Economy

The previous government had planned to cut the fiscal shortfall to 3% of GDP by 2027, but weak tax revenues and budget overruns have put that target all but out of reach, leaving a hole for the new cabinet that took office this month.”Three years is not realistic, not economically or with regards to growth. But to do it in five years is possible,” Villeroy, who is also a policymaker at the European Central Bank, told France 2 TV.Earlier this week, Finance Minister Antoine Armand said the budget deficit was one of the worst in French history. The last government had hoped to limit the 2024 budget deficit to 5.1% of GDP, but the latest estimates suggest it may spiral towards 6%.The overshot puts huge pressure on new Prime Minister Michel Barnier to come up with billions of euros in budget cuts as well as a some targeted tax increases as it races to finalise the 2025 budget.Barnier has suggested he would be open to raising taxes on the wealthy and some corporations. Spending cuts are also expected, which Villeroy said in the interview that he supported.Time is running out for the government to finalise its 2025 budget and hand it over to lawmakers, with mid-October the very latest if it is to be passed by parliament before the end of the year, the head of the Cour des Comptes public audit office Pierre Moscovici said.He added that parliament could pass special emergency laws to ensure taxes are in place by the start of the year, allowing for the overall budget bill to be dealt with later.”That would be rather unorthodox, to say the least,” Moscovici told journalists.In rare good news for the new government, consumer confidence improved for the third straight month in September, topping analysts’ expectations, official INSEE data showed.An increase in the proportion of households feeling that the present is a good time to make big purchases, as well as easing concern about unemployment, helped drive the index up two points to 95, still below the long-term average but at its highest level since February 2022.But the proportion of households considering that now is a good time to save more also increased, a possible sign that consumers want to build up a cushion of spare cash in case times get tougher ahead.While consumer confidence has improved, investors remain concerned about the new government’s ability to tackle the deficit, pushing France’s borrowing costs briefly above Spain’s on Tuesday for the first time since 2008. More

OTTAWA (Reuters) – Canadian Prime Minister Justin Trudeau looks set to survive a vote of confidence on Wednesday after his main political rival appeared to fail to muster enough support to end nine years of Liberal Party rule.Legislators in the House of Commons are due to vote at about 3.30 pm ET (1930 GMT) on a motion by the official opposition Conservative party declaring a lack of confidence in Trudeau’s minority Liberal government.Trudeau, whose popularity has slumped amid unhappiness over rising prices and a housing crisis, became more politically vulnerable this month when the smaller New Democratic Party tore up a 2022 deal to keep him in power until the 2025 election.The right-of-center Conservatives have a big lead in the opinion polls ahead of an election that must be called by the end of October 2025. “I am proud of this country – Canadians are proud of this country. We are going to bring home the country we love,” Conservative leader Pierre Poilievre told the House on Tuesday as he introduced the motion of confidence. The Conservatives say they want an election as soon as possible on the grounds that Canadians cannot afford a planned increase in the federal carbon tax. They also say federal spending and crime have ballooned under Trudeau.Trudeau, while acknowledging public unhappiness, accuses the Conservatives of playing politics rather than focusing on what people need.Poilievre needs the backing of the other two major opposition parties in the House to bring down Trudeau and both have made clear they will not cooperate.The separatist Bloc Quebecois, which seeks independence for the province of Quebec, says it will back Trudeau in exchange for legislation to increase benefits for seniors.The NDP, which like the Bloc and the Liberals is a broadly center-left movement, also says it will not vote to bring Trudeau down despite precipitating Trudeau’s current struggles by tearing up its deal with him. Polls indicate the NDP would also be in trouble if an election were called now.Trudeau played down polls showing his party’s unpopularity, saying they reflect Canadians’ frustrations with daily life.”People are taking a lot out on me for understandable reasons. I’ve been here, and I’ve been steering us through all these things, and people are sometimes looking at change,” he told U.S. late-night television host Stephen Colbert on Monday. More

