Economy

(Reuters) -The United States government has stopped taking applications for student debt relief, after a federal judge blocked President Joe Biden’s loan forgiveness plan, according to a notice on a government website. A judge in Texas who was appointed by former President Donald Trump ruled on Thursday that Biden’s plan to cancel hundreds of billions of dollars in student loan debt was unlawful and must be vacated. The Biden administration is appealing the ruling.”Courts have issued orders blocking our student debt relief program. As a result, at this time, we are not accepting applications. We are seeking to overturn those orders. If you’ve already applied, we’ll hold your application,” the notice says. About 26 million Americans have applied for student loan forgiveness, and the U.S. Department of Education has already approved requests from 16 million. The appeal would be heard initially by a three-judge panel of the New Orleans-based 5th U.S. Circuit Court of Appeals, a court dominated by conservative judges who have stymied other Biden policies. Of the court’s 16 active judges, only four were appointed by Democratic presidents. Trump appointed six of them. White House Press Secretary Karine Jean-Pierre said Thursday the department would hold onto application information “so it can quickly process their relief once we prevail in court.”U.S. District Judge Mark Pittman, an appointee of former Republican President Donald Trump in Fort Worth, called the program an “unconstitutional exercise of Congress’s legislative power” by Biden as he ruled in favor of two borrowers backed by a conservative advocacy group.The litigation could ultimately wind up at the U.S. Supreme Court. Conservative Justice Amy Coney Barrett has already turned back two requests to block the program in lawsuits out of Indiana and Wisconsin, two states she is assigned to assess emergency appeals from. More

BRASÍLIA/RIO DE JANEIRO (Reuters) -An aide to Brazilian President-elect Luiz Inacio Lula da Silva wants to delay the Nov. 20 election for leader of the Inter-American Development Bank (IDB) until next year and is seeking U.S. support for the move. Former Finance Minister Guido Mantega, who is on Lula’s transition team, said he sent a letter to U.S. Treasury Secretary Janet Yellen, and spoke with representatives of other Latin American countries “to look for a candidate that represents union.””The Bolsonaro government would not be able to convince anyone, countries do not like the Bolsonaro government and the Bolsonaro management,” he said in an interview with TV channel GloboNews, adding he had talked to Lula about his move.Outgoing President Jair Bolsonaro had nominated former central bank chief Ilan Goldfajn to run for IDB leader. But Lula allies have questioned the legitimacy of his candidacy, arguing that the IDB election should be postponed until next year so Brazil’s nomination can reflect its newly elected government. The U.S. Treasury did not immediately respond to a request for comment. On Wednesday, Mantega told Reuters he was talking to “several governors” at the IDB to seek to postpone the election until after leftist Lula takes office on Jan. 1.”It only takes a third of the collegiate not to show up to postpone the vote,” said Mantega.According to IDB regulations, a quorum for any meeting must be an absolute majority of governors, including a majority of regional members, “representing not less than two-thirds of the total voting power of the member countries.”The U.S. Treasury, which has said it will not nominate any candidate, holds 30% voting power in the bank, followed by Brazil (11%) and Argentina (11%). Colombia and Chile each hold a 3% stake.A source, who works at the IDB and had initially confirmed the letter, said the chances of a postponement are unlikely, with several other regional nations hoping their candidates will replace Mauricio Claver-Carone, the former IDB chief who was ousted in an ethics scandal.Argentina announced on Friday that it would nominate international economic relations Secretary Cecilia Todesca Bocco as its candidate. Also competing for the post are Mexico central bank Deputy Governor Gerardo Esquivel and Chile’s former Finance Minister Nicolas Eyzaguirre. More

The University of Michigan Survey of Consumers posted a 54.7 reading for November, down 8.7% from the previous month’s reading and well below the estimate.
The survey noted a particular slide in views on spending for durable goods — big-ticket items such as televisions, kitchen appliances and motor vehicles. The index for that group fell 21%.

