Economy

Weaker international demand for Chinese goods has led to a rise in shipping cancellations at the country’s biggest ports, putting a damper on the expected economic boost from its emergence from zero-Covid policies.Industry participants in China point to an increase in “blank sailings”, where carriers miss ports because there is not enough cargo to pick up or they fear delays.While cancellations are typical within the industry and usually rise during lunar new year, the supply chains data provider Drewry said the rate is “exceptionally elevated” this year, because of a drop in demand in the West. China’s exports have fallen for three consecutive months, weakening a core pillar of its struggling economic model.The cancellation rate for ships travelling east from Asia across the Pacific or to Europe will reach 31 per cent over the coming weeks, compared with 23 per cent over the same period last year and 16 per cent in 2021, Drewry said.As well as weak demand there is less to be shipped after hundreds of millions of estimated Covid-19 cases over the past month added to pressure on the country’s supply chains, leading to staff shortages and factory closures.“What happened to the shipping market as the virus spread everywhere in China . . . is worse than my worst projection,” said Mark Young, chief executive of Shanghai-based Asia Maritime Pacific, which owns a fleet consisting of dozens of ships.“The market has many empty ships but fewer cargo ready to be shipped,” he added, comparing the situation with the beginning of the Covid-19 pandemic in early 2020.China’s vast infrastructure linking factories and ports has grappled for three years with a strict zero-Covid regime that required frequent quarantines for personnel and “closed-loop” operations. The policy led to delays and cancellations, but exports largely boomed over that period as demand for goods soared. Simon Sundboell, founder and chief executive of data provider eeSea, said the nature of the disruption had now changed, from a scenario driven by delays within a “hot market” to one of weaker demand.“The industry is coming slowly back to normal and you do need to cancel more because of demand lowering,” he said. “Last year, that was down to all these excessive delays.”One Shanghai-based manufacturer who asked to remain anonymous said the carriers “just aren’t coming into the ports because there’s no volume”. He added that a fall in demand “is resulting in shipping lines reducing the number of vessels in circulation”.Jan Dieleman, head of Cargill Ocean Transportation, said the coronavirus outbreak was “absolutely” contributing to an increase in blank sailings. The commodity shipping group has not cancelled deliveries but has reduced coal shipments to China in recent months, in part because of seasonal changes in demand.

Young said Asia Maritime Pacific had been forced to cancel a sailing to a port on the Changjiang river to collect steel-related cargo because the factory could not produce it in time. He expects to send another ship to collect it in a month. Blank sailings have increased globally over the past year on a weakening economic backdrop. In China, the first nationwide outbreak of coronavirus coincided with the build-up to lunar new year. Maersk, the Danish container shipping company, said demand can be “expected to be volatile given the holiday closure in China combined with both the Covid situation and the ongoing inventory correction in US and Europe”.Anne-Sophie Zerlang Karlsen, head of ocean operations for Asia-Pacific at Maersk, nonetheless suggested that the wider relaxation of Covid-19 measures was “a very positive development that has the potential of lifting the Chinese economy significantly”.Cargill’s Dieleman said the shipping industry was now relying on a rebound in economic activity. “People think that the first [Covid-19] wave will go,” he said. “There is going to be stimulus from the government. So people start being bullish.” More

WELLINGTON (Reuters) – New Zealand’s consumer inflation held near three-decade highs last quarter but came in below the central bank’s forecast, prompting some analysts to bet that cash rate increases over the coming months might be less aggressive than previously thought.Annual inflation ran at 7.2% in the fourth quarter unchanged from the third quarter and just below a three-decade high, Statistics New Zealand said in a statement on Wednesday.Inflation was slight above economists’ expectations in a Reuters poll for a 7.1% annual rise but was below the Reserve Bank of New Zealand’s forecast of 7.5% inflationOn a quarter-on-quarter basis, the consumer price index (CPI) rose 1.4%, following a 2.2% increase in the third quarter.“It is clear that overall inflation pressures are not as severe as the RBNZ feared,” analysts at ANZ Bank said in a note. “The RBNZ now has the luxury of responding in the usual fashion to weakening activity data, reining in its hawkishness to some degree.”Both ANZ and Kiwibank now expect the RBNZ to increase the cash rate by 50 basis points in February rather than a 75 basis point increase.At the central bank’s last meeting in November it increased interest rates by a record amount, forecast further aggressive hikes and warned the economy might have to spend an entire year in recession to bring sky-high inflation under control.The New Zealand dollar has eased back to $0.6480 from around $0.6505 earlier, while the two year swap rate is at 4.865% down from Tuesday’s close of 4.995%.WAR ON INFLATIONStatistics New Zealand data showed price increases were broad based with rising prices for house construction and household utilities, higher food costs and increases in flight costs all on an upward trajectory. Kiwibank economists said New Zealand is currently seeing peak inflation and the inflation, both offshore and onshore, is improving.“The downtrend in inflation is encouraging, but it remains unacceptably high. We see inflation slightly above the top end of the RBNZ’s 1-3% target band by the end of this year,” Kiwibank added. More