NEW DELHI (Reuters) -India’s federal labour minister asked the southern state of Tamil Nadu to resolve a weeks-long strike by workers at Samsung Electronics (KS:005930), a government source said on Wednesday.The protests – the biggest such in India in recent years – at the South Korean group’s plant near Chennai has disrupted operations, with over 1,000 of the 1,800 workers demanding higher wages and union recognition.In a letter addressed to Tamil Nadu Chief Minister M.K. Stalin, labour minister Mansukh Mandaviya has urged the state government to intervene for an “early and amicable” resolution, the source, who did not want to be named as the document has not been made public, said.Reuters could not independently verify the contents of the letter.Samsung and the Tamil Nadu government did not immediately respond to Reuters requests for comment. The labour unrest which began on Sept. 9 is an overhang on Indian Prime Minister Narendra Modi’s mission to attract foreign investment for manufacturing in the country and to triple electronics production to $500 billion in six years. The Tamil Nadu plant accounts for about a third of Samsung’s $12 billion annual revenue in India.The South Korean company has defended its wages, saying its workers at the Tamil Nadu plant are paid almost twice as much as employees in nearby plants belonging to other companies. Its India HR team has also written an email to some striking workers, warning them of pay being withheld for days they don’t work. More

WASHINGTON (Reuters) – The U.S. House of Representatives on Wednesday was poised to avert a partial government shutdown next week, even as a large number of Republicans were prepared to revolt against their leadership for failing to achieve new federal spending cuts. The stopgap funding bill will maintain the government’s current level of roughly $1.2 trillion in annual discretionary funding through Dec. 20, avoiding the furloughing of thousands of federal workers and shutdown of a wide swath of government services just weeks before the Nov. 5 election.House Speaker Mike Johnson plans to use a parliamentary maneuver to pass legislation, bypassing the House Rules Committee to overcome opposition within his own Republican Party, which holds a 220-212 majority.If he succeeds, which is expected, the Democratic-majority Senate is also set to vote on the bill on Wednesday and send it on to be signed into law by President Joe Biden before current funding expires at midnight Monday.A significant number of House Republicans are expected to defy their leader and vote against the measure, after Republican presidential candidate Donald Trump earlier spoke in favor of a shutdown unless controversial legislation was attached to the spending bill that outlawed non-citizens voting in federal elections, something that already is illegal.”We’ll work in a bipartisan way to make sure that this gets done,” No. 3 House Democrat Pete Aguilar told reporters on Tuesday.Some Republicans expressed frustration in the run-up to Wednesday’s vote on the spending bill known as a “continuing resolution” or “CR.””He (Johnson) committed to the conference that we weren’t going to govern by CRs anymore … here we are. So, I’m sure there’s a bunch of members that are frustrated,” said Republican Representative Greg Steube.Hard-right House Republicans had been pushing for a six-month CR with the election piece attached, but last week failed to pass that bill, which would have been lost in the Senate anyway.Nonetheless, some of the most conservative Republicans thought Johnson and all rank-and-file Republicans should have fought harder against a Democratic victory, even if it meant a shutdown.Johnson has repeatedly had to bypass his own restive caucus to pass critical legislation. In March, the House passed the current funding bill despite 112 Republican “no” votes.April brought the passage of nearly $61 billion in new aid for Ukraine, which has battled a Russian invasion since February, 2022. Again, 112 Republicans voted against Johnson’s effort.The infighting comes after Johnson’s predecessor, then-Speaker Kevin McCarthy, was ousted by right-wing Republicans in an historic vote, as they punished him for reaching a bipartisan spending and debt limit deal with Biden.That latter fight will recur late this year. Democrats and Republicans will have to negotiate over full-year government funding. And it faces an even more critical self-imposed Jan. 1 deadline to either to raise the nation’s debt ceiling or risk defaulting on more than $35 trillion in federal government debt. More

