Economy

In the run-up to the midterm elections next month, President Biden is hoping his gearhead reputation will appeal to some parts of the Trump base.WASHINGTON — At a Secret Service training facility in Maryland late this summer, President Biden peeled out in his cherished 1967 Corvette Stingray, pushing it to 118 miles per hour, according to the speedometer that flashed across the screen in an upcoming episode of “Jay Leno’s Garage.”Mr. Biden and Mr. Leno, a fellow car enthusiast, gushed during the show about an electrified classic Ford F-100 — the president’s latest attempt to bridge a passion for muscle cars with an environmental agenda that relies on a transition to electric vehicles.Two years into his presidency, Mr. Biden is once again embracing a persona that has served him since his earliest days in politics almost five decades ago: the car guy.The president has long used his affinity for cars to burnish his workaday origins and, more recently, to conjure an aura of vitality despite being the oldest president in American history. In the run-up to the midterm elections next month — with control of Congress and the future of his agenda at stake — Mr. Biden is hoping his gearhead reputation will appeal to some parts of the Republican base.In a country of car lovers, polls suggest that Democrats are still headed to defeat. But people close to Mr. Biden say his love of cars goes beyond the usual political posturing that is put on display only when voting is near. It is something of an obsession, they say.In Oval Office meetings to chart the future of America’s car industry, Mr. Biden regales aides with obscure trivia about automobiles that were made before many of them were born.Ahead of a gathering of car executives at the White House last year to highlight the electrification revolution, the president huddled with staff members to ponder an important national question: Which vehicle might he test-drive for the cameras? He took a hybrid Jeep Wrangler for a spin on the South Lawn — a perk of the presidency he was happy to accept.Read More on Electric VehiclesA Bonanza for Red States: No Republican in Congress voted for the Inflation Reduction Act. But their states will greatly benefit from the investments in electric vehicle spurred by the law.Rivian Recall: The electric-car maker said that it was recalling 13,000 vehicles after identifying an issue that could affect drivers’ ability to steer some of its vehicles.China’s Thriving Market: More electric cars will be sold in the country this year than in the rest of the world combined, as its domestic market accelerates ahead of the global competition.A Crucial Mine: A thousand feet below wetlands in northern Minnesota are ancient deposits of nickel, a sought-after mineral seen as key to the future of the U.S. electric car industry.“You all know I’m a car guy,” Mr. Biden said at the Detroit auto show last month. “Just looking at them and driving them, they just give me a sense of optimism.”He added, “Although I like the speed, too.”The son of a car dealership manager, Mr. Biden has attributed his love of fast cars to his father, who he has said was a great driver. His lineage came with automotive benefits.In high school, a young Mr. Biden drove a 1951 Plymouth convertible. On the occasion of his senior prom, he impressed his date with a Chrysler 300D that he borrowed from his father’s lot. By the time he was in college, Mr. Biden had purchased a Mercedes 190SL.The Corvette Stingray, which was maintained by Mr. Biden’s sons during his vice presidency, was a surprise wedding present from his father.The interior of Mr. Biden’s 1967 Corvette Stingray.Adam Schultz/Biden for PresidentSecret Service rules prohibit presidents and vice presidents from driving on public roads for safety reasons. Once you reach the highest office, you are relegated to the back of a bulletproof limousine.In 2011, when he was vice president, Mr. Biden told Car and Driver magazine that the security requirement that forbade him to rev engines was “the one thing I hate about this job.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Former President Ronald Reagan famously cherished his red 1962 Willys Jeep, which was a gift from his wife, Nancy, that he would only ride around his ranch. In the early 1990s, Mr. Reagan once gave Mikhail S. Gorbachev a ride in his Jeep Scrambler with a license plate that read “Gipper” during a visit to the ranch.President Bill Clinton used to lament that he could no longer drive his blue 1967 Mustang convertible. In 1994, he drew cheers from a crowd that might have otherwise been hostile when he took his old car for a short drive at the Charlotte Motor Speedway.Even President Donald J. Trump was known to have a multimillion-dollar luxury car collection, though he was rarely seen driving over the years.