Economy

The cost of UK motor insurance has soared to an all-time high, according to a closely watched index, heaping extra pressure on households already confronting a cost of living crisis.Motorists were quoted an average of £776 for motor policies in the second quarter, up a record 40 per cent on the previous year, according to an index from comparison site Confused.com and insurance broker Willis Towers Watson.“The price increases we’re seeing are so significant that it’s going to cause real financial impact to many people,” said Confused.com chief executive Steve Dukes, who called for insurers to be “as competitive as they can be” despite industry pressures. The second-quarter figure exceeded a previous 2011 peak of £663 to be the highest since the data set began in 2006. The methodology of the index was amended two years ago, with historic figures restated to be comparable.Matthew Upton, interim executive director of advocacy at consumer charity Citizens Advice, said consumers were facing “price hikes from every direction, including essential services”.The charity has estimated that one million people cancelled their car insurance last year as bills piled up, with those on universal credit especially likely to do so.“Car insurance is an everyday necessity for so many people, whether the car is needed to get to work, take children to school, or loved ones to appointments,” Upton said. “Now is the time for the government and insurance industry to consider bold ideas . . . to make sure no one is left stranded,” he added, suggesting discounted so-called social tariffs for people on benefits as an example. Prices in inner London, where motorists pay the most, have now reached an average of £1,257. Young people pay even more: male drivers aged 17 to 20 across the UK saw their premiums rise by 60 per cent to £2,414 on average, according to the index.Insurers argue significant price rises are essential given the inflation in the value of payouts on accident claims, which reflect the rising costs of labour, car parts and replacement vehicles. Tim Rourke, UK Head of P&C pricing, product, claims and underwriting at Willis Towers Watson, said insurers were having to deal with a “cocktail of rising costs”, including rising vehicle theft and long repair times, which are “all pushing costs above premium income and forcing insurers to play catch-up by increasing prices”. Rising costs have eviscerated profits for UK motor insurers. Last year represented the worst underwriting conditions in a decade, according to analysis from consultancy EY. Car insurance prices are expected to rise further: one recent industry forecast predicted they will not level off until 2025. Motor insurers will report their half-year results in the coming weeks. More

BRASILIA (Reuters) – Brazil’s government is considering changes to the taxation of closed-end funds and shareholder payouts in order to shore up revenue in next year’s budget, said three senior economic officials with direct knowledge of the matter.The government signaled on Tuesday it would propose a comprehensive income tax reform only after the Senate has passed a consumption tax reform that cleared the lower house of Congress this month.However, the sources, who requested anonymity to discuss internal deliberations, said the Finance Ministry now aims to break off key revenue-raising measures for early passage to bring Brazil’s primary budget deficit in 2024 to zero.The measures include a new model for taxing closed-end funds, changes to a federal income tax (CSLL) on state tax benefits and the end of “interest on equity” (JCP) payments allowing companies to deduct shareholder remuneration from their corporate tax obligations.The government sees those measures as crucial to raising revenue and complying with new fiscal rules in next year’s budget, which must be sent to lawmakers by the end of August.The Finance Ministry declined to comment.A more complex and structural reform, involving income tax exemptions, taxation of profits and dividends and reductions to payroll taxes, would be presented after the consumption tax reform clears the Senate, the sources said.”When the budget bill is sent, revenue measures to meet the targets must also be sent, and some of these measures will already appear in the proposal,” said one of the sources. “The idea is that this will be discussed throughout the second half of the year.”Closed-end funds offer favorable investment opportunities to wealthier Brazilians by taxing earnings only when they are distributed to investors. Previous governments have tried and failed to change that rule and eliminate “interest on equity” payments to shareholders used by companies to reduce taxable earnings. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Whatever is driving Wall Street higher – the finishing line of the Fed’s rate-hiking cycle, a falling dollar or strong earnings – it is not really filtering through to Asian markets.The disconnect between Asia and the rest of the world has widened recently, and correlations between the MSCI Asia ex-Japan index and leading U.S. and global indexes are the weakest in about a month.A solid batch of second quarter earnings from some of the largest U.S. banks and financial firms on Tuesday kept the U.S. stock market juggernaut rolling. Bulls in Asia will be hoping some of that momentum drives local trading on Wednesday.There is certainly room for catch up.The MSCI Asia equity index ex-Japan is up 4.6% this year, significantly underperforming the MSCI World index, S&P 500 and Nasdaq which are up 17%, 19% and 38%, respectively.Figures on Tuesday showed that U.S. retail sales in June were weaker than expected, but any concern about what that signals for the health of the economy was washed away by solid earnings at Bank of America (NYSE:BAC), Bank of New York Mellon (NYSE:BK) and others.As ever, China is the heaviest drag on Asia.Disappointing second quarter growth figures this week pushed the Chinese economic surprises index to its lowest in more than three years. Excluding the pandemic, the index is at its lowest since 2015 just before Beijing’s shock mini yuan devaluation.The economy’s sluggishness is even raising the prospect that China may be entering an era of much slower economic growth, and may never get rich.Whether it chugs ahead at 3% to 4% annually or flirts with Japan-like “lost decades” of stagnation, it looks set to disappoint its leaders, its youth and much of the world.More immediately, the whole gamut of U.S.-China tensions is back on investors’ radar – climate, defense and security, and semiconductors and tech.U.S. climate envoy John Kerry is in Beijing for a three-day visit, China’s defense minister Li Shangfu met veteran U.S. diplomat Henry Kissinger, and U.S. chip company executives met with top Biden administration officials to discuss China policy.In Thailand, meanwhile, parliament convenes on Wednesday to choose a new prime minister. Pita Limjaroenrat led his Move Forward party to election victory in May but failed last week to win the required backing of more than half of the legislature.Ahead of the vote, the Thai baht surged 1.6% on Tuesday to a two-month high against the dollar. It was the currency’s best day since November.Here are key developments that could provide more direction to markets on Wednesday:- Thailand parliament elects prime minister- New Zealand inflation (Q2)- UK inflation (June) (By Jamie McGeever; Editing by Josie Kao) More

