Economy

WASHINGTON (Reuters) – Republican lawmakers taking the hardest line against raising the U.S. government’s $31.4 trillion debt ceiling rely heavily on small donors to fund their campaigns, a Reuters analysis found, shielding them from business lobby pressure to avoid a default.Members of the House Freedom Caucus, a secretive group of at least 37 conservative Republicans, got close to 40% of their campaign funds from smaller donations during the 2022 election cycle, the analysis of financial disclosures found, compared to close to 20% for the rest of the party’s House members.That financial independence from traditional power brokers could make it even harder for Republican Speaker Kevin McCarthy to maintain control over members of his party in a closely divided House and further complicate his negotiations with Democratic President Joe Biden over raising the government’s borrowing limit.House Freedom Caucus members, who want to shrink the role of government, are demanding reductions in government spending. Biden opposes putting conditions on a debt ceiling increase, which is needed to cover outlays and tax cuts already approved by Congress.”The most conservative of us will only support a responsible adjustment of the debt ceiling if it’s accompanied by meaningful and serious fiscal reform,” Representative Clay Higgins, a Freedom Caucus member from Louisiana, said in an interview.Graphics: The House Freedom Caucus relies heavily on small donors | https://www.reuters.com/graphics/USA-DEBT/FREEDOM-CAUCUS/zgpobklqmvd/graphic.jpgSome Freedom Caucus members leaned especially hard on small donors; U.S. Representative Marjorie Taylor Greene of Georgia got close to 70% of her 2022 campaign fund from people giving $200 or less, Reuters found. Her office did not respond to requests for comment.U.S. Representative Jim Jordan, who is from Ohio, got close to 60% of his funds from small donors while Representative Andy Biggs, who is from Arizona, brought in close to 50%. “We’ve got – I forget how many hundred-thousand donors we have, regular people all across the country who believe in the values and principles that make our country great,” Jordan said.Biggs did not respond to request for comment.The Freedom Caucus members also raised significant sums from larger donors and traditional political fundraising committees.Reuters reviewed mandatory financial disclosures to the Federal Election Commission in which campaigns declare funding from donors giving $200 or less. The analysis did not examine in detail other funding sources such as groups controlled by companies and lobby organizations, or independent spending by Super PACs. Unlike other congressional caucuses, the House Freedom Caucus doesn’t disclose its membership, a practice that began in 2015. Membership is by invitation only which helps keep the group rigidly conservative.Reuters identified at least 37 members of the House Freedom Caucus by reviewing public statements in which they identified themselves as members, or by asking their offices.Small-dollar fundraising helps lawmakers buck pressure from traditional power brokers and corporate groups, said Ian Vandewalker, a campaign finance expert at New York University’s Brennan Center. “The ability to raise money outside those structures means you have freedom to thumb your nose at those structures,” Vandewalker said.Some hardline Republicans outside the group also rely heavily on small donors. Representative Matt Gaetz of Florida, one of several hardliners who confirmed they are not members of the caucus, took in close to 60% of his campaign fund from small donors. Gaetz’s office did not respond to a request for comment.Small-dollar donations – often courted via provocative emails and social media posts – also help reinforce the hardline brands of some lawmakers.”A controversial House member who might have struggled with fundraising 20 years ago is now going to thrive,” said Alex Conant, a Republican strategist who worked on Republican U.S. Senator Marco Rubio’s 2016 presidential campaign.Small-donor fundraising for Democrats as well as Republicans has grown rapidly over the last decade, with campaigns using email and social media posts to solicit contributions nationwide. Many political observers praise the expansion of small-dollar fundraising for countering the influence of deep-pocketed interest groups and for financing campaigns in many competitive races. DEFAULT COULD RISK RECESSIONThe Treasury Department has warned Congress that failure to raise the legal cap on federal debt by early June would risk a default in which Washington ceased to pay all its bills.Some economists warn a default would trigger a recession as the