“It’s convenient for senior American politicians to have a favorite American muscle car,” said David A. Kirsch, a professor at the University of Maryland’s business school and the author of “The Electric Vehicle and the Burden of History.” “It is a type of affinity with the American worker, and I think it does connote an image of male virility and machismo that is important for a leader who wants to appear strong.”Mr. Biden’s love of cars has always been part of his political image.The 2009 recovery act that Mr. Biden oversaw as vice president was instrumental in saving the American car industry and the rescue of Detroit after the financial crisis the previous year. At the time, Mr. Biden helped lead the rollout of $2 billion in research grants to accelerate the development of batteries for electric vehicles.When Mr. Biden was seeking re-election in 2012 on the ticket with President Barack Obama, his mantra at campaign rallies was: “Osama bin Laden is dead, and General Motors is alive.”The White House has sought to capitalize on Mr. Biden’s knowledge of cars and the industry, regularly scheduling events at manufacturing facilities owned by Ford, General Motors and Chrysler. The visits also offer the president the opportunity to engage in car talk while shining a light on an industry in transition.After Mr. Biden’s visit to Ford last year, when he test-drove the electric F-150 Lightning, the company received 200,000 reservations for the new truck.“When the president is driving it, people see this is a piece of automotive technology that’s cool,” said Mark Truby, Ford’s chief communications officer.Mr. Biden driving the new Ford F-150 Lightning at the Ford Dearborn Development Center last year.Doug Mills/The New York TimesDespite recent signs of progress, managing the move to electric vehicles is a political challenge. Supply chain disruptions have made it more difficult for consumers who want electric vehicles to get them. European countries are upset over the Biden administration’s efforts to favor domestic manufacturing with tax credits.The shift to electric is also increasingly tied to culture wars at a time of deep national divisions. This month, Representative Marjorie Taylor Greene, Republican of Georgia, said Democrats who promote electric vehicles were trying to “emasculate the way we drive.”Mr. Leno, who is one of the few people to have been driven by Mr. Biden since he took office, said the president handled his green Corvette with aplomb.“You know, he’s a good driver,” Mr. Leno, who would not confirm if the president actually pushed his car to triple-digit speeds, said in an interview. “He still has a Corvette; he can drive a stick. I mean, most presidents are not car guys.”Still, Mr. Biden will not be driving electric cars or his own classic combustion vehicle on public roads anytime soon.“I miss it,” Mr. Biden told Mr. Leno on the show, which airs on Wednesday night on CNBC. “Every once in a while I take the Corvette out of the garage and just run up and down the driveway.” More

The European Central Bank is expected to start the delicate process of shrinking its balance sheet this week after eight years of bond purchases and generous lending more than quadrupled its total assets to €8.8tn.The shift would mark an intensification of the ECB’s efforts to remove monetary stimulus and cool inflation, which in September reached an all-time high of 9.9 per cent in the 19 countries that share Europe’s single currency, almost five times its 2 per cent target.Policymakers must proceed with caution or risk a UK-style bond market sell-off that would add to the economic problems facing the region. “It is going to be a challenging six months for the ECB, in which many of the potential trade-offs between inflation, growth and financial stability could become more intense and tricky to manage,” said Silvia Ardagna, senior European economist at Barclays.Thursday’s meeting of the ECB governing council in Frankfurt is set to agree on raising interest rates, almost certainly by 0.75 percentage points for the second consecutive time. That would lift its deposit rate to 1.5 per cent — the highest it has been since January 2009. Several members of the council, headed by ECB president Christine Lagarde, have said they also plan to discuss ways to start shrinking the balance sheet, which has ballooned over the past decade from around €2tn to a figure that equates with 70 per cent of eurozone gross domestic product. Markets have grown accustomed to generous support from the ECB. Removing this stimulus when the eurozone is being dragged into recession by an energy crisis and investors are nervous about the high debt levels of southern European countries could be a recipe for financial market turbulence. Giorgia Meloni said in her first parliamentary speech as Italy’s prime minister that tighter monetary policy was “considered by many to be a rash choice” that “creates further difficulties” for heavily indebted member