional economic outlook.In particular, European governments should spend more on “additional transfers targeted at households in need, hiring subsidies to reintegrate the unemployed faster, temporary investment tax credits to bring forward investment and equity support schemes for viable firms in need of capital”, the fund recommended.
The IMF recently trimmed its growth forecast for the eurozone this year to 4.5 per cent and estimates that it faces a long-term output loss relative to the pre-Covid-19 trend of about 1.5 per cent of GDP by 2025.“As monetary policy — close to the effective lower bound in several economies — becomes less effective in boosting output, fiscal policy needs to play an increasingly larger role,” the IMF said. “Fiscal measures to stimulate investment and to facilitate job creation and reallocation would speed up the recovery.”Christine Lagarde, president of the European Central Bank and former head of the IMF, compared the eurozone economy to a patient coming out of intensive care but still leaning on two crutches. “You don’t want to remove either crutch, the fiscal or the monetary, until the patient can actually walk fine, and to do that means support well into the recovery,” she said on Wednesday.The $1.9tn fiscal programme launched by the US government is expected to provide a 0.3 percentage-point boost to eurozone GDP and a 0.15 percentage-point lift to inflation by 2023, Lagarde added.
Several European countries are ramping up their spending plans. The German government last month approved a €60bn supplementary budget and the Dutch cabinet is discussing extra expenditure.Mario Draghi, Italy’s prime minister and Lagarde’s predecessor at the ECB, is preparing a new package of stimulus measures worth up to €40bn — about 2.5 per cent of GDP — which could push Italy’s budget deficit this year above 10 per cent of GDP. That would be the first time the country’s deficit has hit double digits since the early 1990s.Since taking office two months ago Draghi has argued that his country and others in Europe must provide significant support to their economies to reduce the impact of pandemic lockdowns. Draghi is expected to present his plan to Italy’s two parliamentary chambers for approval in the final week of April.EU governments are this month due to submit plans to Brussels for how they plan to spend their share of the bloc’s €750bn NextGenerationEU recovery fund. However, the money is not due to start being distributed before June, while several governments are yet to approve the plan and it faces a legal challenge in Germany.Luis de Guindos, vice-president of the ECB, told MEPs on Wednesday: “If we want a timely recovery in Europe, we have to avoid any cliff effects from the premature scaling back of these [stimulus] policies. It is therefore of the utmost importance that the NextGenerationEU plan becomes operational without delay.” More
(Reuters) – After it shut down for two months last year, Jan-Ie Low and her family reduced the hours at their Las Vegas restaurant and converted much of their dining room into a food delivery hub. Outdoor dining was not an option in the desert heat. Conventions, which bring in diners, were canceled because of the coronavirus. “If you don’t adapt, you’re going to be left behind,” said Low, whose family has owned the SATAY Thai Bistro & Bar for more than 15 years. Despite the changes made, sales dropped by about 50% in 2020 from the year before.COVID-19 is hitting business owned by Asian Americans on multiple fronts. Pandemic related closures and restrictions on indoor gatherings were particularly hard on the restaurants, stores, nail salons and other service industries in which many Asian-owned firms are concentrated. Language barriers and a dearth of banking relationships made it difficult for some business owners to access government aid, even as they coped with an added layer of fear amid a surge in hate crimes linked to racist rhetoric that blames Asians for the coronavirus.According to a report https://www.fedsmallbusiness.org/medialibrary/FedSmallBusiness/files/2021/45-entrepreneuers-aarp-report released last month by the New York Federal Reserve and AARP that focused on older entrepreneurs who make up 80% of all small business owners, small firms owned by Asian Americans fared worse than those owned by Black Americans and Hispanic Americans – despite going into the pandemic in a stronger economic position.