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Europe and Latin America failed to agree on even an expression of “concern” over Russia’s invasion of Ukraine, but leaders of the two regions maintained that their first summit in eight years had pushed forward relations.Wording on Ukraine had already been significantly watered down over the course of the two-day meeting, including by removing any reference to Russia, to the frustration of European leaders who have sought to win over the “global south” to Ukraine’s cause.But Nicaragua, whose president Daniel Ortega is an ally of Vladimir Putin, was the sole holdout on a text approved by 59 other nations that expressed “deep concern on the ongoing war against Ukraine”. That prevented a unanimous statement on the issue.After the summit, Charles Michel, the president of the European Council, said: “It’s also essential to note that our friends in Latin America and the Caribbean support us . . . the war is a problem for Europe and the world.”European leaders stressed they had achieved broad agreement for the expression of “concern” about the war, including from other Russian allies such as Cuba, Venezuela and Bolivia. The countries in attendance, minus Nicaragua, issued a joint declaration.“What’s important to me is that all the EU members are aligned on that and all the Celac [Community of Latin American and Caribbean States] members are aligned except Nicaragua,” said Emmanuel Macron, the French president. “The meeting was very important and very ambitious,” said Alberto Fernández, president of Argentina. “Never before have we been able to reach so many points of agreement as we have achieved now.”Macron also praised the role of Brazilian president Luiz Inácio Lula da Silva in supporting efforts to find common language. “[Lula] doesn’t go as far as some allies of Nato but he is perfectly lucid on the nature of this war and its consequences, including on food,” said Macron, referring to Russia’s decision to back out of a deal to export Ukrainian grain across the Black Sea.While talks on the joint statement were held up by Nicaragua, there was progress in side-meetings at the two-day summit. Both Lula and European Commission president Ursula von der Leyen said they hoped to reach agreement on the long-delayed EU-Mercosur deal by the end of the year. Lula, Macron, Fernández and Gustavo Petro, the president of Colombia, brokered the first meeting between the government of Venezuela and its opposition since talks broke down between the parties in Mexico in November 2022. Countries also reached accord on the post-Cotonou agreement, a political and trade agreement between the EU and African, Caribbean and Pacific countries, which had been blocked by Poland. Establishing more regular contact with Latin American leaders had also been a goal of the summit. The leaders agreed to meet in Colombia in 2025.Additional reporting by Henry Foy in Brussels and Michael Stott in London More