states such as Italy. A key decision awaiting the ECB this week is how to reduce the attractiveness of €2.1tn in ultra-cheap loans that it provided to commercial lenders after the pandemic hit, known as targeted longer term refinancing operations (TLTRO).This scheme kept banks lending during the pandemic. But now the ECB is raising rates above zero, it will allow lenders to make €28bn of risk-free profits by simply placing money they borrowed back on deposit with it, according to estimates by US bank Morgan Stanley. Such a taxpayer-funded boost for banks is politically unpalatable when households and businesses are struggling with rising borrowing costs. An ECB poll of lenders published on Tuesday showed eurozone banks were becoming much pickier in granting loans, pulling back from supplying mortgages at the fastest rate since the 2008 financial crisis. One option is to change the terms of the loans retrospectively, but banks have warned this could trigger legal challenges and increase risk premia in some countries. Another is to change the rules for remunerating reserves, paying zero interest on TLTRO borrowing. Analysts expect any change to result in early repayment of about €1tn of TLTRO loans in December. The ECB declined to comment.The central bank could also signal it is preparing to shrink the €5tn portfolio of bonds it has amassed over the past decade. Reducing the amount of maturing securities it replaces from early next year — a process known as quantitative tightening — would move the ECB closer in line with the US Federal Reserve and the Bank of England. But economists warn shrinking the bond stockpile runs the risk of heightened turmoil. A sell-off in UK bond markets forced the BoE to intervene last month by restarting its bond purchases temporarily only weeks before it planned to begin selling the large portfolio of gilts it already owns. Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said the UK sell-off was “a useful reminder that any aggressive withdrawal of liquidity risks being highly disruptive for the bond market and the transmission of monetary policy”. Given the scars left by the eurozone sovereign debt crisis a decade ago, when spiralling borrowing costs for governments in southern Europe brought the eurozone to the brink of collapse, the ECB intends to tread carefully.France’s central bank governor François Villeroy de Galhau advocated a careful approach when he told the Financial Times last week: “Balance sheet normalisation shouldn’t be completely on automatic pilot: let us start clearly but cautiously, and then accelerate gradually.”The ECB bought over €2tn of bonds over the past two years, hoovering up more than all the extra debt issued by eurozone governments in that period. It only stopped enlarging its bond portfolio in July and it continues to buy about €50bn of securities a month to replace those that mature.Villeroy said he envisaged the ECB would decide on plans to stop reinvestments in its largest pool of bonds — the €3.26tn asset purchase portfolio — as soon as December, with a view to implementing the change during the first half of next year.The central bank is expected to continue reinvesting a separate €1.7tn pandemic emergency purchase portfolio (PEPP) until 2025 at the earliest. The ECB can focus PEPP reinvestments on certain countries, providing a first line of defence against any severe sell-off in the bond markets of heavily indebted countries.By building up such a large portfolio of government bonds, the ECB has created a scarcity of highly rated securities, such as German Bunds, which brings down risk-free rates at a time when the ECB is trying to raise them. Konstantin Veit, portfolio manager at Pimco, said: “As there are limited safe options out there to invest in, this leads to collateral scarcity and drives a large part of the money market to trade well below the ECB’s deposit rate.”Germany’s debt agency this month sought to address this problem by creating more bonds that it can lend out to investors via repo markets. More

The writer is founder and editor of Risky FinanceAs inflation becomes more persistent across developed nations, there is a costly bill looming for governments.In recent years, governments have exploited rising investor demand for bonds with returns that are linked to inflation, issuing increasing amounts of such instruments. The terms were attractive for issuers, with investors willing to accept negligible yields while inflation was low.But now the bill to issuers is rising as inflation surges. An example of this can be seen with the UK, which pioneered this form of bonds, known as “linkers”, in the 1980s and is struggling to restore fiscal credibility after its abortive “mini” budget in September.The UK’s Office for National Statistics has flagged the rising cost of linkers, noting that index-linked gilts accounted for £55bn of the UK’s £92bn interest