Economy

“The government supports this amendment,” Bechu told franceinfo radio after some lawmakers from President Emmanuel Macron’s bloc filed an amendment to the 2023 tax bill. Imposing tougher laws on private jet emissions has become a political issue in France since this summer, when wildfires which scientists said were likely linked to climate change raged throughout the country amid serious heat waves. Several Twitter accounts tracking French billionaires’ private jet flights have emerged, causing a public outcry over emissions by the wealthy while ordinary people are being asked to make energy savings.While members of France’s main opposition bloc on the left had called for an outright ban, the government had said it was in favour of adjusting regulation. More

Republican candidates in critical battleground races in the US midterm elections are seizing on soaring mortgage rates to attack Democrats on inflation, as they hope that a renewed focus on the economy will help them win control of Congress in November.High petrol prices have continued to serve as the Republicans’ main weapon on the campaign trail despite an overall decline in recent months. But the Federal Reserve’s steep interest rate increases this year have given them additional ammunition by triggering a swift rise in mortgage rates to levels not seen since the 2008 housing-led financial crisis.According to the most recent data, the average interest rate for a 30-year fixed-rate mortgage in the US has risen to about 6.7 per cent, doubling from about 3 per cent in January.This has destabilised the housing market in many areas and raised concerns about affordability — two factors that are increasingly being cited by Republican politicians, who blame the administration of Joe Biden and congressional Democrats far more than the Fed.“It’s reckless government policy that spent trillions of dollars that we did not have and then paid people not to go to work: that’s what fuelled the inflation. If they hadn’t done that, the Fed would not have had to react,” said Mark Robertson, a Republican who is challenging Dina Titus, the Democratic member of Congress from Nevada.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

“I have wealthy, gated neighbourhoods, and then I have very modest homes in the east side of Las Vegas. And the impact is mostly on those modest and middle-class areas. Those are the people that are struggling the most . . . this is really hurting them,” Robertson added.Other aspiring Republican members of Congress hoping to earn a seat on Capitol Hill and deliver a majority to the GOP in the November election have been piling on as monetary tightening is starting to bite.In a tweet last week, Madison Gesiotto Gilbert, who is trying to win a House race in Ohio, attacked “one-party Democrat control of Washington” for causing “historic inflation” and triggering the doubling of mortgage rates.In a tweet this week, Tom Barrett, who is trying to unseat Elissa Slotkin, a Michigan Democrat, posted a chart blasting what he called the “Slotkin/Biden effect”: a rise in the monthly mortgage payment needed to afford a median US home from $1,698 to $2,547.In another congressional race in Nevada, Sam Peters, the Republican challenging incumbent Democrat Steven Horsford, said the contrast in the state of the housing market in his area is dramatic compared with a year ago.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

“Houses were flying. You couldn’t even put them on the market. They were gone in a day . . . Fast-forward to now, there’s a bunch more inventory, but people are priced out because of the interest rates,” he said.Peters added that relief was not in sight: “There’s a lot of work to do, to get our inflationary environment under control.”The attention on housing and mortgages comes as Republicans are trying to refocus their midterm election campaigns on the economy in the final stretch of their races. In doing so, they hope to win over swing voters and keep their base energised, after Democrats regained some ground following the June Supreme Court ruling on abortion.“There is a general discontent among Americans about the state of the economy. For a lot of millennials, even a lot of Gen X, certainly Gen Z, this is the first time that they are living in a world of high interest rates and living in a world of things being more expensive,” said Ben Koltun of Beacon Policy Research. “Gas prices are up, food is up, mortgage rates are up, housing costs are up. That affects everybody.”With the central bank likely to continue raising interest rates in a bid to tame inflation — most officials forecast the federal funds rate to peak at 4.6 per cent in 2023 — economists warn mortgage rates are unlikely to retreat any time soon. This means first-time homebuyers will continue to be boxed out of the market even as property prices fall from their peaks.Fed chair Jay Powell went so far last month as to warn that the once-booming housing market will probably “have to go through a correction”. The remark came during the press conference following the central bank’s decision to implement a third-straight 0.75 percentage point rates rise and lift the fed funds rate to a new target range of 3 per cent to 3.25 per cent.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