Shoppers are seen in a Kroger supermarket on October 14, 2022, in Atlanta, Georgia.
Elijah Nouvelage | AFP | Getty Images

Higher interest rates, a potential recession and persistently high prices made consumers substantially less confident about the current state of the economy as well as where things are heading, according to a closely watched sentiment gauge released Friday.
The University of Michigan Survey of Consumers posted a 54.7 reading for November, down 8.7% from the previous month’s reading of 59.9. That was well off the Dow Jones estimate, which forecast the number to be little changed at 59.5.

Along with that reading, the current economic conditions index fell 11.9% to 57.8. The index of consumer expectations, which looks at where respondents see things heading in six months, tumbled 6.2% to 52.7.
On an annual basis, the headline index reading fell 18.8%, while the current conditions measure was off 21.5% and the future expectations measure slid 17%.

The University of Michigan release comes a day after the Bureau of Labor Statistics reported that the consumer price index rose 0.4% in October, below the 0.6% estimate. That news set off a wild rally on Wall Street, where sentiment rang high that the Federal Reserve could ease the pace of interest rate increases as inflation shows signs of leveling off.
“For now, both inflation and higher borrowing costs are squeezing household spending,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “For low-income households in particular, higher prices for essentials limit discretionary spending, crimp savings, and contribute to higher credit card debt.”
The survey noted a particular slide in views on spending for durable goods — big-ticket items such as televisions, kitchen appliances and motor vehicles. The index for that group fell 21% as consumers were wary of rising borrowing rates and elevated prices.

Durable goods purchases have been on the decline since mid-2021, falling the past two quarters after exploding in the early days of the Covid pandemic.
“Better news on October inflation didn’t come in time to provide a boost to sentiment, which declined unexpectedly,” Baird added. “The economy may not be in recession, but for households struggling under the weight of higher prices, it certainly feels like it for many.”
Inflation expectations edged higher in the month despite October’s CPI reading, which showed that year-over-year prices rose 7.7%, compared to 8.2% the previous month.
The one-year inflation outlook rose to 5.1%, the highest level since July, while the five-year gauge rose to 3%, the highest since June. Those readings have remained in a tight range for most of the year, starting 2022 respectively at 4.9% and 3.1%.
But those are high by historic terms and come as the Fed has boosted its benchmark interest rate by 3.75 percentage points since March. Friday’s survey shows consumers, whose spending comprises 68% of U.S. GDP, are wary heading into the pivotal holiday shopping season.
“Consumers managed to hold their heads above water earlier this year when gasoline prices were peaking at well above $5 per gallon,” wrote Paul Ashworth, chief North America economist at Capital Economics. “But it will be harder for them to shrug off high interest rates given that the household saving rate is already at an unusually low level.”
The sentiment index reached its historic low in June as worries accelerate that the U.S. already was in recession or heading for one. GDP rose at a 2.6% annualized pace for the third quarter, helping to assuage some anxiety over a contraction after the first two quarters saw negative readings, but many economists still expect the U.S. to hit a recession in 2023.

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Today’s top storiesNew EU forecasts showed a sharp drop in German output would drag the bloc into recession this winter. Inflation will also be higher than originally forecast at 7 per cent for 2023, a slight improvement on the 9.3 per cent expected this year. China eased coronavirus quarantine restrictions for close contacts and international travellers in the first signs of a softening of its zero-Covid strategy. The manufacturing hub Guangzhou however is on the brink of a citywide lockdown.The crypto market faces a 2008-style financial crisis, according to the head of Binance, the world’s largest crypto exchange, a point echoed by US editor-at-large Gillian Tett. Binance’s rival FTX, previously valued $32bn, has filed for bankruptcy.For up-to-the-minute news updates, visit our live blogGood evening.“I am under no illusion that there is a tough road ahead.”That was the reaction of chancellor Jeremy Hunt to news this morning that the UK economy had shrunk more than expected, highlighting the challenge he faces ahead of his landmark statement on the public finances of a nation teetering on the edge of recession.GDP fell 0.6 per cent between August and September, while output dropped 0.2 per cent between the second and third quarter, the first three-monthly decline since February 2020. This leaves the UK economy, unlike its peers, smaller than before the pandemic. The Bank of England has already forecast that the third quarter would be the start of a long recession thanks to tighter financial conditions and the squeeze on household budgets from surging prices.There are also ominous signs in the labour market, an area where the government has been keen to trumpet its success. New analysis suggests the UK will be the only developed economy with employment still below pre-pandemic levels at the start of 2023. A new “winter of discontent” is also looming as more public sector workers — nurses are the latest — demand pay rises in line with inflation.