U.S. government missed payments on everything from Social Security checks for seniors to soldiers’ wages. The 2011 debt-ceiling fight took the United States to the brink of default. Rating agency Standard & Poor stripped the government of its top-tier credit rating. The S&P 500 index lost about 15% of its value, according to a Goldman Sachs (NYSE:GS)’ research note.While McCarthy has pledged that the government won’t default, the Republicans’ narrow 222-212 majority has given outsized power to the Freedom Caucus.Prominent members of the Freedom Caucus have so far downplayed corporate lobbyists’ warnings that brinksmanship over the debt ceiling could hurt the economy.”What will damage the economy is what we’ve seen the last two years: record spending, record inflation, record debt. We already know that’s damaging the economy,” said Jordan, a founding member of the group.    ‘I AIN’T LISTENING’Freedom Caucus members are among the most conservative members of Congress, according to their voting records.They are also further to the right than the Tea Party Republicans who led the 2011 debt-ceiling standoff, a Reuters analysis found. The analysis used a metric developed by political scientists and widely used in academic research known as DW-Nominate, which uses congressional voting records to score lawmakers on a scale from least to most conservative.Yet some corporate lobbyists expect Freedom Caucus members will not be in a position to dictate the outcome once serious negotiations about raising the debt limit get underway.Freedom Caucus member Chip Roy, a U.S. Representative for Texas, said no one from the business community has approached him on the debt ceiling because they probably understand his fiscal policy views.”If you want me to keep spending money I don’t have so you can sit here and sell me a bunch of crap about default, I ain’t listening,” Roy said.Indeed, as the June deadline approaches, business groups are more likely to focus on building a coalition of centrist Republicans and Democrats who control the U.S. Senate, some lobbyists said.     The likely winning approach in Congress “tends to be from the middle out,” said Neil Bradley, a U.S. Chamber of Commerce vice president who previously worked for Republican leadership in the U.S. House of Representatives.Other business lobbyists are bracing for a bumpy ride.”We try to educate our members and folks to help them understand how the process works,” said Steve Stivers, a former Tea Party Republican who now heads the Ohio Chamber of Commerce. “I don’t pretend that it’s going to happen magically before any kind of deadline or full pressure situation.” More

Investing.com — The January U.S. CPI release is due for release later Tuesday and could determine market expectations for what the Federal Reserve plans in terms of interest rate hikes in the near future. Kazuo Ueda looks set to become the next Bank of Japan governor, while Lael Brainard heads to the White House. Wall Street is set to open just higher, while crude weakens on the planned SPR release. Here’s what you need to know in financial markets on Tuesday, 14th February.1. U.S. CPI looms largeThe latest U.S. consumer price index has the potential to be one of the most important economic releases this year – will it provide room for the Federal Reserve to cut rates later in 2023 or are more aggressive hikes on the agenda?The January CPI is due out at 8:30 ET (13:30 GMT), and analysts expect the monthly topline figure to rise 0.5% and the yearly figure to rise 6.2%.A lot of the attention is likely to be on the core release, which excludes fuel and energy prices. It is expected to rise 0.4% for the month and 5.5% for the year, but there could be room for an upside surprise as the blockbuster jobs report earlier this month suggested there could be plenty of wage growth pressure.”Many business contracts typically reset in January, and companies traditionally set new prices, which are seldom fixed lower,” said Stephen Innes at SPI Asset Management. “January price inflation is also correlated with input cost inflation from the prior year — which was substantial.”2. Ueda nominated for BoJ governor roleThe Japanese government Tuesday officially nominated Kazuo Ueda to become the next central bank governor, confirming speculation which started circulating late last week.If confirmed, Ueda would succeed Haruhiko Kuroda, whose term ends on April 8, and would become the first postwar BoJ governor to come from academia.He faces the tricky task of adapting his predecessor’s complicated yield curve control policy, which has seen the yen fall to a 20-year low against the U.S. dollar, without derailing a fragile economic recovery.3. U.S. stocks