Economy

One-fifth of Britons say they are being forced to borrow more money to meet their payments, with half unable to save at all, in a sign that households are feeling the pain of the cost of living crisis. UK inflation is rising at a near 40-year record pace while lenders are raising their mortgage rates after the announcement of the government’s “mini” Budget pushed up expectations of further monetary tightening by the Bank of England.The stress this is putting on households is now clearly visible with fresh data showing that the proportion that are in financial difficulty is increasing, with spending falling and consumer confidence at a record low.While the “mini” Budget, announced by the chancellor last month, was intended to boost economic growth through tax cuts, some analysts argue that it is having the opposite effect. Paul Dales, chief UK economist at Capital Economics, warned that the fiscal plan risked “lengthening the cost of living crisis and overlaying [it with] a cost of borrowing crisis”.The government’s approach to the economy will probably result in more persistent inflation and higher interest rates, leading to a deeper recession and ultimately higher unemployment in the medium term, said Dales. But new data show that consumers are already struggling. In the two weeks to September 25, 22 per cent of the population said they had to borrow more money or take out credit — an increase of six percentage points from November last year when the survey was first conducted — according to a report by the Office for National Statistics. The findings tie in with recent data from the Bank of England that show credit card borrowing rose at its fastest pace in 17 years in August.

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Peter Tutton, head of policy, research and public affairs at StepChange, a debt charity, said the “debt situation worsened in August”.The government has released an energy support package, which limits yearly household energy bills to £2,500 on average, but this only came into effect this month with many already “significantly more stretched than they were a year ago”, said Tutton.He added that people were “vulnerable to panic borrowing to try to fill the gap between their income and their essential spending”.Nearly half the population think they will be unable to save any money in the next 12 months, up from one-third last year, the ONS data showed. A further one-third said they would be unable to afford an unexpected but necessary expense of £850 — a measure of the risk of poverty — representing an increase of 5 percentage points since November.Martin Beck, chief economic adviser to the consultancy EY Item Club, said consumers were being affecting by many pressures. “You’ve got high inflation, falling real wages, you’ve got people with mortgages paying more interest,” all of which will be detrimental to consumer spending, he said. As many as half of respondents said they found it difficult to afford their energy bills in September, according to the ONS. Almost one-third had struggled to meet mortgage payments. Mortgage rates are expected to triple to about 6 per cent next year following further monetary tightening by the central bank.Gabriella Dickens, economist at the consultancy Pantheon Macroeconomics, said that a boost to consumer spending from the energy support scheme was likely to be “offset by the market disruption” following the “mini” Budget. Dickens expects most households to use more of their savings for debt repayments rather than spending, forecasting a 1.5 per cent contraction in household expenditure next year. In a sign that household budgets are already tightening sharply, retail sales fell steeply in August. Meanwhile, the number of new car registrations was lower in September than in the same period last year. Data showed that two-thirds of Britons said they had to reduce non-essential spending and gas electricity or gas usage, while more than two in five reported cutting back on groceries and car usage, ONS data showed.The consumer association Which? found the number of households making adjustments to cover essential spending was at a 10-year peak. Its research showed that two-thirds of those surveyed — or 18.2mn households — had cut back on essentials, sold items or dipped into savings. According to Google data, which tracks visits to retail and entertainment venues, numbers were down 11 per cent last month compared with February 2020. Meanwhile, spending on entertainment had fallen to 30 per cent below pre-pandemic levels, even without adjusting for inflation, according to fintech company Revolut.Yael Selfin, chief UK economist at KPMG, said: “Consumer spending is weakening and margins are [being] squeezed, as businesses are finding it harder to pass on higher costs.” More

BEIRUT (Reuters) – A Lebanese woman who last month held up a Beirut bank to retrieve her own savings was released on bail on Thursday after she handed herself in to authorities following weeks on the run, her lawyer said. Sali Hafiz, 28, was ordered to pay 1 million Lebanese pounds ($25) and slapped with a 6-month travel ban over the Sept. 14 bank holdup that turned her into a folk hero in a country where hundreds of thousands of people have savings trapped in banks. The money was intended to pay for treatment for her sister who has cancer, she said. Lebanon’s informal capital controls were put in place by banks in 2019 as the financial system imploded and never formalized by law, leading depositors fed up with the arbitrary measures to take matters into their own hands.More than a dozen depositors have held up banks to access their own savings in the past month alone. Most of those have only faced brief detention but Hafiz’s case differs as she went on the run.Banks say they make exceptions for humanitarian cases and have called on the government to pass formal controls and work to resolve the crisis. Lenders closed for about a week last month after a spate of hold-ups. They have since reopened with heightened security – but frustrated savers have shown no signs of letting up. On Wednesday, Lebanese lawmaker Cynthia Zarazir held a sit-in at her bank branch north of Beirut to retrieve $8,500 trapped in the bank that she said she needed for a surgery. Such actions have been met with widespread popular support as government authorities fail to tackle the crisis with slow implementation of reforms required to unlock an IMF bailout.Hafiz managed to retrieve nearly $12,000 from her account when she entered the bank and threatened employees with what later turned out to be a fake pistol. More