“There was an underlying [affordability] problem going into this and now we have this spike in mortgage rates, which has priced millions of people out of the homebuying market. We’ve also seen very high growth in rents,” said Nancy Vanden Houten, lead US economist at Oxford Economics.“It’s part of this bigger issue of everything costing more, especially the things that are essentials and consume greater shares of lower and middle-income households’ budgets,” she added.Robert Dietz, chief economist at National Association of Home Builders, said the economic pain and the political fallout from the housing turmoil could extend well past the midterms.“We’re not at the end of the Fed tightening, despite what markets are gambling on, and there are going to be higher interest rates,” he said.“Given where housing is in terms of this particular business cycle, the importance of rent in terms of household budget challenges, and the importance of the home-ownership rate, I think we are more likely to see housing rise among those top-tier political issues in the 2024 presidential elections,” Dietz added.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Democrats are trying to fend off GOP attacks on housing and mortgages by pointing to the fact that Republicans have not announced any coherent plan of their own to bring down inflation, while they have passed legislation to bring down the cost of critical goods such as prescription drugs. The Biden administration has also announced steps to boost the supply of affordable housing, which should help ease expenses related to shelter.The changes in the housing market may be even more politically salient in fast-growing battleground states such as Arizona, Georgia and Nevada, which are particularly prone to boom-and-bust cycles. A CNN poll released this week found Republicans had a slight edge over Democrats in three statewide races: for secretary of state, governor, and a pivotal Senate seat. Housing prices have also skyrocketed in the metro areas of several states with competitive Senate races. Median sale prices have risen by 34-39 per cent in Phoenix, Las Vegas and Atlanta over the past two years, according to data from real estate brokerage Redfin. However these have started to cool recently as mortgage rates have soared and the inventory of homes has grown, following a prolonged post-recession decline in housing supply.For Steve Baird, a veteran realtor in the Las Vegas area who is backing Robertson in his bid for Congress, the speed and scale of the disruption and change in the housing market this year has been both striking — and disturbing.“It’s just anaemic right now and sellers have got to be very competitive and willing to take discounts,” he said. “It’s always hard, you know, coming off the market that we’ve been in.” More

The writer is an FT contributing editorIn July of 1694 an act of parliament gave William and Mary the right to levy a tax on shipping and beer. In return, they had to dedicate that revenue toward paying back a group of people who would lend them £1.2mn. This is the act that chartered what would become the Bank of England. The preamble gives the bank one purpose: the money is to go “towards carrying on the War against France”.That is no longer the statutory goal of the Bank. But that first £1.2mn loan to William and Mary is still treated by economists and policymakers as definitional. Whether to carry on against France or inflation, central banks buy and sell sovereign debt. Any other assets are seen as either political or, worse, not normal: embarrassing panic buys to be shed from the balance sheet as quickly as possible.In the past two weeks gilts had a swoon, and then a Fed governor said that treasury markets were “functioning well” — two of the most terrifying words in markets. It’s possible that we’re asking sovereign debt to do too much, and right there in that original act there’s an option we keep pretending doesn’t exist: central banks can buy whatever we tell them to.In 1694, Parliament forbade the Bank from trading in its own stock, or in any kind of merchandise. But the Bank could take goods as security for a loan, and it could buy bills of exchange, a kind of check for commercial goods, cashable at a bank in another city. The Bank, as originally imagined, did not just lend to the crown. It had a direct connection to the private economy through its own balance sheet. That connection was still strong in the 19th century, when economist and journalist Walter Bagehot composed his rules for central banking; the Bank had more private securities on the balance sheet of its banking department than it did government securities. Bagehot didn’t instruct a central bank in a panic to suddenly buy new things, but to buy more of what it already knew how to buy.There’s a more recent tradition of economists looking back at how the Bank made gilt markets deep and liquid, giving Britain deep pockets for wars, creating safe assets and a new source of paper cash for markets. That £1.2mn loan to William and Mary is now seen as the act that created modern finance, an immaculate conception. But in Bagehot’s day, the Bank was just as important — and as admired, among American financiers — for the way it bought and sold private debt.It was the skill with private securities that Paul Warburg, architect of the Federal Reserve, wanted to copy from the Bank. But wars produce sovereign debt, and the Fed stepped in during the first world war to help create and prop up the market for Liberty Bonds. It did the same during the second world war, holding down yields in the treasury market.By the time the Fed informed the Treasury Department in 1951 that it was done helping out, the shift on its balance sheet toward treasuries was already almost complete. The Federal Reserve — and the BoE and the European Central Bank — now have more admirable missions than fighting France. And they claim the power to make independent decisions. But they are completely, abjectly dependent on their own governments for the only assets they feel truly comfortable buying.There are defensible reasons for keeping everything but sovereign debt off a central bank’s balance sheet. Most importantly, it insulates central bankers from politics. They cannot be blamed over who gets the benefit of a treasury or a gilt auction — that’s for lawmakers to worry about. And the markets for the sovereign debt of large, rich countries are deep and liquid, making it easier to intervene. The problem with both of these arguments is that since 2008 they have been dragged out to comic extremes. It has been easy to see the comedy, but we should talk more about the extremity.There are massive distributional consequences to quantitative easing, for example — it raises the value of homes and financial assets. Just because you’re buying a treasury doesn’t mean you’re committing an apolitical act. And markets for sovereign debt are deep and liquid in part because central banks have spent the last century making them that way — running auctions, fretting about market bottlenecks, clearing everything out of the way that might prevent a government from borrowing.We now expect sovereign debt to do everything. It still funds the government, and in theory should send a price signal about debt sustainability. It is also the policy asset for the central bank, which sits on a massive portfolio, damping price signals. Sovereign debt also has to remain liquid as the safe asset for private portfolios, which can get difficult when a central bank is sitting on so much of it. And we’re stuck with this system because we all somehow forgot fully half of what a central bank could do. More