payment bill in the year to August — an outsized contribution considering that they are 25 per cent of outstanding gilts. Meanwhile, the US is set to pay $150bn in interest this year on its portfolio of Treasury inflation-protected securities, half the amount it pays on nominal Treasury bonds, according to the US Treasury website. This is even more remarkable, given that just 9 per cent of US government bonds are Tips.These costs are set to rise further, based on market inflation expectations. We estimate that for the £2tn of UK gilts, annual interest costs are set to rise to £110bn a year in 2024, and stay at around £100bn annually for a decade. That’s double UK government forecasts and doesn’t take into account any additional borrowing.With the UK government under new prime minister Rishi Sunak about to make difficult decisions about spending and taxation, debt interest becomes more important since it contributes to deficits. Why are inflation-linked bonds proving so expensive? It’s partly due to accounting reasons.From a cash perspective, linkers look attractive to issuers because of the way investors are compensated for inflation. The annual coupons that characterise most bonds are there, but they are small. The real meat of linkers is in how inflation affects their principal amount or redemption value. Every year this increases by inflation — the so-called “uplift”.As a result, the UK’s stock of index-linked gilts, which started out with a total face value of £500bn, are now worth £700bn. But the difference doesn’t have to actually be paid to investors until the day the bond matures, which might be decades into the future.However, this doesn’t satisfy those who compile national accounts, which in the UK is the ONS. Even though no cash is paid to investors before maturity, they do still receive something — the increase in value. Similar to the way that tax authorities like to record grants of unvested employee share options as a form of taxable income, the ONS and other countries’ government bean counters use an “accrual” basis, treating linker uplift as an effective interest payment to investors.

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For the years when inflation was low, this didn’t matter — but that’s changed. For forecasts, the ONS defers to the UK Office of Budget Responsibility. In March 2022 the OBR predicted an £83bn interest payment bill for the government over the next 12 months, net of £12bn it receives from the Bank of England’s portfolio of bonds bought under its quantitative easing programme to support markets. The problem is that the OBR’s inflation forecast assumes that the BoE’s Monetary Policy Committee hits its target. As a result, it expects the UK consumer price index to rapidly revert to mean levels after 2023, reducing interest costs on linkers.Things look different if you use a market-based metric — the break-even inflation rate, or difference between nominal and real bond yields at a given maturity.In contrast to the OBR, the market does not believe that the MPC will control inflation in the medium term. Break-even inflation is currently around 4 per cent per annum for 10 years, and we use this to compound the value of linkers over time, and thus estimate an annual interest cost. For maturing debt, we assume that this is replaced by new nominal gilts paying the current 10-year yield as a coupon — now 3.91 per cent.The combination of persistent inflationary uplift and higher refinancing costs will keep UK interest payments at an annual £100bn for years to come. This shows the impact of persistent inflation and government fiscal errors on the long-term financing position of the UK. Other countries with index-linked debt beware. More

“It is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment,” Brown said in the letter, also addressed to the Fed’s Board of Governors and released publicly by Brown’s office. “We must avoid having our short-term advances and strong labor market overwhelmed by the consequences of aggressive monetary actions to decrease inflation, especially when the Fed’s actions do not address its main drivers.”Fed policymakers are widely expected to deliver a fourth straight supersized interest-rate hike when they meet next week, bringing the policy rate to 3.75%-4% as part of what has been the sharpest set of rate increases in about 40 years. Brown’s letter did not explicitly ask Powell or the Fed to slow or stop rate hikes, though it did urge “continued caution” in light of the synchronized monetary policy tightening by central banks around the world and Russia’s war in Ukraine among other factors posing the “real possibility of worsening the global economic situation.” Powell for his part has nodded to those risks and to the likelihood that raising borrowing costs will lead to a rise in unemployment, now at a historically low 3.5%. But he has also argued that beating