Economy

Will UK inflation follow in the footsteps of the US?The greater than expected softening of US inflation last week is not likely to be repeated in the UK.Economists forecast that the annual pace of consumer prices, due to be released on Wednesday, will show inflation accelerated to 10.8 per cent in October, up from a 40-year high of 10.1 in the previous month, according to a Reuters poll.“We expect that the October headline inflation print will be all about energy,” said Ellie Henderson, an economist at Investec. This is because government measures to tackle the energy price crisis did not fully offset the rise in the bills in October. With household energy bills rising by 27 per cent on the month, she expects the headline inflation figure to have increased to 10.7 per cent, slightly below consensus.However, she expects the core CPI measure, which excludes food and energy, to slow to 6.2 per cent from 6.5 per cent in the previous month, as businesses have sought to reduce the costs they pass on to customers against a weaker consumer-spending backdrop.This will be the peak in UK price pressures, Henderson added, as a rebound in sterling is also likely to have exerted downward pressure on inflation.Earlier in the month, the Bank of England forecast CPI inflation to pick up to about 11 per cent in the final quarter and fall sharply to about 5 per cent by the end of next year, as energy prices exert less pressure on the annual rate of price growth.However, the bank noted that the risks around the inflation projections were on the upside in the medium term following great uncertainty over prices and supply of Russian gas to Europe. Valentina RomeiWhat will retail sales data tell us about the health of the US consumer? Retail sales data, due to be released on Wednesday, will offer insight into the health of US consumer spending as inflation begins to cool. Economists forecast that the Census Bureau will report a 0.9 per cent increase in overall retail sales in October from the previous month, according to a Reuters poll, following a flat reading in September.That number is expected to have been driven by an increase in petrol prices, which have come down from the peaks seen this summer but remain variable. TD Securities, an investment bank, also expects increased spending on cars to have driven the figure higher. Stripped of those effects, the rate of increase is forecast to be 0.4 per cent from the previous month.The retail sales data follow last week’s US inflation figures for October, which undershot forecasts and signalled that the Federal Reserve’s aggressive interest rate increases were beginning to make a dent in prices. Smaller price rises typically slow the growth of retail spending. Big retailers including Walmart, Home Depot and Macy’s will also report third-quarter earnings in the coming week. Bank of America analysts noted that the bank’s data showed that Hurricane Ian had an effect on spending in September. That was not reflected in last month’s Census Bureau and the analysts are therefore watching for any downward revisions to September’s data. Kate DuguidWhat will eurozone industrial production data reveal about the state of the bloc’s economy?European manufacturers have managed to keep increasing production for much of this year, despite grappling with soaring energy costs, supply chain bottlenecks and falling consumer confidence. But economists doubt this can last much longer.The latest test of eurozone factories’ resilience will come on Monday with the publication of industrial production data for September. Economists polled by Reuters expected output to be up 0.3 per cent from the previous month and 3 per cent from a year ago.This follows monthly declines in the national factory output numbers that have already been released showing a 0.8 per cent drop in France, a 1.8 per cent decline in Italy and 0.3 per cent fall in Spain. Germany bucked the downward trend with an increase of 0.6 per cent.“Looking through the monthly volatility, it seems that industrial output is still moving sideways,” said Dirk Schumacher, head of European macro research at Natixis. “Put differently, the recession in the manufacturing sector is so far only visible in the sentiment data, but not the hard data.”Certain energy-intensive sectors are, however, already suffering sharp drops in production. Schumacher said output in the German chemicals sector was “in freefall”, having already decreased 15 per cent since the start of the year. Martin Arnold More

Yellen told reporters on the sidelines of G20 summit meetings in Bali that Senate control by Democrats would ease the path for approving nominations and other legislative actions.”We want to see the debt ceiling get done. If it got done in the lame duck, that would be great, as far as I’m concerned,” Yellen said. More

HANOI (Reuters) – German Chancellor Olaf Scholz discussed energy and trade ties with Vietnam’s Prime Minister Pham Minh Chinh during a visit to Hanoi on Sunday, the first for a German leader in more than a decade.Scholz’s stop in Vietnam on his way to the G20 leaders’ summit in Indonesia, highlights Vietnam’s growing role in global supply chains as many German firms consider diversifying their manufacturing operations by expanding their presence beyond China, their main hub in Asia.At a joint news conference with Chinh, Scholz said Berlin wanted deeper trade relations with Vietnam and would support the country’s transition to a greener economy, including through the expansion of the metro system in Hanoi, Vietnam’s capital.The Hanoi visit follows Scholz’s trip to China last week, the first by a Western leader in three years since the start of the COVID-19 pandemic. He will next visit Singapore before heading to the G20 summit on Nov 15-16. Vietnam and Singapore are the only countries in Southeast Asia that have a free trade agreement with the European Union. As a result, they are the EU’s biggest trading partners in the region.Germany is Vietnam’s second-largest trading partner among EU states after the Netherlands, with exchanges worth $7.8 billion last year, according to law firm Dezan Shira – far less however than the United States, China, Japan and South Korea.About 500 German firms operate in Vietnam, of which around 80 have manufacturing plants in the country, according to the German chamber of commerce in Vietnam, AHK. Among them are engineering giant Bosch, energy firm Messer, and several smaller companies involved in the global automotive supply chain.Many more are looking to diversify some of their activities away from China where about 5,000 German companies operate, AHK head in Vietnam, Marko Walde, told Reuters. Over 90% of German firms planning such a move look at Southeast Asia as their preferred choice, Walde said, noting that Vietnam and Thailand were favourites in the region. More