In addition to approving the half-percentage-point cut, Fed policymakers projected the benchmark interest rate would fall by another half percentage point by the end of this year, a full percentage point next year, and half a percentage point in 2026, though they cautioned that the outlook that far into the future is inherently uncertain.Following are forecasts from some major banks on economic growth, inflation, and how they expect certain asset classes to perform:Forecasts for stocks, currencies and bonds:S&P 500 US 10-year EUR/USD USD/JPY USD/CNY target yield target Goldman Sachs 5,600 1.08 150 7.20 3.85% Morgan Stanley 5,400(for 1 140 7.5 June 2025) UBS Global 5,200 3.85% 1.09 148 7.25 Wealth Management* Wells Fargo 5,300-5,500 3.75%-4.25% 1.06-1.10 156-160 Investment Institute Barclays 5,600 4.25% 1.09 145 7.20 J.P. Morgan 4,200 1.13 146 7.25 3.55% BofA Global 5,400 3.75% 1.12 151 7.38 Research Deutsche Bank 5,750 4.60% 1.07 135 Citigroup 5,600 4.20% 1.02 135 7.25 HSBC 5,400 3.00% 1.05 145 7.10 Oppenheimer 5,900 UBS Global 5,600 4.0% 1.12 145 7.10 Research* Evercore ISI 6,000 RBC 5,700 * UBS Global Research and UBS Global Wealth Management are distinct, independent divisions in UBS Group—-U.S. INFLATIONU.S. consumer prices rose slightly in August, but underlying inflation showed some stickiness amid higher costs for housing and other services.U.S. inflation (annual Y/Y for 2024) Headline CPI Core PCE Goldman Sachs 2.6% 2.6% Morgan Stanley 2.10% 2.70% Wells Fargo 3.0% 2.60% Investment Institute Barclays 2.9% 2.6% J.P.Morgan 2.50% 2.50% BofA Global 3.5% 2.8% Research Deutsche Bank 3.10% Citigroup 2.0% 2.7% HSBC 3.4% —–Real GDP growth forecasts for 2024 GLOBAL U.S. CHINA EURO UK INDIA AREA Goldman 2.7% 2.8% 0.7% 1.1% 6.9% Sachs 4.7% Morgan 2.8% 1.9% 4.2% 0.5% -0.1% 6.4% Stanley UBS Global 3.1% 2.4% 4.9% 0.6% 0.2% 7.0% Wealth Management* Barclays 2.6% 1.2% 5.0% 0.3% 1.1% 6.2% J.P.Morgan 2.6% 4.6% 6.5% 0.7% 2.7% 1.1% BofA Global 3.2% 2.7% 0.7% 1.1% 7.6% Research 4.8% Deutsche 3.2% 2.7% 4.9% 0.9% 1.2% 7.0% Bank Citigroup 2.4% 2.0% 0.7% 1.0% 7.3% 4.7% HSBC 2.6% 2.3% 4.9% 0.5% 0.4% 6.3% UBS Global 3.1% 2.5% 4.6% 0.6% 1.1% 7.0% Research* More

“The U.S. move has no factual basis, violates the principles of market economy and fair competition, and is a typical protectionist approach,” said a spokesperson for the commerce ministry.The U.S. Commerce Department on Monday proposed the planned regulation, first reported by Reuters, which would also force American and other major automakers in the future to remove key Chinese software and hardware from vehicles in the U.S. connected to the internet and navigation systems.The action “seriously affects the normal cooperation between China and the United States in the field of connected vehicles, disrupts the global automotive industry supply chain, and harms the interests of United States consumers,” the spokesperson said, according to a statement.The move would effectively bar Chinese cars and trucks from the U.S. market, with major concerns centred around data collection by connected Chinese vehicles on U.S. drivers and infrastructure and potential foreign manipulation of vehicles. China and the U.S. have tussled over respective national security concerns. The U.S. has enforced major export bans on semiconductors, and the latest proposal is a significant escalation in U.S. restrictions on Chinese vehicles, software and components.”The U.S. should immediately revoke its restrictive moves,” the spokesperson said. More

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The average contract rate on a 30-year fixed-rate mortgage dropped 2 basis points in the week ended Sept. 20, the data showed, a far smaller move than the half-of-a-percentage point policy rate cut delivered by the Federal Reserve last week. Mortgage rates had been falling for weeks in anticipation of the Fed’s move, however, and are now down more than three-quarters of a percentage point compared with July, and more than 1.75 percentage points compared with the October 2023 peak. Applications to refinance existing home loans jumped as homeowners took advantage of the decline in home-loan rates in recent months to trim their regular house payments. Refinancing now accounts for more than 57% of all mortgage applications, the data show, above the historic median of 48%. More