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Hunt meanwhile is casting around for ways of filling the £55bn budgetary hole as he prepares for his big moment on November 17 in what could be, as former top government official Nicholas Macpherson sees it, a return to Treasury orthodoxy.About half is set to be filled by spending cuts, ushering in what former Bank of England official Charlie Bean dubbed “Austerity 2.0”. Other potential measures include a delay in social care reforms, a freeze in income tax thresholds and a stealth raid on inheritance tax. (And if you think you could balance the books yourself, have a go at our “fill the black hole” interactive.)Ultimately, says economics editor Chris Giles, Hunt has to choose between politics and economics. Immediate tax rises and spending cuts may put the country’s finances in better position later this decade, but that’s when the opposition Labour party is likely to be in power. Deferring action could minimise the immediate pain and mean Labour inherits weak public finances, but runs the risk of falling foul of financial markets. And, as recent history shows us, that is not a good position to be in.FT Schools is hosting a free economics webinar on Monday with senior FT journalists and guests covering topics from green energy to government budgets and Brexit. See the full agenda here and sign up here to submit your questions to the panel.Need to know: UK and Europe economyUK targets for housing suffered a new blow as developers warned demand had dropped as much as 50 per cent as higher mortgage rates kick in. The trend is also clear from the latest survey on new buyer inquiries from the Royal Institution of Chartered Surveyors.The UK has frozen more than £18bn in assets as part of sanctions against Russia, according to new data. Since Russia’s full-blown invasion of Ukraine in February, it has hit 120 Russian entities and more than 1,200 individuals linked to the Kremlin.EU leaders promised to outline measures to set a limit on gas prices on November 24 but several member states declared their impatience with the commission’s efforts.Need to know: Global economyUS consumer price inflation slowed from an annual 8.2 per cent to a better than expected 7.7 per cent in October, the lowest level since January. Core CPI, which excludes volatile food and energy, also slowed, hitting an annual rate of 6.3 per cent. US stocks and government bonds rallied on the news as investors bet the Federal Reserve would slow the pace of rate rises.US business leaders celebrated what looks like a split Congress after the midterm elections, arguing that a divided government prevents either party from doing anything too extreme. Catch up on the latest results with our election tracker.Unless Africa gets support to rebuild its food and water systems to cope with climate shocks, a humanitarian catastrophe will follow, warns Michelle Williams, an academic at Harvard. Encouraging innovation from African scientists, engineers, farmers, financiers, entrepreneurs and political leaders is key, she argues. The G20 group of nations meets next week in Bali, an occasion FT commentator Gideon Rachman calls the “first global summit of the second cold war”. The meeting will be the first face-to-face as leaders between Joe Biden and Xi Jinping and will also feature a rare appearance on the world stage for host nation Indonesia’s president Joko Widodo. Need to know: businessSMIC, China’s largest chipmaker, said US sanctions had hit output. Germany blocked another Chinese purchase of a semiconductor company, highlighting concerns over security and supply chains. Apple iPhone maker Foxconn said it would keep expanding in China despite the hit to revenues from Covid restrictions. China is still trying to court global companies, as evidenced at the Shanghai trade fair.Daimler Truck, the world’s largest truckmaker, warned the global supply chain was “broken” even as it reported a 27 per cent jump in third-quarter sales to €13.5bn. Electric carmaker Polestar echoed the supply chain message.An official report showed many UK companies took Covid support funds from the government even though they could have accessed finance elsewhere. Science round upPressure is mounting for political solutions to the climate crisis as new data highlight the impact from extreme heat on developing countries. India’s workers, students and business owners have given FT film makers a first-hand account of how extreme heat affects working conditions.

