Economy

The producer price index rose 0.2% in October, below the 0.4% estimate.
A significant contributor to the slowdown in wholesale inflation was a 0.1% decline in services, the first outright decline in that measure since November 2020.
On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in September.
In other economic news, the Empire State Manufacturing Survey for November registered a reading of 4.5%, much better than the estimate for a -6% reading.

Wholesale prices increased less than expected in October, adding to hopes that inflation is on the wane, the Bureau of Labor Statistics reported Tuesday.
The produce price index, a measure of the prices that companies get for finished goods in the marketplace, rose 0.2% for the month, against the Dow Jones estimates for a 0.4% increase.

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Stock futures tied to the Dow Jones Industrial Average were up more than 400 points shortly after the release, reflecting market anticipation that cost of living increases not seen since the early 1980s were easing if not receding. However, market gains tapered through the day, with the Dow up just over 100 points late in the session.
On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in September and off the all-time peak of 11.7% hit in March. The monthly increase equaled September’s gain of 0.2%.
Excluding food, energy and trade services, the index also rose 0.2% on the month and 5.4% on the year. Excluding just food and energy, the index was flat on the month and up 6.7% on the year.
“The PPI read certainly adds more fuel to the fire for those who feel we may finally be on a downward inflation trend,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office.
One significant contributor to the slowdown in inflation was a 0.1% decline in the services component of the index. That marked the first outright decline in that measure since November 2020. Final demand prices for goods rose 0.6%, the biggest gain since June an traceable primarily to the rebound in energy, which saw a 5.7% jump in gasoline.

The deceleration came despite a 2.7% increase in energy costs and a 0.5% increase in food.
Inflation has soared during the pandemic era as supply chains could not keep with overheated demand for long-lasting big-ticket items, particularly those dependent on semiconductors. Economists generally expect that inflation has at least plateaued, though there are plenty of risks on the horizon, including a potential rail strike that could apply new pressure to supply chains.
The producer index is generally considered a good leading indicator for inflation as it gauges pipeline prices that eventually work their way into the marketplace. PPI differs from the more widely followed consumer price index as the former measures the prices that producers receive at the wholesale level while CPI reflects what consumers actually pay.
Hopes that inflation is at least slowing spiked last week when the CPI showed a monthly gain of 0.4%, lower than the 0.6% estimate. The 7.7% annual gain was a deceleration from a 41-year peak of 9% in June. Markets also soared following Thursday’s CPI release.
Federal Reserve officials have been raising interest rates in hopes of bringing down inflation. The central bank has hiked its benchmark borrowing rate six times year for a total of 3.75 percentage points, its highest level in 14 years.
Markets on Tuesday afternoon were pricing in about an 80% chance that the Fed would downshift in rate hikes in December, with a 0.5 percentage point increase after four straight 0.75 percentage point moves.
Vice Chair Lael Brainard said Monday she expects the pace of hikes soon will slow, through rates are likely to still go higher. She said the Fed can move to a more “deliberate” posture as it watches the impact of its rate hikes.
In other economic news Tuesday, the New York Fed’s Empire State Manufacturing Survey for November registered a reading of 4.5%, an increase of 14 percentage points on a monthly basis and much better than the estimate for a -6% reading. The index measures the difference between companies reporting expansion vs. contraction.
However, both the prices paid and received components saw increases, rising 1.9 points and 4.3 points respectively.