The Eurochambres’ report, based on the responses of trade and commerce organisations representing around 70% of world GDP, shows prolonged geopolitical tensions and instability as the top challenges for the global economy this year. Participants from the United States and the United Kingdom see rising inflation fuelled by soaring food and energy prices among the top challenges, while energy security is of particular concern in the European Union. Survey participants were asked about their expectations for real GDP growth in their country or region for 2023, which were compared to benchmark forecasts from the International Monetary Fund (IMF). U.S. and Chinese participants have similar real GDP growth estimates to those of the IMF, while the British Chambers of Commerce forecast a 1.3% contraction for the economy, much more pessimistic than the 0.3% growth predicted by the IMF. In the euro zone, the forecasts are largely in line with the IMF. However, there are significant differences between countries. The Spanish Chamber of Commerce and the Italian Union of Chambers of Commerce Unioncamere are optimistic for their countries’ growth compared to the IMF forecasts, while the German Chamber of Commerce and Industry DIHK predicts a greater slowdown for Germany’s growth than the IMF. However, the DIHK forecast of a 3.0% year-on-year GDP contraction in 2023 dates back to autumn and the economic environment has brightened considerably in the last months, with some economists now saying that the euro zone’s largest economy could avoid a recession. The 2023 Eurochambres global economic survey was conducted during November and December 2022. More

Good morning. The activist fund Elliott Management has become one of the largest shareholders of Dai Nippon Printing — a 146-year-old Japanese conglomerate with a huge but unheralded global share in components of electric vehicle batteries and smartphone screens. The stakebuilding adds to only a handful of investments that Elliott has previously made in Japan — with Masayoshi Son’s SoftBank Group and Toshiba the most prominent. People close to the fund characterised it as an experiment in extracting trapped value that could pave the way for significantly more activity. Elliott has quietly increased its investment in DNP over the past few months, according to people familiar with the situation, and now holds a stake of a little less than 5 per cent worth about $300mn, making it the third-largest external shareholder. People close to DNP said Elliott’s initial engagement with the company, which has a market capitalisation of $6.3bn and currently trades where it did 20 years ago, has focused on a series of demands: a more aggressive share buyback scheme, the sale of its sprawling real estate holdings and an accelerated disposal of its extensive portfolio of shares in other Japanese companies.Five more stories in the news1. Germany to send Leopard tanks to Ukraine Germany is to send Leopard 2 tanks to Ukraine, in a move that marks a significant breakthrough in western efforts to bolster Kyiv’s fight against the Russian army. The decision to send tanks marks a U-turn for German chancellor Olaf Scholz, who had long hesitated to provide Ukraine with heavy armour.Related read: Several senior Ukrainian officials have resigned after President Volodymyr Zelenskyy swiftly sought to defuse concerns over corruption at a time when he is requesting more western weaponry to repel Russian forces.2. China property bonds rebound on support from Beijing Bonds issued by China’s highly indebted real estate developers have rebounded sharply over the past two months, in a sign that efforts by Chinese authorities to bolster the hard-hit sector are bearing fruit. China’s high-yield dollar bond index, which is dominated by property developers, has recovered almost 50 per cent from the record low hit in early November.3. US sues Google over its digital ad ‘dominance’ The US Department of Justice is suing Google for allegedly exercising monopolistic control of the digital advertising market. It is the latest legal broadside against the company as Washington seeks to crack down on the dominance of Big Tech. 4. Classified documents found at Pence’s private residence Former US vice-president Mike Pence turned over classified documents to the Department of Justice last week as federal authorities continue to probe how sensitive government files ended up at the private residences of Joe Biden and Donald Trump. The discovery adds to growing scrutiny of how current and former leaders handle classified information. 5. US touts Biden green subsidies to lure clean tech from Europe The row between EU and US politicians over subsidies linked to Joe Biden’s Inflation Reduction Act is deepening as governors across America try to lure European clean energy businesses to their states.