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Global carbon emissions will hit a record high this year, despite a slowdown in China, thanks to an increase in coal use and a pick-up in economic activity after the worst of the coronavirus pandemic.The promise of nuclear fusion for “unlimited clean energy” is moving from fantasy to reality. Gene-edited crops aka “frankenfoods” could be a fix for climate change, thanks to their increased resistance to extreme heat and drought. Our Big Read examines proposals for lighter regulation from the EU.Moderna ended its truce onenforcing patents against its vaccine rivals, setting up a fight over mRNA technology. The decline in Covid infections has gathered pace across the UK.What makes our cells tick? Read our review of Siddhartha Mukherjee’s new book on the science of the body: The Song of the Cell.Get the latest worldwide picture with our vaccine trackerIn Wednesday’s DT we inadvertently referred to a potential “blue wave” of Republican support in the midterm elections, which as our US readers will know, should of course have been “red wave”. We apologise for the error.Some good newsA new ranking of the world’s best female scientists hopes to promote women’s achievements while bringing more attention to gender bias in the science community. Imed Bourchrik, the co-founder of Research.com, told DT: “We hope it will contribute to providing more opportunities and equal chances for women in science.”A new ranking of top women scientists aims to celebrate female achievements and highlight gender bias in the science world © Getty Images More

About four in five consumers now describe buying conditions for homes as bad, a record in data going back to 1978, according to the University of Michigan’s consumer sentiment survey for November. The number of people who attribute the erosion in conditions to higher interest rates is at the highest level in 40 years, figures showed Friday.The housing market, which is especially susceptible to higher borrowing costs, has been crumbling since the Fed began raising interest rates in an effort to curb demand across the economy and tame rampant inflation. Mortgage rates have been hovering around the highest levels in two decades, and as of last week were above 7%.A separate gauge from the university showed home-buying conditions related to housing prices slipped in November. While somewhat improved since earlier this year, it remains deep in negative territory and well below the peak in mid-2020.Higher rates aren’t just weighing on the housing market. Buying conditions for household durable goods slumped this month after surging in October, and the share of consumers who said purchase conditions for motor vehicles were bad because of rising borrowing costs climbed to the highest since 1982.The University of Michigan’s main consumer sentiment gauge retreated to a four-month low in early November while inflation expectations rose.©2022 Bloomberg L.P. More

Speaking at an event hosted by the finance professionals association CFA Society Brazil, Campos Neto said the country needs to have an eye for social issues but also for fiscal balance, “otherwise we will return to a world of uncertainties.”Lula, who will take office on Jan. 1, pushed on Thursday for more room to increase social spending without setting long-term fiscal rules or naming his top economic policymakers, triggering a fall in Brazilian markets. Campos Neto, who will head the central bank until December 2024, highlighted that the positive dynamics seen at the margin for Brazilian inflation need to be confirmed and will depend on the definition of the country’s fiscal anchor going forward.The negative reaction to Lula’s comments is the latest example of investors delivering an immediate, bruising response to nascent governments’ economic proposals, amid a challenging global backdrop of high inflation, weak growth and low risk appetite.In Britain, for example, former Prime Minister Liz Truss resigned after markets shunned her plans for major unfunded tax cuts.”I don’t know if there was a Liz Truss moment for Brazil (yesterday), but it was a clear demonstration of the markets’ sensitivity to the fiscal issue,” said Campos Neto. He said the central bank’s autonomy would pass “an important test” but believed in the continuity of that status under Lula’s future administration. Campos Neto also stressed that the bank’s policymakers are open to participating in the transition government. More