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Rishi Sunak has told the UK’s top executives to rein in their pay as their workers face a cost of living crisis — but he criticised demands by nurses for a double-digit pay increase. Speaking at the G20 summit in Indonesia, the UK prime minister said: “I would say to executives to embrace pay restraint at a time like this and make sure they are also looking after all their workers.”His comments will cause concern in some boardrooms given complaints by executives that British-listed companies were already unable to match the pay offered by their global and often private rivals. Sunak added that he was “sure executives of most companies will be thinking about pay settlements for senior management, for their workers and making sure they are fair. That’s what everyone would expect.”Chancellor Jeremy Hunt is expected to use the Autumn Statement on Thursday to lift the cap on banker bonuses, according to Whitehall insiders. It is one of the few announcements made by his predecessor Kwasi Kwarteng in September’s mini budget that Hunt is not expected to reverse.Britain’s new prime minister is one of the wealthiest to ever hold the office given both his past career as a banker and hedge fund manager and the family fortune of his wife, Akshata Murty, whose father founded IT company Infosys.A report by PwC last week showed that FTSE 100 chief executive pay was at its highest for at least five years after a rise of almost a quarter on average this year — fuelled by higher bonuses — but most companies are paying below-inflation increases to their staff.Sunak said he did not want to see a wage price spiral as “the people who are going to suffer the most are the people on the lowest incomes . . . and we’ll still be having this conversation in a year’s time”.Policymakers have come under fire for suggesting that workers should accept a painful squeeze on pay in order to bring down inflation at a time when many companies have seen a post-coronavirus pandemic rise in profits and big bonus payouts to executives.

Andrew Bailey, Bank of England governor, has since argued that companies need to show restraint on executive pay, as much as workers in their wage demands. Unions argue that inflation has been turbocharged by corporate profiteering at workers’ expense — and that public sector workers in particular cannot be expected to swallow another year of real-terms pay cuts, following a decade of austerity.“The government must see key services as a driver of economic growth, not a drain on the public purse,” said Christina McAnea, general secretary of Unison, the UK’s biggest union.She and other union leaders representing NHS workers met health secretary Steve Barclay on Tuesday for talks intended to help head off the threat of strikes that could hit hospitals across the UK over the winter.The prime minister on Tuesday waded into the dispute, criticising demands by nurses for a significant pay increase. Last week, the Royal College of Nursing voted for industrial action and has called for a 5 per cent pay rise above inflation. Sunak said he had “enormous gratitude for our nurses” but “what the unions are asking for is a 17 per cent pay rise and I think most people watching will understand that’s unaffordable”.Executives told the Financial Times that there were sympathies with the situation facing many people in the UK but that pay was a complex issue often linked to historic performance targets. More

“Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labour market conditions that benefit all.” Thus did Jay Powell, chair of the Federal Reserve, open his press conference after the meeting of the Federal Open Market Committee on November 2 at which it was decided to raise the rate on federal funds by 0.75 percentage points to 4 per cent. He was right. It is the duty of the state to ensure that its money has a predictable value. Central banks are entrusted with this task. Recently, they have been failing badly. It is a necessity and an obligation to rectify this failure.Between September 2019 and September 2022, headline levels of consumer prices, which are the ones relevant to people, rose 15.6 per cent in the US, 14.1 per cent in the UK and 13.3 per cent in the eurozone. If central banks had hit their targets, these price levels would have risen just over 6 per cent.There are good excuses for this failure, notably the disruptions caused by Covid-19 and then Russia’s war on Ukraine. Yet the outcome is not just due to supply shocks. In the three years to the second quarter of 2022, nominal demand expanded 21.4 per cent in the US, 15.8 per cent in the UK and 12.5 per cent in the eurozone. This is equivalent to compound annual growth of 6.7 per cent in the US, 5 per cent in the UK and 4 per cent in the eurozone. These rates of growth of demand are simply inconsistent with 2 per cent inflation in these economies, especially in the US and UK.Not so long ago, many worried that inflation had been too low for too long. In August 2020, the Fed duly announced a new “Statement on Longer-Run Goals and Monetary Policy Strategy”. In this it stated that “following periods when inflation has been running persistently below 2 per cent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 per cent for some time”. It is hard to argue that the subsequent inflation overshoot has been “moderate”. More importantly, it has transformed the history. In the US and UK, the price level increase over the past decade is equivalent to a compound annual increase of 2.5 per cent. At the end of this decade, that level is some 6 percentage points higher in both countries than it would have been if the price target had been hit. Yet people are not arguing that symmetry now demands sub-target inflation, maybe at 1 per cent for six years. In the eurozone, in contrast, inflation over the past decade is now back to the target of 2 per cent.The idea that one should correct for bygones was not sensible. But if people conclude that central banks will only offset past low inflation, not past high inflation, and that inflation shocks are more probable than deflation shocks, too, they might reasonably conclude that inflation will not average 2 per cent. This view will be reinforced by the fact that central banks adopt ultra-loose policy more enthusiastically than they do the reverse. In sum, people will think that they have a clear inflation bias.This is not just ancient history, far from it. It ought to shape what central banks do now. This is particularly true in the US, where the contribution of presumably temporary rises in energy and food prices is smaller than elsewhere and so the domestic factors in inflation are far more important. This history strengthens the already strong case for getting back to the target sooner rather than later. Thus, the longer inflation remains high, the further the price level will go above what it should be and so the bigger the cumulative losses for those who trust the stability of money. This will stoke anger. It will also make it more essential for the losers able to do so to recoup their losses. That will make wage-price and price-price spirals more durable. Furthermore, the longer inflation remains above target, the more likely inflation expectations are to be fundamentally “de-anchored”. That would make the task of restoring credibility harder and the costs of doing so greater. The worst possibility of all would be not for disinflation to be done too slowly, but for policymakers to give up too quickly, making it necessary to do it all over again in even worse circumstances. That, too, will be more likely if the disinflation is too long drawn out.