to open higher; Palantir soars after reporting a profitU.S. stock markets are set to open marginally higher Tuesday ahead of the important consumer inflation data.By 6:25 ET (11:25 GMT), Dow Jones futures were up 30 points or 0.1%, S&P 500 futures were up 0.2%, and Nasdaq 100 futures were up 0.4%.Aside from the January CPI release, investors will continue to look at corporate earnings, although the season is coming to a close.Coca-Cola (NYSE:KO), Restaurant Brands International (NYSE:QSR), and Airbnb (NASDAQ:ABNB) are scheduled to release numbers Tuesday, and their results will be studied for insights into the health of the consumer.Additionally, Palantir Technologies (NYSE:PLTR) stock soared 18% premarket after the data analytics firm reported its first-ever quarterly profit, while Ford (NYSE:F) stock edged higher after the auto giant announced plans to cut just under 4,000 jobs across Europe as part of a global drive to cut costs and be competitive in the electric vehicle market.4. Brainard heads to the White HouseLael Brainard looks to have landed a new job, with Bloomberg reporting that the Fed’s vice chair is set, potentially as early as later Tuesday, to be appointed to the White House’s top economic policy position.Brainard would replace White House National Economic Council Director Brian Deese, who has announced his resignation.It’s difficult to see what policy implications such a move would have, but Brainard was widely regarded as something of a dove in the FOMC, being generally pro-stimulus. However, the wider narrative has certainly turned towards combating inflation.5. Crude weakens on U.S. SPR releaseCrude oil prices fell Tuesday, weighed by the plans of the U.S. government to release more oil from its strategic reserves.The Biden Administration announced late Monday that it will sell another 26 million barrels of crude from the Strategic Petroleum Reserve, as part of a release mandated by Congress, adding to the record 180 million barrels released in 2022 to combat rising fuel prices.This announcement came as something of a surprise as the Energy Department has been trying to stop some of the sales required by 2015 legislation so the reserve can be refilled.By 06:25 ET, U.S. crude futures were down 1.7% at $78.75 a barrel, while Brent crude was down 1.3% at $85.47 a barrel.The American Petroleum Institute is set to release its estimate of U.S. crude inventories later in the session, as is the Organization of Petroleum Exporting Countries monthly report. More

WASHINGTON (Reuters) – U.S. consumers flush with the COVID pandemic aid payments that flowed from the government in 2020 and 2021 flocked to auto lots and drove vehicle prices to sky-high levels.The repair bills followed, and even as inflation moderates for autos themselves the rising cost of auto maintenance – up about 13% over the last year – is one of the dozens of services that helped keep overall U.S. prices rising far faster than the Federal Reserve is willing to tolerate.As the U.S. central bank plots its next moves in the battle against inflation, the behavior of businesses in the services sector – from hair salons to airlines, restaurants and financial planners – will play a large role in determining whether the Fed succeeds in slowing inflation without interest rate hikes so aggressive they trigger a recession.Prices in that sector are now “really kind of the wild card … While there’s a general understanding that we think inflation will be going down, it still is difficult … to quantify exactly what those magnitudes are going to be,” Robert Rich, a senior economic and policy advisor at the Cleveland Fed and director of its Center for Inflation Research, said at an event on Monday.The U.S. Labor Department is due to release its Consumer Price Index report for January at 8:30 a.m. EST (1330 GMT). Economists polled by Reuters expect the pace of price increases slowed to an annual rate of around 6.2%, compared to 6.5% in December and a recent peak of around 9% in June.Even though that headline rate remains high, Fed officials will arguably be paying even more attention to the granular details around what is contributing most to any drop – and more importantly to what is not.At this point, between improving supply chains and changes in consumer behavior from the outset of the pandemic, the Fed feels it has won the battle when it comes to most goods: On average, outside of food and energy products that are driven by global commodity costs, prices of products have been falling recently and detracting from overall inflation.It is now the broad array of services, which account for about two-thirds of consumer spending, that is keeping inflation elevated