Video: US offshore wind: tapping an underused resource | FT Energy Source

The day ahead Inflation figures Inflation updates are due from the UK, Australia, Spain, Sweden and Singapore. Japan will also report its Consumer Price Index (CPI) cost of living measure. Use our global inflation tracker to see how your country compares on rising prices.

Tesla earnings It will be another week for Elon Musk watchers (just like every other week) with Tesla reporting fourth quarter figures. The company has been cutting prices of its electric vehicles to bolster demand in the US and Europe.🎧 Listen: In a recent episode of the Behind the Money podcast, the FT’s Richard Waters answers whether Tesla’s golden age of growth is over. To coincide with the publication of Martin Wolf’s new book, ‘The Crisis of Democratic Capitalism’, join him and other thought leaders online for a subscriber-exclusive event on January 31. Register for free here.What else we’re readingWhat I learnt in my days on the mountain in Davos At the World Economic Forum last week, the general mood on the economy in the high-income countries was one of great optimism about the near-term future. Yet these optimists may be getting ahead of themselves, writes the FT’s Martin Wolf. Wagner Inc: a Russian warlord and his lawyers Russian entrepreneur Yevgeny Prigozhin, founder of the private mercenary operation known as the Wagner Group, is one of the most sanctioned individuals on the planet. An FT investigation shows how he has used leading corporate lawyers around the world to try to keep western governments at bay.Seven must-stay hotels in Singapore Whether you’re after a close look into the cocktail-bar scene or a poolside loll followed by a Michelin-starred dinner, here is a selection of the city’s very best accommodations. The rise of Esther Crawford in Musk’s ‘hardcore’ Twitter The social media giant’s director of product management has become one of the few women at Twitter to join Elon Musk’s trusted lieutenants. Some insiders believe the 39-year-old has the energy needed to transform the company’s flailing business. Others say she’s a sycophant and opportunist.Why passive investing makes less sense in the current environment Passive portfolio management is attractive in a world where investment outcomes are heavily influenced by a common global factor — as in the decade of artificially floored interest rates and massive central bank injections of liquidity. But in a world where the macro outlook is murky dynamic asset allocation trumps low fees, writes Mohamed El-Erian.Take a break from the newsJapanese eyewear remains unmatched. It uses elements from the past, refashioned into something by modern means, designed for the future. We find out how the country’s glasses are made.

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OTTAWA (Reuters) -Canadian Finance Minister Chrystia Freeland said on Tuesday her approach to this year’s budget, due out sometime this spring, would be carefully calibrated due to a high level of uncertainty in the global economy.”There is still a lot of uncertainty in the world economy, and that means that we do need to continue to take a fiscally prudent approach,” Freeland said in answer to a reporter’s query about this year’s budget that was streamed online.”We still do not know for sure how the plane is going to land. We do not know for sure how the COVID recession is going to finally play out,” she said in Hamilton, Ontario on the sidelines of a meeting of cabinet ministers.Last fall, Freeland promised not to make the central bank’s job of taming decades-high inflation harder when she presented a fall fiscal update, which did however include C$11.3 billion in new spending that some analysts said was too much.Inflation is still over 6% – more than three times the central bank’s 2% target. The Bank of Canada will announce its latest interest-rate decision on Wednesday, with analysts forecasting a quarter-point increase and then likely a pause.The government has already said it was willing to increase health transfers to the provinces this year, and that it wanted to invest to make Canada more competitive with the United States as it pivots toward green technologies. Canada has also pledged to bolster its own military and to keep helping Ukraine with weapons and aid. More