India said on Tuesday that G-20 finance chiefs and central bankers had made headway on the group’s ambitious agenda to reform the world’s financial architecture, despite differences over the war in Ukraine that surfaced during the talks. “The Indian presidency received wide support on all the agenda items,” Nirmala Sitharaman, the finance minister, said after the conclusion of meetings in Gandhinagar. Ajay Seth, another finance ministry official, also said that India was “taking the discourse forward” after top policymakers from the club of large economies met to discuss plans to overhaul multilateral lenders, forge an agreement on international taxation, and share the burden of restructuring poor countries’ debt. India holds the G-20’s rotating presidency and is due to host a summit of its leaders in New Delhi in September at a time when the war in Ukraine has split a group that includes Russia and China, alongside the US and leading European economies. Sitharaman confirmed that Russia’s exit on Monday from the Black Sea grain deal that ensured shipping of food from Ukraine — one of the world’s top agricultural producers — and subsequent attack on Ukrainian ports, had come up during Tuesday’s talks. “Several members condemned it, saying this shouldn’t have happened,” she said. “Food passing through the Black Sea shouldn’t have been stopped or suspended.” The deal had helped lower global food inflation in recent months and allayed concerns that hunger would become widespread. However, Sitharaman said there were signs of progress on deals to provide more debt relief to some of the world’s most economically vulnerable countries, such as Sri Lanka, Zambia, and Ghana. China, a major bilateral creditor, had been blamed by western nations, including the US, for delaying deals to restructure vulnerable countries’ debts. Beijing, which is the largest bilateral lender to several developing countries, had been reluctant to provide debt relief, up until recent weeks, when it agreed to provide some support to Zambia. Sitharaman said she was now “very hopeful” that Beijing could be brought fully onboard in other debt restructurings. “We were able to push this agenda of debt distress, particularly among the Global South countries,” Sitharaman said. “A speedy resolution, an effective resolution should happen.” India has hosted G-20 ministerial meetings across the country in the run-up to the leaders’ summit on September 9-10. It has faced, however, difficulties in trying to hammer out consensus among the bloc’s members at a time of war, financial distress in some indebted countries and slowdown in most leading economies. India has remained neutral in the war. But it has been vocal about the conflict’s impact on countries in the Global South, of which it sees itself as a leader, while trying to bridge differences between Russia and China on the one hand and western democracies that have supported Ukraine and sanctioned Moscow.

India is also pushing the group to accept the African Union as a full member during its presidency. Amitabh Kant, India’s G-20 Sherpa, told the Financial Times in an interview last week that India had invited all the G-20 leaders to September’s summit, and that it expected them all, including Russian President Vladimir Putin and Chinese leader Xi Jinping, to attend. “We are expecting all leaders to come,” Kant said. “We haven’t heard from anyone that they’re not coming.” China’s finance minister and Russia’s acting finance ministry director attended this week’s G-20 meetings. More

The enemy of my enemy is my friend. On this basis, closer western relations with India make good sense. Joe Biden’s warm embrace of the once-banned Narendra Modi, now its politically dominant prime minister, in Washington and Emmanuel Macron’s equally warm embrace of the Indian leader in Paris are aimed at forging a close relationship with a country expected to be a powerful counterweight to China. Is this a good bet for western powers? Yes. India is indeed likely to be a rising great power. Interests also align. But how far values are shared is a more open question.Where is India now and where might it go, economically and politically?Today, India has the world’s fifth-largest economy at market prices and third largest at purchasing power. Its population is 1.43bn, almost exactly the same as China’s. By 2050, however, India’s population is forecast by the UN to reach 1.67bn, against 1.31bn in China.India’s GDP per head (at purchasing power) is close to 40 per cent of China’s levels, according to the IMF. Back in 1990, India and China were both almost equally poor, with GDP per head, measured at purchasing power, estimated at 4.6 per cent and 4.1 per cent of US levels, respectively. In what is surely the most remarkable economic performance in world history, China’s GDP per head reached 28 per cent of US levels last year, against India’s 11 per cent. Yet, while China’s relative performance was incomparably the best, India came second among the seven largest emerging economies.

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China’s was an extreme example of the most successful development strategy of the modern era — high investment, rapid industrialisation and progressive upgrading of exports of manufactures. This was also Japan’s path. India has followed a very different one. Between 2014 and 2023, its investment rate has averaged just 31 per cent of GDP, against China’s 44 per cent, and its national savings rate averaged 30 per cent, against China’s 45 per cent. More strikingly, the share of manufacturing in India’s GDP has been falling, not rising, as would have been expected at this stage in its development. This share was 13 per cent of GDP in 2022, against China’s 28 per cent. While the ratios of trade to GDP (at market prices) have become roughly equal, China is by now a far bigger exporter to world markets.