inflation – running at more than three times the Fed’s 2% target – is the only way to ensure long-term labor market strength. Brown’s letter to Powell comes as his fellow Democrats across the country battle to maintain their razor-thin majority in the Senate, with a particularly closely watched race in Ohio, Brown’s home state. The elections take place a week after the Fed’s meeting. Republicans blame Democrats’ pandemic aid and other policies for high inflation and say they will do a better job with the economy; Democrats have blamed rising prices on greedy corporations and supply chains. Fed policymakers say the research shows inflation is being driven both by sky-high demand and supply constraints, and that regardless of the cause, they are committed to doing what they can to bring it down.Brown’s letter is unlikely to sway them from that view, though they are expected to at least begin talking about slowing rate hikes when they gather Nov. 1-2. Still, Brown’s missive underscores the political backdrop against which the Fed operates, much as policymakers try to stay out of politics and say their very effectiveness depends on political independence. “I ask that you don’t forget your responsibility to promote maximum employment and that the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate,” Brown wrote. More

BENGALURU (Reuters) – The global economy is approaching a recession as economists polled by Reuters once again cut growth forecasts for key economies while central banks keep raising interest rates to bring down persistently-high inflation.One bright spot is that most major economies already in a recession or heading into one are starting with relatively low unemployment compared with previous downturns. Indeed the latest poll expects the smallest gap between growth rates and joblessness in at least four decades.But while that might deaden the intensity of recessions – most respondents say it will be short and shallow in key economies – that may also keep inflation elevated for longer than most currently expect.A majority of the top global central banks are over two-thirds of the way to the expected terminal interest rate, but with inflation still much higher than their mandates, the risk is those rate expectations are too low.After being late to call the inflation problem, global central banks have spent most of this year frontloading rate hikes to catch up. Most economists and central banks are of the view there will be little work left to do next year.Michael Every, global strategist at Rabobank, said “risk of a global recession” is what everyone’s talking about and has become mainstream in forecasts. “I think that’s pretty much a no-brainer when you look at the trend in all the key economies.”Looking at the low jobless rate is problematic, Every said, because it is a lagging indicator and “the longer it stays stronger the more central banks will feel that they can continue to hike rates.” (Graphic: Reuters Poll – Terminal rate outlook https://fingfx.thomsonreuters.com/gfx/polling/gkplwmxndvb/Reuters%20Poll%20-%20Terminal%20rate%20outlook.png) Of the 22 central banks polled this time, only six were expected to hit their inflation targets by the end of next year. That was a downgrade from July surveys, where two-thirds of 18 were expected to hit their respective targets by then.Analysts at Deutsche Bank (ETR:DBKGn) wrote: “…history never repeats exactly, but since inflation forecasting has generally been so poor over the last 18 months, it’s worth us asking what normally happens when inflation breaches these thresholds. The answer is that it’s normally quite sticky.”In the meantime global equity and bond markets are in disarray while the U.S. dollar is at a multi-decade peak in foreign exchange markets based on U.S. rate expectations.A strong 70% majority of economists, 179 of 257, said chances of a sharp rise in unemployment over the coming year were low to very low, underscoring how widespread the view is among forecasters that it won’t be a devastating recession. Global growth is forecast to slow to 2.3% in 2023 from an expected 2.9% this year, followed by a rebound to 3.0% in 2024, according to Reuters polls of economists covering 47 key economies taken Sept. 26-Oct. 25.Those were all downgrades from polls taken in July. (Graphic: Reuters Poll – Economic outlook of major economies https://fingfx.thomsonreuters.com/gfx/polling/zjpqjqerkvx/Reuters%20Poll%20-%20Economic%20outlook%20of%20major%20economies.png) Over 70% of economists, 173 of 242, said the cost of living crisis in the economies they cover would worsen over the next six months. The remaining 64 expected it to improve.While the inflation cycle is global in nature, made worse by a sudden surge in energy prices after Russia invaded Ukraine on Feb. 24, much will depend on how far the U.S. Federal Reserve was likely to push rates higher.The Fed is expected