UK interest rates are already higher than they need to be to bring inflation back to its target level, a Bank of England policymaker argued on Friday.Silvana Tenreyro, an external member of the BoE’s Monetary Policy Committee, told a conference in London that “policy was already in restrictive territory” before the November MPC meeting, when the majority of members voted to raise interest rates by 0.75 percentage points to 3 per cent.She said it was too early to see the full effects of “the fastest tightening in policy in the MPC’s history”, arguing that interest rate rises fed through to the economy more slowly than in the past, as fixed-rate mortgages were more common and most homeowners had yet to refinance. Even if interest rates remained at their current level, the economy was likely to fall into recession and inflation to fall below target in the medium term, leading the BoE to cut interest rates from 2024, she suggested. If interest rates rose in line with recent market expectations, the UK would face a prolonged recession accompanied by a sharp rise in unemployment and further falls in living standards. UK GDP shrank in the third quarter, according to official data released on Friday that suggested the economy had already entered recession and was now smaller than immediately prior to the Covid-19 pandemic.Other MPC members have already made clear that the central bank does not think interest rates will need to rise as high as the 5.25 per cent peak market pricing implied in the run-up to the last policy meeting.But Tenreyro, who has been one of the most dovish voices on the MPC in recent months, is an outlier in suggesting that the central bank has already done enough to rein in inflation, which stood at 10.1 per cent in September — five times the BoE’s 2 per cent target. Jonathan Haskel, another MPC external member, struck a very different note in a speech published on Friday, which he was due to deliver at the Bank of Israel on Sunday. Haskel said the latest signs of the economy slowing did not imply there was less need for the BoE to tighten policy. High inflation could be especially sticky in the UK, he argued, because the country had a very tight labour market — partly as a result of ill health keeping people out of the workforce — and a very poor record on investment.“My concern is that these supply-side stresses risk persistent inflationary pressure . . . right now, I believe it important for monetary policy to stand firm,” Haskel said. But some observers are increasingly worried that central banks — having been too slow to raise interest rates in the recovery from the pandemic — could now make the opposite mistake, with their collective efforts to curb inflation causing a sharper global downturn than necessary.

Tenreyro dissented from the majority of MPC members at the last meeting, voting for a rate increase of just 0.25 percentage points. The only reason she backed even this increase, she told the Society of Professional Economists, was to guard against the risk of so-called “second-round effects” setting in and turning high inflation into a self-fulfilling phenomenon. This could happen if people saw high inflation as normal, with workers demanding bigger wage rises to offset it and companies trying to preserve profit margins.But, she said, there were now signs of the labour market loosening, with employers telling BoE agents that they had paused recruitment, and fiscal policy also looked likely to be “tighter than I previously assumed”. More

The Comprehensive Economic and Trade Agreement (CETA) sets out the removal of tariffs on 99% of all goods types traded between the EU and Canada, some over a period of up to seven years.It has been provisionally in force since September 2017, and has so far been ratified by 16 of the 27 EU member countries, with Germany’s coalition agreeing in June to add its signature.The Irish government had intended to do so as well through a vote in parliament once it cleared the legal hurdles. Deputy Prime Minister Leo Varadkar said last year that a delay would send out the wrong message on Ireland’s commitment to trade.However a member of the ruling coalition challenged it in the courts, arguing that the deal should be put to a referendum because its ratification may affect the ability to introduce regulation, particularly in relation to the environment.The Supreme Court ruled that the deal is unconstitutional as Irish law now stands and that parliament would have to make amendments to arbitration laws to permit ratification.The lawmaker who took the case, Patrick Costello, is a member of the junior coalition Green Party and the two larger governing parties would need the support of its smaller partner to pass legislation clearing the block on ratification.Irish citizens are entitled to vote on any major changes to EU law and have twice delayed European integration by rejecting referendums before eventually passing them once concessions were offered. More