WASHINGTON (Reuters) -The U.S Defense Department added more Chinese companies, including drone maker DJI Technology and surveillance equipment maker Zhejiang Dahua Technology, to a blacklist that subjects them to an investment ban for Americans.BGI Genomics Co Ltd, which runs a massive gene databank and has DNA-sequencing contracts worldwide, and CRRC Corp, which makes and sells rail transit gear, were also among the 13 added to the list the Pentagon released on Wednesday.Last year, a Reuters review of scientific papers and company statements found that BGI was using prenatal tests developed in collaboration with the Chinese military to collect genetic data for sweeping research on the traits of populations. “The department is determined to highlight and counter the People’s Republic of China’s military-civil fusion strategy,” the Pentagon said in a statement.That strategy supported the Chinese military’s modernization goals by ensuring its access to advanced technologies and expertise were acquired and developed by Chinese firms, universities, and research programs “that appear to be civilian entities,” it added.The list bars buying or selling publicly traded securities in target companies.An initial tranche of about 50 Chinese companies that included telecoms equipment maker Huawei was added to the U.S. list in June last year.At the time, President Joe Biden signed an executive order that banned U.S. investment in the dozens of Chinese companies alleged to have ties to defense or surveillance technology sectors. The order aimed to prevent U.S. investment from supporting the Chinese military-industrial complex, as well as military, intelligence, and security research and development programs.It was part of Biden’s efforts to counter China, such as reinforcing U.S. alliances and pursuing large domestic investments to bolster American economic competitiveness, as ties sour between the world’s two biggest economies.In a statement, the Chinese drone maker said there was “no reason” why it had been added to the blacklist. “DJI stands alone as the only drone company to clearly denounce and actively discourage military use of our products,” it said, adding that it was not a military company in China, the United States or elsewhere.”DJI has never designed or manufactured military-grade equipment, and has never marketed or sold its products for military use in any country,” it said. More

The Caixin services purchasing managers’ index (PMI) fell to 49.3 from 55.0 in August as COVID containment measures disrupted supply and demand and restricted national travel. An official survey published last week also showed services activity slowing, although its reading remained slightly above the 50-point mark that separates growth from contraction on a monthly basis.China’s economy showed signs of improvement in August with faster-than-expected growth in factory output and retail sales, but is being held back by protracted COVID curbs and a worsening property slump.”The current pandemic situation is still severe and complex, and the negative impact of COVID controls on the economy is still pronounced,” said Wang Zhe, senior economist at Caixin Insight Group.”Policy implementation should focus on promoting employment, granting subsidies, as well as boosting demand and market confidence by sending policy signals,” said Wang.The Caixin survey showed services companies are grappling with sluggish demand, shrinking production and rising costs, although foreign orders are recovering.The new business sub-index registered the first drop in four months in September, of which new export business expanded for the first time since December 2021.Input prices have risen every month since June 2020, the sub-index showed, mainly driven by higher raw material and labour costs.That led services firms to reduce their payrolls at a sharper rate, with a sub-index for employment at 48.5, in contraction territory for the ninth straight months and down from 48.9 in August.With few signs COVID containment measures will ease in the near terms, the market was much less optimistic.Many Chinese cities advised residents to avoid unnecessary trips for the public holidays, adding to COVID policies that have kept tens of millions of people under lockdown and exacting a growing economic toll.Beijing is ramping up efforts to support the economy with a relending facility worth 200 billion yuan ($28.12 billion) on equipment upgrade and relaxation of mortgage rate floors.Caixin’s September composite PMI, which includes both manufacturing and services activity, fell to 48.5 from 53.0 the previous month. Factory activity shrank more sharply in September, pointing to a faltering recovery.The Caixin PMI is compiled by S&P Global (NYSE:SPGI) from responses to questions sent to purchasing managers in China.($1 = 7.1135 Chinese yuan) More