to go for a fourth consecutive 75 basis points interest rate hike on Nov. 2, and economists say it shouldn’t pause until inflation falls to around half its current level.China, the world’s second largest economy, was expected to grow 3.2% in 2022, far below the official target of around 5.5% and also well below pre-pandemic growth rates. Excluding the meagre 2.2% expansion after the initial COVID-19 hit in 2020, that would be the worst performance since 1976. India’s economy was also forecast to grow well below its potential over the next two years with medians showing 6.9% growth in the 2022-23 fiscal year and 6.1% next year.The euro zone economy was expected to grow 3.0% this year but flatline in 2023 before expanding 1.5% in 2024.(For other stories from the Reuters global economic poll:) More

(Reuters) – U.S. companies from tech giants Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) to GE and toymaker Mattel (NASDAQ:MAT) on Tuesday reported big slowdowns in growth or warned things were going to get worse, fanning recession fears and driving down stocks.The rash of disappointing results points to a host of problems plaguing the American economy. A strong dollar has hurt the overseas profits of large firms, while soaring inflation has prompted interest rate hikes and companies to raise product prices, even as consumers have been forced to cut spending.U.S. consumer confidence ebbed in October, data showed Tuesday, after two straight monthly increases amid heightened inflation concerns and worries of a possible recession next year.After years of turbo-charged growth, Microsoft posted its slowest rise in sales in five years and Google parent Alphabet grew just 6% last quarter at its slowest pace since September 2013 barring a small quarterly decline in 2020. Google, which many had expected to be more resilient because of its status as the world’s largest digital advertising platform by market share, shocked the market with weaker-than-estimated advertising revenue as customers in the insurance, mortgages and cryptocurrencies industries tightened their ad budgets.”Despite being seen as one of the most insulated companies in the advertising space relative to peers, Google’s poor quarter is the latest sign that worsening fundamentals and a tough macroeconomic environment are prompting advertisers to cut back on spending,” said Jesse Cohen, senior analyst at Investing.com.Google’s results bode ill for Facebook (NASDAQ:META) parent Meta Platforms, which is especially reliant on advertising and reports results on Wednesday. Last week, its smaller rival Snap Inc (NYSE:SNAP) forecast no revenue growth for the holiday quarter, setting off warning bells in the social media industry. Alphabet said it plans to cut hiring by more than half.Conglomerate GE, which is in the process of breaking up into three companies, said it will reduce global headcount by a fifth at its onshore wind unit, which has been battling higher raw material costs due to inflation and supply-chain pressures.Shares in Alphabet slumped 7% in trading after the bell. Microsoft fell 2% and chipmaker Texas Instruments (NASDAQ:TXN), which forecast quarterly revenue and profit below estimates, was down 5%. Shares in Spotify (NYSE:SPOT), which also warned on slow advertising growth, slid 4%. Meta shares fell 4%.A lack of demand for personal computers and laptops was evident in Microsoft’s past quarter as its Windows business slumped 15%, a sharp turnaround after months of pandemic-fueled sales thanks to people working and studying from home.Texas Instruments (TI) echoed the sentiment, backing up similar predictions from fellow chipmakers Samsung Electronics (OTC:SSNLF) Co Ltd and Advanced Micro Devices (NASDAQ:AMD) Inc earlier this month.”During the quarter we experienced expected weakness in personal electronics and expanding weakness across industrial,” said TI boss Rich Templeton. The company like other chipmakers has to contend with gadget makers cutting orders to clear stockpiles of chips after the pandemic-led boost in demand quickly flipped to a slump in a matter of weeks.Weak demand for consumer electronics has also been flagged by Apple (NASDAQ:AAPL) iPhone assembler Foxconn as China’s economy has slowed dramatically on COVID-19 related curbs.Mattel, which is very susceptible to discretionary spending cuts, lowered its profit forecast for the year and said it would ramp up promotions heading into the busy holiday season to encourage inflation-hit shoppers to buy its Barbie dolls.Earlier on Tuesday, post-it maker 3M Co said it expected weak consumer spending to continue into the upcoming holiday season and cut its full-year forecasts. Still, there were bright spots in the report cards. Chipotle Mexican Grill Inc (NYSE:CMG) reported quarterly sales and profits that topped the Street as wealthier customers chowed down on their burritos despite higher prices even as lower-income consumers ate there less often. Coca-Cola (NYSE:KO) Co, a favorite in a slowdown, joined rival PepsiCo (NASDAQ:PEP) Inc in lifting its annual forecasts, as customers bought their sugary sodas despite multiple rounds of price hikes. More