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What then might lie ahead?Let us start with the fundamentals. India’s gross savings rate, though not as high as China’s, is high enough, particularly given the possibility of importing capital, to finance a growth rate of at least 5-6 per cent. India also has reasonable macroeconomic stability. Entrepreneurship is abundant and infrastructure is improving. India will definitely not suffer from labour shortages, but the opposite. As Ashoka Mody notes in India is Broken, the inability to generate sufficient good jobs is a great failure. Yet another is the inability to educate the population to a high standard: human capital is likely to prove a far tighter constraint than physical capital.

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India is an obvious location for companies following a “China plus one” strategy. It also has the advantage over obvious competitors of a large home market. Nevertheless, India has repeatedly failed to exploit opportunities for fast growth of exports of manufactures over the last 75 years. Suspicion of open trade always gets in the way.As was true of many other countries, India has suffered from an overhang of bad debt since the global financial crisis. This “twin balance sheet problem” was a significant constraint on growth. But, argues this year’s Economic Survey, “in the course of the last decade, Indian non-financial private sector debt and non-financial corporate debt as a share of GDP declined by nearly 30 percentage points”. Bank balance sheets have also been repaired. In all, the credit engine is once again in quite good shape.

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The IMF forecasts annual economic growth at a little over 6 per cent from 2023 to 2028, with GDP per head growing at roughly one percentage point more slowly. Such growth would be quite close to the averages of the past three decades. Provided the country is not buffeted by big global or domestic shocks, this sounds perfectly feasible, even rather plausible. But what about the longer term? Remember that India still has huge room for catching up. It is also a young country, with a grossly underemployed labour force, potential for improving the quality of that labour force, a reasonably high savings rate and increasingly widespread hopes of greater prosperity. A great deal of adaptation will be required to meet the climate change challenge, given the failure to bring global emissions down. But the energy transition also offers huge opportunities to India. On balance, I judge that India should be able to sustain growth of GDP per head at 5 per cent a year, or so, up to 2050. With better policies, growth might even be a bit higher, though it could also be lower.

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So, let us assume that India’s GDP per head continues to grow at 5 per cent a year, while that of the US grows at 1.4 per cent, roughly as it has over the last three decades. Then, by 2050, India’s GDP per head (at purchasing power) would reach about 30 per cent of US levels, roughly where China’s is today. According to UN median forecasts, India’s population would also be 4.4 times as big as that of the US. So, its economy would be some 30 per cent larger than the US’s.It is, in sum, quite reasonable to assume that India will become a great power. It is not that hard to imagine that its economy will be of a similar size to that of the US by 2050. Thus, western leaders are making a sensible bet on an alliance of convenience with India. But will India also be a liberal democracy? I will discuss that issue next [email protected] Martin Wolf with myFT and on Twitter More

Michael S. Barr, the Fed’s vice chair for supervision, said AI technology has the potential to get credit to “people who otherwise can’t access it.”
“While these technologies have enormous potential, they also carry risks of violating fair lending laws and perpetuating the very disparities that they have the potential to address,” he added.

Michael Barr, vice chair for supervision of the board of governors of the Federal Reserve, testifies during a House Committee on Financial Services hearing on Oversight of Prudential Regulators, on Capitol Hill in Washington, DC, on May 16, 2023.
Mandel Ngan | AFP | Getty Images

The Federal Reserve’s top banking regulator expressed caution Tuesday about the impact that artificial intelligence can have on efforts to make sure underserved communities have fair access to housing.
Michael S. Barr, the Fed’s vice chair for supervision, said AI technology has the potential to get credit to “people who otherwise can’t access it.”

However, he noted that it also can be used for nefarious means, specifically to exclude certain communities from housing opportunities through a process traditionally called “redlining.”
“While these technologies have enormous potential, they also carry risks of violating fair lending laws and perpetuating the very disparities that they have the potential to address,” Barr said in prepared remarks for the National Fair Housing Alliance.
As an example, he said AI can be manipulated to perform “digital redlining,” which can result in majority-minority communities being denied access to credit and housing opportunities. “Reverse redlining,” by contrast, happens when “more expensive or otherwise inferior products” in lending are pushed to minority areas.
Barr said work being done by the Fed and other regulators on the Community Reinvestment Act will be focused on making sure underserved communities have equal access to credit. More