and may present the Fed with a slow-moving endgame in defending its 2% inflation target.At a Feb. 1 news conference following the end of the central bank’s latest policy meeting, Fed Chair Jerome Powell noted his concern that “disinflation” had yet to take hold in much of the services sector.”So far, we don’t see that. And I think until we do, we see ourselves as having a lot of work left to do,” in raising interest rates and restricting credit as much as needed to ensure inflation falls broadly and sustainably, Powell said. ‘CLEAR SIGNS OF DISINFLATION’The news, however, isn’t all bad. For the purpose of calculating inflation, “housing” is considered a service. Whether in the case of rent or an equivalent calculated for homeowners, Fed officials are confident inflation for “shelter” is about to slow as home price appreciation ebbs and falling rents for newly leased apartments or houses work their way into annual averages.Even outside of housing, the general pace of services inflation has been falling somewhat.The less rosy news: It isn’t clear how fast or how much further it will decline, leaving the Fed in a waiting game to see if services-sector inflation falls on a timeline that makes policymakers comfortable they will make steady progress back to the 2% inflation goal.Personal consumption expenditures data as of December show that services outside of energy and housing were contributing about 1.9 percentage points on an annualized basis to headline PCE inflation, nearly consuming all of the Fed’s target inflation rate even if all other prices were steady. While that is down from nearly 3 percentage points in August, it represented an increase over the prior month.Omair Sharif, president of Inflation Insights, said he felt inflation would continue to slow in the industries where Powell has thrown the focus, with prices cooling in particular for things like air travel and health services.”There are some clear signs of disinflation,” said Sharif, who estimated that much of the run-up in services inflation early in 2022 came from transportation prices, notably airfares, something he attributed to post-pandemic “reopening pressure” that is now waning.By Sharif’s estimation, consumer prices for “core” services excluding energy and housing over the last six months rose at a 3.8% annual rate, only about half a percentage point higher than right before the pandemic.Still, the pace was “high and needs to come down,” Seth Carpenter, chief global economist at Morgan Stanley (NYSE:MS), said in a note. Carpenter said he felt that one of Powell’s top stated concerns, of low unemployment driving wages higher for workers in the services sector and keeping inflation elevated, may be overstated.But that doesn’t mean the Fed can rest easy.”The link from wages to inflation is there, but small, and both services wage and price inflation are trending down,” he said, noting a recent White House study indicating wage growth across key services businesses was declining. “But it will not be a smooth decline.” More

Toyoda, who joined Toyota in 1952, presided over the Japanese automaker’s expansion into manufacturing in the United States, the launch of the luxury Lexus brand and the Prius hybrid, and the global recognition for pioneering a new model for quality control in manufacturing.He died less than a month after his son, Akio Toyoda, 66, the third-generation of the founding family to run the automaker, announced that he was stepping down as president and would become chairman.”Shoichiro Toyoda raised Toyota to become the world’s top automaker,” Japan’s Prime Minister Fumio Kishida said in a statement of condolence.Toyoda, who studied engineering as a graduate student at Tohoku University, said he never forgot his father’s reminder that “an engineer belongs on the factory floor.” His first job at Toyota, he recalled, was inspecting cars that had been returned for defects.In 1957, after being assigned to test drive Toyota’s Crown across the United States, he recommended the company start exports. Sales of the car, which Americans found dangerously underpowered, were later cancelled.”It was a serious mistake,” Toyoda said later. “Still, I learned from my misjudgement and became determined to develop a high-quality car.”In the 1960s, Toyoda was one of the executives charged with implementing a new “total quality control” system based on the ideas of an American professor, William Deming. Under the system, later copied by other automakers and companies in other industries, workers were encouraged to contribute suggestions to improve production and reduce defects.”The program transformed Toyota’s corporate culture,” Toyoda later wrote in a serialized