(Graphic: Concentrated in hard hit sectors – https://graphics.reuters.com/HEALTH-CORONAVIRUS/USA-ASIAN-BUSINESS/qzjpqzegovx/chart.png)SIGNIFICANT FINANCIAL TOLL Some 9% of firms owned by Asian Americans were financially “distressed” in 2019 – far lower than the 19% of Black owned firms and 16% of Hispanic owned businesses given that rating based on their profitability, credit score, and business funding, according to New York Fed research. Among white-owned firms, the figure was 6%. But businesses owned by Asian Americans took a steeper hit early on in the crisis. By the end of March, sales for Asian-American businesses were down by more than 60% from a year earlier, greater than the roughly 50% drop faced by other small businesses, according to research https://www.jpmorganchase.com/institute/research/small-business/small-business-financial-outcomes-during-the-onset-of-covid-19#finding-4 from the JPMorgan Chase (NYSE:JPM) Institute.Some 90% of small Asian-American firms in the New York Fed study lost revenue last year, greater than the 85% for Blacks, 81% for Hispanics and 77% for whites. Michael Park, owner of Bobby Schorr Cleaners in Philadelphia, said the dry cleaning business his family has owned for 34 years sometimes made only about $100 a day in sales early on in the pandemic, less than a tenth of normal. Business picked up a bit over the summer as people became more comfortable venturing out, but sales are still about 25% of pre-pandemic levels, he said. Park used grants and small business loans to cover basic expenses. “We’re just trying to stay afloat,” he said.TROUBLE ACCESSING AIDJamie Lee, who works for a community development organization that supports housing, development and small businesses in Seattle’s Chinatown district, said many of the owners she works with know enough English to serve customers, but are uncomfortable filling out complex financial forms necessary to tap into grants and government aid, such as the Paycheck Protection Program.Minority-owned businesses were largely excluded from the first round of PPP loans issued last spring, according to research published in January by Robert Fairlie from the University of California at Santa Cruz and Frank Fossen of the University of Nevada. More support for minority-owned businesses came after the program was adjusted to include more participation from smaller and community-based lenders, the researchers found. Low, the managing partner of the Nevada Thai restaurant, said applying for a PPP loan felt like hunting for toilet paper in the early months of the crisis. She eventually found a small lender – not the large bank her family-run restaurant typically works with – willing to process her application. In Washington, Teizi Mersai, the business operations manager for Lam’s Seafood Market, a Vietnamese-American-owned grocery store in an area known as Little Saigon in Seattle, said he and other mom and pop shop owners are thankful for the support they received from neighborhood groups that helped them apply for aid and tap into other resources.“The community really does come together,” he said.Mersai also joined a delivery service so that customers could order groceries online. It took about six months to get fully set up because he and his staff had to research platforms and then photograph thousands of the Asian items they offer, including drinks, noodles and snacks that were not captured in stock images provided by a third-party website.The move online and a loosening of restrictions should help sales, Mersai said.A few weeks ago, something happened that put the staff on edge. A store clerk, who was Asian American, was hit while he was on his way home from work. The employee was not seriously harmed by the blow to his face and it is unclear whether the attack was a hate crime. But colleagues are taking precautions.“We basically tell everyone to make sure you travel in pairs as much as you can,” Mersai said. More
In its regional outlook for the euro zone, the IMF said the extra fiscal boost could then be followed by stronger consolidation once excess capacity has been reduced. “Such additional support to the tune of 3 percent of GDP over 2021−22 could lift output by about 2 percent by the end of 2022 and more than halve the medium-term scarring due to robust supply-side effects,” the IMF said in the report.”This would have greater benefits for households with low incomes and fewer side effects than additional monetary stimulus. It would also bring inflation closer to target in many countries and help rebuild monetary policy space,” it said.Euro zone countries provided more than 3 trillion euros in national fiscal stimulus and liquidity schemes last year to keep their economies going and some, like Italy, are announcing new support measures as the third wave of the pandemic triggers new lockdowns across the bloc. More