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Against this, it will be argued that there are risks of creating financial turmoil and an unnecessarily deep global recession, possibly even tipping economies into Japanese-style chronic deflation. This is indeed a danger. It is why the scale and duration of past fiscal and monetary support was a mistake, especially in the US, as Lawrence Summers of Harvard has long argued.

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Yet it is hard to argue that an interest rate of 4 per cent is too tight in an economy with a core inflation rate of 6.3 per cent. This is even truer of the Bank of England’s 3 per cent and the European Central Bank’s 2 per cent. If the US and global financial systems cannot survive even these low rates, they are in unforgivably bad shape.

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Past policy mistakes have interacted with a series of big shocks to generate high inflation. Those mistakes are real and significant, however. It is noteworthy, for example, that comparable shocks to energy and food prices in the early 2000s did not generate inflation as high as today’s in the US. Aggregate demand has also been unsustainably strong, again especially in the US. This has to be corrected, both firmly and fast, if the foundations of renewed growth are to be laid. The risks of tightening are real. But those of letting inflation become entrenched are greater. As Macbeth says, if one has to do something hard, “’twere well / It were done quickly.”[email protected] Martin Wolf with myFT and on Twitter More

Australia’s prime minister Anthony Albanese pressed Chinese president Xi Jinping to lift punitive export sanctions at a meeting that he called an “important step” towards stabilising ties between the major trading partners.But at the meeting on Tuesday, the first between leaders of Australia and China in six years, Xi offered no immediate easing of Beijing’s sanctions on products ranging from coal to beef and barley.The 30-minute encounter on the sidelines of the G20 summit in Bali marked in itself a limited thawing in ties between Canberra and Beijing. “I reaffirmed the Australian government’s view that it is in the interests of both sides to continue on the path of stabilising and developing our ‘comprehensive strategic partnership’,” said Albanese, referring to the description of their relationship that Canberra and Beijing adopted in 2014.Albanese played down the possibility of any early easing of the trade restrictions imposed by China in 2020, but said the two countries had agreed to hold further talks. There were “many steps still to take”, he added. In a statement on the meeting, China’s foreign ministry did not directly mention the sanctions Beijing imposed after Australia called for an independent investigation into the first Covid-19 outbreak in 2020.Relations had already been deteriorating over growing Australian concerns about Chinese influence in the country. Australia in 2018 banned Chinese telecoms equipment maker Huawei from its 5G network, a decision Beijing slammed then as “politically motivated”.At their meeting, Xi told Albanese he hoped Canberra would provide a “sound business environment for Chinese enterprises to invest and operate in Australia”, Chinese state media reported.Australian exports have boomed since the imposition of the Chinese sanctions, with suppliers of targeted products switching to other markets and China continuing to buy critical products such as iron ore and natural gas that were spared the punitive tariffs.Xi, who has returned to the world stage after a three-year absence during the pandemic, has drawn praise from US allies for condemning any threatened use of nuclear weapons in Ukraine. Russian president Vladimir Putin has made repeated warnings about possible use of nuclear weapons as his eight-month invasion of Ukraine falters.Albanese said he had specifically asked China to exercise its influence on Russia on such threats. “I noted that China has called that out and that is a good thing,” the prime minister told journalists after the meeting. In a separate meeting with Dutch prime minister Mark Rutte, Xi also referenced the need to avoid nuclear threats, Rutte said.