memoir carried by the Nikkei newspaper.Toyoda was named a managing director at Toyota in 1961 for his work on quality. In 1981, he was named to head Toyota’s sales organization.Following a merger of production and sales organisations a year later, he took over the helm of the newly integrated Toyota Motor Corp, serving as chairman from 1992 to 1999.As head of the Japanese business lobby Keidanren from 1994 to 1998, Toyoda lobbied to deregulate growth industries like mobile phones and to cut the corporate tax rate.Toyoda joined Toyota two years after his father, Kiichiro, was forced to step aside as Toyota president when the company ran into financial difficulties and needed a bank bailout brokered by the Bank of Japan.”I have not forgotten,” he said in 2014 when recounting how Japan’s central bank helped save the automaker in 1950. He also said his career had taught him that no company was bound to last and that most declined after 30 years.(This story has been refiled to add dropped word “in” in paragraph 15) More

But measures introduced so far and a recovery in the economy might not be enough to bring the debt level down below 80% of GDP, Assistant Governor Suwannee Jatsadasak told a media briefing.Thailand’s household debt stood at 86.8% of GDP in the third quarter of 2022, among Asia’s highest.Given the current economic situation, inflation and interest rates, “we think that by 2027, if nothing is done, household debt will be 84% of GDP,” Suwannee said.A debt level higher than 80% of GDP could be a drag on long-term economic growth and pose risks to the country’s financial stability, she said.The Bank of Thailand (BOT) on Tuesday issued a directional paper on sustainable solutions to the country’s debt overhang problems, including over how to handle existing debt and to offer responsible lending.Responsible lending rules should be introduced in the third quarter of this year after seeking opinions from relevant parties in the second quarter, BOT director Oramone Chantapant said.In the second quarter, the BOT expects to issue a consultation paper over how to allow retail lenders to set interest rates based on debtors’ risk profiles, she said, adding such a rule should come into effect late this year.However, interest rate ceilings have not been removed, Oramone said. More

Overseas sales of wine and spirits – France’s second-biggest export after aerospace goods – reached 17.2 billion euros ($18.42 billion) in 2022, up 10.8% on 2021, the Federation of French Wine and Spirits Exporters (FEVS) said.However, volumes sold fell 3.8%, mainly due to poor wine production in 2021 linked to frost damage and logistical problems, it said. Champagne exports outperformed, though, gaining 8.5% in volume and 20% in value as they set a record last year.After sharp rises in the past two years sales of Cognac, France’s most exported spirit, gained more than 9% in value but fell 4% in volume.Exports to the United States, France’s largest market for wine and spirits, jumped 14% last year to 4.7 billion euros and now accounted for over a fourth of total exports in value. “The United States confirmed its role as the driving force behind French wine and spirits exports,” FEVS Chairman Cesar Giron told Reuters.Exports to Britain, France’s second largest market, rose nearly 7% in value last year to 1.7 billion euros ($1.8 billion), helped by inflation.Restrictions linked to the COVID-19 pandemic in China weighed on wine and spirits exports to the region last year but Giron expected a rebound in 2023 after Beijing relaxed curbs.”Restaurants and hotels are full, people want to see each other so I expect a rebound in the coming months in terms of wine and spirits in China,” he said.A resumption in travel would also boost duty free sales, he said.The war between Russia and Ukraine cut exports to Russia by half but Giron stressed that the market was relatively small compared to total exports. The war had rather an indirect impact due to the rise in energy prices and grain to make vodka.($1 = 0.9339 euros) More