The Ever Given was declared suitable for onward passage from the Great Bitter Lake to Port Said, where she would be assessed again before departing for Rotterdam, Bernhard Schulte Shipmanagement (BSM) said in a statement.The ship has been in the lake, which sits between two sections of the canal, since being dislodged on March 29. The 400-metre (430 yard) vessel was stuck in the canal for six days, blocking traffic. The Suez Canal Authority (SCA) said on Wednesday that negotiations aimed at reaching an agreement “may take some time”. It has made a $916 million compensation claim against the ship’s Japanese owner Shoei Kisen, UK Club, one of its insurers, said.The SCA has also obtained a court order to detain the ship as discussions over compensation continue. “The SCA’s decision to arrest the vessel is extremely disappointing. From the outset, BSM and the crew on board have cooperated fully with all authorities,” BSM chief executive Ian Beveridge said in the statement.”BSM’s primary goal is a swift resolution to this matter that will allow the vessel and crew to depart the Suez Canal.”Taiwan’s Evergreen Line, which is the Ever Given’s charterer, said separately on Wednesday it was investigating the scope of the Egyptian court order “and studying the possibility of the vessel and the cargo on board being treated separately”.Panama’s Luster Maritime and Japan’s Higaki Sangyo Kaisha, the vessel’s registered owners, have started legal proceedings in London’s High Court to open a limitation fund that lawyers say will serve as a cash pool of around $115 million to satisfy valid English claims.Japan’s Shoei Kisen is the beneficial, or ultimate, owner of the vessel. Two Suez Canal Authority sources told Reuters that the owner had offered $100 million in response to the Canal’s claim. Shoei Kisen declined to comment. More
(Reuters) -Wells Fargo & Co reported first-quarter profit ahead of Wall Street estimates on Wednesday as the bank reduced its reserves by $1.6 billion and costs tied to its years-old sales practices scandal stabilized.The San Francisco-based lender did not report material restructuring and remediation charges in the quarter as Chief Executive Officer Charlie Scharf undertakes what he has said will be a “multi-year journey” to overhaul the bank.The fourth-largest U.S. lender said profit rose to $4.74 billion, or $1.05 per share, in the three months ended March, from $653 million, or 1 penny per share, a year earlier.Analysts on average had expected a profit of 70 cents per share, according to the IBES estimate from Refinitiv.The loan loss reserve release added 28 cents to the earnings per share.The slight year-earlier profit was caused by an exceptionally large provision for potential loan losses, as U.S. banks braced for unpaid bills due to the COVID-19 pandemic shuttering the economy and pushing millions out of work.Since then, an ultra-loose monetary policy, trillions in stimulus support and an accelerated vaccination program have largely put the world’s largest economy on a more solid footing.Earlier in the day, JPMorgan Chase & Co (NYSE:JPM) said it released more than $5 billion in reserves in the first quarter, helping the largest U.S. bank’s earnings jump almost 400%. Wells Fargo (NYSE:WFC) reported overhead, or efficiency ratio, which measures cost per dollar of revenue, of 77%, from 74% a year earlier.Pre-tax, pre-provision profit fell 13% to $4.07 billion.Changes in pre-provision profit are more important this quarter than usual because they are not impacted by different judgments banks make about future loan losses, analysts have said.Wells Fargo has been operating under penalties from regulators since 2016 when details of a sales scandal emerged and led to the departure of two chief executives and billions of dollars in litigation and remediation charges and a Federal Reserve imposed asset cap of $1.95 trillion. The asset limit has kept Wells Fargo from freely increasing loans and deposits to boost interest revenue and better cover costs. Other banks’ balance sheets have swelled.Last year Scharf said he was looking for $10 billion of costs to cut over several years from Wells Fargo’s roughly $54 billion annual expense base because its overhead ratio was worse than at peers.”Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low interest rates and tepid loan demand continued to be a headwind for us in the quarter,” Scharf said on Wednesday. More