The approval allows for the issuance of $3.8 billion, bringing total disbursements under the arrangement to about $17.5 billion.”Decisive actions by the new economic team have been critical to stabilizing markets and rebuilding confidence,” the IMF said in a statement.Argentina, a major grains producer, struck a new IMF deal earlier this year to replace a failed program from 2018.The new program came with economic targets, including rebuilding depleted international reserves and reducing a deep primary fiscal deficit to improve the country’s finances.”Relevant end-September quantitative program targets were met, including for net international reserves and monetary financing of the fiscal deficit,” the IMF said.Its managing director, Kristalina Georgieva, added that the decision comes after Argentina’s new economic team, named in July, had adopted “decisive corrective measures” that were starting “to restore confidence and policy credibility.”The South American country is still struggling with a high annual inflation rate, with forecasts that it will top 100% this year. But compliance with the agreed fiscal and monetary policies will allow Argentina to gradually reduce inflation, an IMF source said, speaking on condition of anonymity. “Through the implementation of lasting fiscal and monetary measures, the (exchange rate) gap and inflation can be reduced little by little,” the source said, noting that the process would “take time.” More

The gain of 263,000 was shy of recent monthly totals but still robust. Stocks fell on fears of a harder, longer Fed campaign to fight inflation.Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates. But the strong showing left many investors unhappy because they saw signs that the fight against inflation may become tougher and more prolonged.Employers added 263,000 jobs on a seasonally adjusted basis, the Labor Department said Friday, a decline from 315,000 in August. The number was the lowest since April 2021 but still solid by prepandemic standards. The unemployment rate fell to 3.5 percent, equaling a five-decade low.“If I had just woken up from a really long nap and seen these numbers, I would conclude that we still have one of the strongest job markets that we’ve ever enjoyed,” said Carl Tannenbaum, chief economist at Northern Trust.Officials at the Federal Reserve have been keeping a close eye on hiring and wages as they proceed with a series of rate increases meant to combat inflation. The job data indicates that, for now, they are doing so without tipping the economy into a recession that would throw millions out of work.But it also increases the prospect that the effort to subdue price increases will be more extended. For investors, that came as bad news, since higher interest rates raise costs for companies and weigh on stock prices.The S&P 500 recorded its worst one-day performance since mid-September, falling 2.8 percent and eroding gains from earlier in the week.Fed officials have signaled in speeches this week that they remain resolute in trying to wrestle inflation lower, and that they are waiting for clear evidence that the economy is headed back toward price stability before they pull back.Wage growth has subsided somewhat, at least compared with the trend a year ago. Average hourly earnings climbed 5 percent from a year earlier, roughly matching economists’ expectations but slowing down slightly from the prior annual reading.Wages are still growing, but less rapidly in some sectorsPercent change in earnings for nonmanagers since January 2019 by sector More

WASHINGTON (Reuters) – The U.S. Treasury moved to preserve and expand the supply of affordable housing on Friday by finalizing a new tax credit income rule that may qualify more housing projects and extending deadlines for when they must be placed in service.The finalized income-averaging rule for the Low-Income Housing Tax Credit now allows a broader mix of income levels among residents of qualifying projects, by using an average, rather than fixed limits for all units.The rule clarifies a 2018 law passed by Congress to allow developers more flexibility in qualifying for the credits.Previously, projects qualifying for the tax credit, which can offset up to 70% of an affordable housing project’s costs, needed to make at least 20% of the units available to residents earning 50% of the local area’s median income (AMI) or 40% of the units at 60% of AMI.A Treasury official said the new regulation allows for at least 40% of a project’s units to meet an average of 60% of AMI — allowing more higher-income tenants to mix with lower-income residents.Dave Borsos, vice president of capital markets at the National Multifamily Housing Council, an industry trade group, said the change would keep more low-income people in such units even if their income rises slightly. Such units are typically rented at 30% of a tenant’s gross income or less.”The concern that we had as an industry was what happens when you have somebody who is suddenly making 61% of the income threshold, which would have required you to force that person to leave the property,” he said. Delays to deadlines for when a property is placed in service to qualify for the tax credit will also keep some projects from being disqualified due to delays in construction and supply chain problems prompted by the pandemic, Borsos said.The Federal Housing Finance Agency also has taken steps to allow housing finance enterprises Fannie Mae and Freddie Mac (OTC:FMCC) to provide an additional $6 billion in “forward commitment” financing per year to allow developers of affordable housing projects to secure long-term financing. The changes announced on Friday follow Treasury’s move in July to allow state, local and tribal governments more flexibility to funnel COVID-19 rescue funds to affordable housing, including through direct long-term project loans. More