The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose 0.5 point to 90.3 last month, also lifted by an improvement in the share of owners who expected better business conditions over the next six months.Still, it was the 13th consecutive month that the index was below the 49-year average of 98. Owners expecting better business conditions over the next six months rose 6 points to a net -45%, pushing further away from an all-time low of -61% last June.Twenty-six percent of owners reported that inflation was their single most important problem, down 6 points from December and 11 points below July’s reading, which was the highest since the fourth quarter of 1979. About 42% of owners reported raising average selling prices, down a point from December. The steady decrease aligns with views that inflation is cooling after surging in the first half of 2022 in part because of stretched supply chains.While data on Tuesday is expected to show monthly consumer prices accelerating in January, the overall trend in inflation is slowing, with the year-on-year CPI forecast rising 6.2%, according to a Reuters survey of economists. That would be the smallest annual increase in the CPI since late 2021 and would allow the Federal Reserve to continue with its small pace of interest rate hikes next month. The U.S. central bank has raised its policy rate by 450 basis points since last March from near zero to a 4.50%-4.75% range, with the bulk of the increases between May and December. Forty-five percent of owners reported job openings that were hard to fill, up 4 points from December and keeping the share at a historically very high level. Construction had the highest percentage of unfilled jobs, followed by transportation and manufacturing. This fits in with government data this month showing there were 1.9 job openings for every unemployed person in December. More

UK wage growth accelerated more than expected in the three months to December but remained below inflation, according to official statistics that will be closely watched by the Bank of England ahead of its next interest rate decision.Growth in average regular pay, excluding bonuses, rose to an annual rate of 6.7 per cent in the final three months of 2022, up from a revised 6.5 per cent in the three months to November.That was higher than the 6.5 per cent forecast by economists polled by Reuters. The Office for National Statistics said it was the strongest regular pay growth rate since records began in 2001, excluding the coronavirus pandemic period.Ashley Webb, UK economist at Capital Economics, said that the BoE “will be increasingly concerned about the persistence of domestic inflationary pressures”. Markets are pricing a 0.25 percentage point increase in interest rates when the central bank’s Monetary Policy Committee meets on March 23. Once again, pay grew more quickly in the private sector than it did for public sector workers, one of the factors behind a wave of strike action in recent months. Average regular pay growth for the private sector was 7.3 per cent in the last three months of 2022, and 4.2 per cent for the public sector.Darren Morgan, ONS director of economic statistics, said: “Although there is still a large gap between earnings growth in the public and private sectors, this narrowed slightly in the latest period. Overall, pay, though, continues to be outstripped by rising prices.”Pay growth in both sectors is still below inflation, which is running at 10.5 per cent. Adjusted for inflation, regular pay fell by an annual rate of 2.5 per cent.Rachel Gomez, senior economist at think-tank Pro Bono Economics, said: “The national pay squeeze has now entered its 15th month.”Reflecting unusually high bonuses in 2021, when inflation started to climb, wage growth including bonuses slowed to 5.9 per cent in the three months to December, the lowest level since the summer, and contracted by 3.1 per cent in real terms.Falling real wages were behind the 843,000 working days lost because of labour disputes in December, the highest number since 2011, ONS data showed. The figure for the second half of 2022, at almost 2.4mn, was the highest in more than 30 years.The labour market remained tight. The unemployment rate was unchanged at 3.7 per cent in the three months to December, just 0.2 percentage points above its historical low of 3.5 per cent reached in the summer.

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Total employment rose by 74,000 in the three months to December from the previous three months, stronger than analysts’ forecast of 40,000.Inactivity, which tracks those not looking for work, also decreased in the final quarter, partially reversing the increase seen over the past three years that has contributed to labour shortages and wage pressure.The fall in inactivity was “particularly welcome as the chancellor looks to further boost workforce participation in his upcoming Budget”, said Nye Cominetti, senior economist at the Resolution Foundation.Job vacancies continued to decline, but remained well above the historical average.Commenting on the data, Jeremy Hunt, the chancellor, said: “In tough times, unemployment remaining close to record lows is an encouraging sign of resilience in our labour market.“The best thing we can do to make people’s wages go further is stick to our plan to halve inflation this year.” More