Asked whether Brexit was the reason Britain’s economy was lagging other countries, Hunt told the BBC: “I don’t think that’s the biggest issue … I think it’s much more to do with other factors in the labour market that I want to think about.” “That’s creating constraints for businesses that are finding they can’t employ the people they need to. That’s absolutely something I’ll be talking about on Thursday.” More

The so-called warning strikes will take place at targeted locations in the states of Hesse, Thuringia and Rhineland-Palatinate, the union said.The union, which represents metal and electric industry workers, have called for an 8% pay increase. More

“It is envisaged to ensure the viability of 14 systemically important banks of the country. If absolutely necessary, the National Bank will primarily ensure the vital activities of state-owned banks,” the bank said on Telegram messaging apps.Russia systematically attacks Ukrainian energy sector causing blackouts for significant parts of the country. More

A notice to the institutions from the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) outlined 16 steps to support the industry, including loan repayment extensions, in a major push to ease the deep liquidity crunch which has plagued the property sector since mid-2020.The move, which was first reported by Bloomberg, comes as cash-strapped property developers struggle to tap sources of funding to finish projects and pay suppliers. Several developers have defaulted on their offshore debt obligations over the past year, fuelling a property downturn which has weighed on the world’s second-largest economy.Chinese regulators are encouraging financial institutions to allow real estate companies to defer repayment of some loans, such as property development and trust loans, the sources said.The sources quoted the notice as saying that if a loan is due to mature within six months, real estate companies can be allowed to defer repayments for one more year.According to the notice, trust companies are also encouraged to provide financing for real estate firms on projects such as rental housing construction and mergers and acquisitions, the sources said.The sources declined to be named because the notice was confidential. The PBOC and CBIRC did not immediately respond to Reuters’ requests for comment.China’s property sector, once a pillar of growth, has slowed sharply this year as the government sought to restrict excessive borrowing by developers. The clampdown has triggered falls in property sales and prices, bond defaults and the suspension of housing construction, angering homeowners which have threatened to stop mortgage payments.More than 200 local governments have taken steps to prop up the distressed sector this year, mainly targeting homebuyers, including by providing subsidies, cutting mortgage rates and allowing for smaller down payments. Overall demand, however, remains fragile.The notice comes as policymakers recently ramped up support for crash-strapped developers. Chinese regulators expanded a key financing support programme designed for private firms, including real estate companies, to about 250 billion yuan ($35.18 billion) this week.”The Chinese authorities provided a slew of supportive measures over the weekend to support the property sector, which is likely to improve the market sentiment towards the Chinese economy,” said Hao Zhou, chief economist at Guotai Junan International.”Weak property sales and investment suggest that a turnaround of (the) property outlook remains uncertain over the foreseeable future, which justifies the recent supportive measures from the Chinese authorities.”($1 = 7.1066 Chinese yuan renminbi) More

(Reuters) – The head of the International Monetary Fund warned of risks to the global economy from the rivalry between China and the United States, while describing tariffs put on Chinese imports under then-President Donald Trump as counterproductive.”We may be sleepwalking into a world that is poorer and less secure as a result,” IMF Managing Director Kristalina Georgieva told the Washington Post in an interview published on Saturday.”I lived through the first Cold War on the other side of the Iron Curtain. And, yeah, it is quite cold out there,” Georgieva, who was born and raised in Bulgaria, said in the interview. “And to go in a second cold war for another generation is … very irresponsible.”President Joe Biden has yet to resolve the key policy issue surrounding tariffs on Chinese goods established by his predecessor that cost U.S. importers billions of dollars.”It is important to think through actions and what they may generate as counter actions carefully, because once you let the genie out of the bottle, it’s hard to put it back in,” Georgieva said of the Trump-era tariffs.Biden’s team wrestled for months with various ways to ease the costs of duties imposed on Chinese imports as it tries to tamp down inflation.China’s military exercises around Taiwan led Biden administration officials to recalibrate their thinking on whether to scrap some tariffs or potentially impose others on Beijing, people familiar with the matter told Reuters in August.Beijing staged the war games that month after U.S. House Speaker Nancy Pelosi visited Taipei, and has since continued military activities nearby including almost daily fighter jet crossings of the sensitive median line in the narrow Taiwan Strait.Relations between the world’s two largest economies have strained in recent years over issues like tariffs, Taiwan, intellectual property, cyber security, the removal of Hong Kong’s autonomy and the origins of the coronavirus outbreak, among others. More