“We also spoke . . . about the war in Ukraine. President Xi spoke out against the threat of nuclear weapons; an important message for Russia,” said Rutte in a statement.However, Xi has not publicly criticised Russia directly over the nuclear threats and the Chinese foreign ministry’s reports of the meetings with Albanese and Rutte did not mention them.In a meeting with his French counterpart Emmanuel Macron on Tuesday, Xi reiterated China’s calls for peace talks and a ceasefire in Ukraine.Additional reporting by Henry Foy in Bali and Edward White in Seoul More

The FDI inflows were at 7.9 billion riyals ($2.1 billion) in the second quarter, compared with about 51.9 billion riyals in the same period last year.With the exclusion of the closing of state-owned Saudi Aramco (TADAWUL:2222)’s IPO deal in the second quarter of 2021, the Kingdom’s foreign direct investment grew 46.5% year on year. ($1 = 3.7580 riyals) More

The text seen by Reuters set out their proposal for a new fund, with its principles and operating policies to be established by the next round of climate talks in Dubai in 2023. More

WASHINGTON (Reuters) – World Bank and IMF officials are pressing Zambia’s creditors to accelerate negotiations on reducing the country’s official debt burden, but sources familiar with the process said they are unlikely to finalise an agreement until early next year.China and France have led a series of meetings in recent months to renegotiate Zambia’s bilateral debts under the common framework created by the Group of 20 major economies and the Paris Club of official creditors, but progress has been halting.Chad on Friday became the first country to reach a debt agreement under the framework, but that deal does not include any debt reduction, given a bump in revenue from rising oil prices.The Zambian government told investors in October that it hoped it to agree debt relief terms with official creditors by the end of the year or early 2023.Zambia was the first African country to default during the COVID-19 era as it struggled with debt that reached 133% of GDP at the end of 2021. The IMF estimates that Zambia needs $8.4 billion of “cash debt relief” – cutting both interest payments and loan repayments – from 2022 to 2025.Once a deal is hammered out, Zambia would be the first country to reach an agreement that includes an actual reduction in its debt stock under the common framework.”We would like to see an acceleration of the tempo and authorisation of the treatment later this year or early next year,” said one of the sources, who was not authorised to speak publicly.World Bank President David Malpass told Reuters he met with Zambian President Hakainde Hichilema during the U.N. climate conference in Egypt and Hichilema was pressing creditors to finalise a memorandum of understanding (MOU) on the debt reduction.”It’s important to get that by year end,” Malpass told Reuters. “The longer it stays open, the greater the risk of the process getting further delayed. They initiated the common framework in (early) 2021, so it’s dragging on a long time.”Any MOU would have to be completed before April, when the IMF aims to carry out a first review of Zambia’s $1.3 billion, three-year loan in April, a crucial step in the southern African country’s push to restructure its debts. More