Senate Minority Leader Mitch McConnell, who has played an integral role in debt ceiling negotiations in the past, predicted that no solution formulated by the Democratic-led Senate is likely to win approval from the House, which Republicans control by a slim margin. “In this current situation, the debt ceiling fix – if there is one, or how it’s to be dealt with – will have to come out of the House,” McConnell told reporters.House Republicans want to exact spending cuts from Biden in exchange for a deal on the debt ceiling. But the White House has repeatedly rejected negotiations over spending cuts, arguing that Congress has an obligation to increase the borrowing limit and avoid a default and the possibility of economic chaos.”It’s entirely reasonable for the new speaker and his team to put spending reduction on the table. I wish him well in talking to the president. That’s where a solution lies,” McConnell said. “I can’t imagine any debt ceiling provision passed out of the Senate with 60 votes could actually pass this particular House,” he added. Biden and McCarthy have agreed to meet to talk about the debt ceiling and other issues. But no meeting has been scheduled. McConnell spoke days after the U.S. government hit its $31.4 trillion borrowing limit, prompting the Treasury to begin extraordinary measures that could stave off a default until early June. Treasury Secretary Janet Yellen has called on Congress to move quickly to address the borrowing limit. More

The retail giant said the minimum wages for those employees would range from $14 to $19 an hour, up from $12 to $18 an hour.Walmart, the nation’s largest private employer, is significantly raising its starting wages for store workers, as it battles to recruit and retain workers in a tight retail labor market.On Tuesday, the retail giant said in a memo to employees that it was increasing its minimum wages for store workers to a range of $14 to $19 an hour, up from $12 to $18 an hour.In the memo, Walmart’s chief executive of U.S. operations, John Furner, said the increase was meant “to ensure we have attractive pay in the markets we operate.” The move would immediately affect about 340,000 of the company’s 1.3 million frontline hourly workers in stores across the United States.For years, Walmart has been under pressure from unions, policymakers and activists to raise its wages for workers in its stores. The raises announced Tuesday would increase the average wage across Walmart stores to roughly $17.50 an hour from about $17, though the company’s average wage still trails some competitors like Costco.“We want to make sure we attract the best associates,” a Walmart spokesperson, Anne Hatfield, said in an interview.The raises, which will take affect in March, come amid still persistently high inflation, which has been particularly difficult to navigate for low-wage workers whose paychecks are being stretched by the costs of food, fuel and other basic necessities.The move by Walmart is also a curiously optimistic sign regarding the broader economy: One of the nation’s largest companies is taking steps to retain workers, even as other large employers have been announcing layoffs.Mark Zandi, the chief economist at Moody’s Analytics, said he was surprised that Walmart had raised wages “so significantly” given the risks of a recession.“It suggests that Walmart doesn’t think the economy will suffer a recession anytime soon, or that if it does, it will be a short-lived and modest downturn,” Mr. Zandi said in an email.The move may also reflect the longer-term challenges that retailers face in retaining workers as baby boomers age out of the work force and the labor pool shrinks, he said.Even though the raises will ease the inflationary strain on Walmart workers, they may inadvertently prolong the problem broadly by boosting wages across other sectors of the economy.“Walmart’s move to hike their minimum wage may also complicate the Fed’s efforts to quell wage pressures and thus inflation,” Mr. Zandi said, “as the decision may impact wage hikes and price increases in other labor-intensive industries such as health care, hospitality and personal services that the Fed is focused on in its fight against inflation.” More

While weeks of deadly protests have affected some sectors, particularly tourism, minister Alex Contreras said, the economy could grow “close to” 4% this year, while the Peruvian sol remains the most stable currency in the region.Contreras said the economy is still expected to grow 3% in the first quarter of this year, maintaining a projection from last month.Nonetheless, protests have already caused 2 billion soles ($516.65 million) in damages to production and 3 billion soles in infrastructure damages, President Dina Boluarte said on Tuesday in a separate briefing.Attempts to manage the economic impact of the unrest, which began following the ouster and detention of her predecessor, former President Pedro Castillo in December, include the $1.55 billion plan announced late last year.Targeting the regions most affected by the protests, the plan includes the expansion of welfare provisions such as pensions, soup kitchens and access to natural gas in homes as well as public works, and investments in mining and agriculture.Contreras added Tuesday that Peru was looking to promote lithium development and will be creating a lithium working group, though he said a formal announcement had yet to be made.Peru is the world’s second-biggest copper producer, but so far has limited lithium production.Contreras said mining companies had expressed interest in expanding their operations in the country despite the unrest.President Boluarte repeated her calls for dialogue to end the protests this week, claiming the violence was being caused by a group of “radicals with their own political agenda.”($1 = 3.8711 soles) More