SYDNEY (Reuters) -Australian inflation raced to a 32-year high last quarter as the cost of home building and gas surged, a shock result that stoked pressure for a return to more aggressive rate hikes by the country’s central bank.Data from the Australian Bureau of Statistics (ABS) on Wednesday showed the consumer price index (CPI) jumped 1.8% in the September quarter, topping market forecasts of 1.6%.The annual rate shot up to 7.3%, from 6.1%, the highest since 1990 and almost three times the pace of wage growth.A closely watched measure of core inflation, the trimmed mean, also climbed 1.8% in the quarter, lifting the annual pace to 6.1% and again far above forecasts of 5.6%.That would be unwelcome news to the Reserve Bank of Australia (RBA) which had thought core inflation would peak at 6.0% in the December quarter, with CPI topping at 7.75%.Instead, analysts were warning that both core and headline inflation were certain to spike even further this quarter with the ABS’s new monthly CPI accelerating in September.”The upshot is that CPI inflation will approach 8% in Q4,” said Marcel Thieliant, a senior economist at Capital Economics.”The stronger-than-expected rise in consumer prices is consistent with our forecast that the RBA will hike rates more aggressively than most anticipate.”It is particularly ill-timed for the RBA since it surprised many this month by downshifting to a quarter-point rate hike, following four moves of 50 basis points.Rates have already risen by a massive 250 basis points since May and the RBA had wanted to go slower to see how the drastic tightening was impacting consumer spending.FOOD COSTS SOARInvestors now suspected the central bank may have to reconsider, perhaps not at its policy meeting next week but rather in December.Futures still imply a quarter point move on Nov. 1 to 2.85%, but now show some chance of a half-point hike in December and a peak for rates around 4.20% in July.The European Central Bank and the Bank of Canada are both expected to hike by 75 basis points this week, while the Federal Reserve should match that at its meeting on Nov. 2.Australia’s Labor government bowed to inflation concerns this week by restraining spending in its 2022/23 Budget, despite calls for more cost-of-living support amid soaring prices.There are also fears recent flooding across eastern Australia will lift food prices even higher, with supermarket chain Coles warning of declining volumes in fresh food where prices were up 8.8% on a year earlier.Wednesday’s CPI report showed food prices were already climbing at an annual pace of 9.0%, with the third quarter alone seeing a surge of 3.2%.The ABS noted that annual inflation for essential goods and services leaped to 8.4% in the September quarter, highlighting the extent of cost-of-living pressures. More

TOKYO (Reuters) -U.S. Treasury Secretary Janet Yellen respects Japan’s stance of not disclosing whether it had intervened in the foreign exchange market, Japan’s top currency diplomat said on Wednesday, adding he was in close touch with the United States every day.Masato Kanda made the comment after domestic media reported this week that Japan did not gain U.S. consent to its suspected foray in the market overnight on Friday, as the yen struck 32-year lows near 152 yen. That raised speculation that Japan and the United States might be at odds over currency policy, which would make it difficult to intervene further.Group of Seven (G7) financial leaders make it a tacit rule that they inform partners when intervening in the market.”We will monitor the market to see if there are any excessive, disorderly moves and will continue to take decisive steps as needed,” Vice Finance Minister of International Affairs Kanda told reporters at the ministry.”Treasury Secretary Yellen respects Japan’s stance of not confirming whether or not we conducted intervention, so we appreciate that.”Finance Minister Shunichi Suzuki also said on Tuesday that Japan was closely in touch with the United States and that both have reaffirmed the Group of Seven agreement on currencies.Since Japan’s yen-buying intervention on Sept. 22, the authorities have kept mum on whether they had entered the currency market, although sources have said stealth intervention was conducted last Friday and this Monday.Japan likely spent as much as 9.2 trillion yen ($62 billion) in total since last month to prop up its currency, according to market estimates. On Wednesday morning, the dollar was broadly weaker amid signs that Federal Reserve rate hikes are slowing the U.S. economy. The greenback hit a 32-year high against the yen of 151.94 on Friday.($1 = 148.0300 yen) More