President Biden traveled to Poughkeepsie, N.Y., to connect a $20 billion investment by IBM to the bipartisan bill meant to spur production of critical microchips.During his visit to IBM’s Hudson Valley facility in New York, President Biden highlighted the CHIPS and Science Act that provides subsidies to companies that sign up to jump-start domestic production of semiconductor chips.Erin Schaff/The New York TimesPresident Biden visited the Hudson Valley of New York on Thursday to tour an IBM facility after the company announced it would invest $20 billion across the region to increase its production of semiconductors and develop advanced technologies, including artificial intelligence and quantum computing.Mr. Biden has ramped up his travel schedule to promote the bipartisan legislative achievements that his administration has guided as the November midterm elections approach. At the company’s campus in Poughkeepsie, N.Y., he highlighted an industrial bill he signed in August that provides subsidies to companies that sign up to jump-start domestic production of semiconductor chips.The White House has held up the law as a way to keep up with China and other countries — including South Korea, Japan, India and Germany — that offer subsidies for the production of semiconductors, which are critical components in everything from smartphones to military technology.“More is going to change in the next 10 years than it has in the last 40,” Mr. Biden said. “Where in God’s name is it written that we can’t be the manufacturing hub of the world? There’s a lot of reasons to be optimistic.”The legislation, called the CHIPS and Science Act, contains $52 billion in subsidies and tax credits for companies that manufacture chips in the United States, with more than half of the amount dedicated to helping companies build facilities for making, assembling and packaging some of the world’s more advanced chips.In a news release before Mr. Biden’s visit, IBM hailed the bill for its effort to “secure supply of next-generation chips for today’s computers and artificial intelligence platforms as well as fuel the future of quantum computing by accelerating research, expanding the quantum supply chain, and providing more opportunities for researchers to explore business and science applications of quantum systems.”IBM’s announcement came two days after Micron Technology, the Idaho-based computing company, announced that it planned to spend as much as $100 billion over the next two decades or more to build a computer chip factory complex in upstate New York.“There is no doubt that without the CHIPS Act, we would not be here today,” Sanjay Mehrotra, the chief executive of Micron, said on Tuesday.During his remarks, Mr. Biden emphasized that the law would bolster American competitiveness in research and technology at a time when other countries have pulled ahead.“We’re going to make sure that any company that uses federal research and development funding to invest in new technologies has to make the product in America,” Mr. Biden said to applause, adding later: “It matters. This is about economic security, folks. It’s about national security. It’s about good-paying jobs you can raise a family on.”.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-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs 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.Administration officials hope that the bill’s bipartisan support, coupled with a windfall of pledged investment from large technology companies, is the sort of accomplishment that could appeal to voters ahead of the midterms. Seventeen Republicans voted for the bill in the Senate, while 24 Republicans supported it in the House.At one point, Mr. Biden, citing news reports, accused the Chinese government of lobbying in Congress against the law. “The Chinese Communist Party actively lobbied against the CHIPS and Science Act that I’d been pushing in the United States Congress,” Mr. Biden said. “Unfortunately, some of our friends on the other team bought it.”Representative Sean Patrick Maloney of New York, the chairman of House Democrats’ campaign arm, accompanied the president on his trip, as did Paul Tonko, and Pat Ryan, two Democratic congressmen from New York. Gov. Kathy Hochul, a Democrat, greeted Mr. Biden when he arrived in New York.Mr. Biden’s visit was also meant to bolster the fortunes of two Democrats facing tight races in next month’s elections. Mr. Maloney is facing a challenge from Assemblyman Michael Lawler in his district, which includes the Hudson Valley.Mr. Ryan, who won a special House election in August, is in a tight race against Assemblyman Colin Schmitt of New Windsor for the swing-district seat. The special election was seen as a potential test of the impact that June’s Supreme Court decision that ended the constitutional right to abortion might have on the midterm elections.After leaving Poughkeepsie, Mr. Biden traveled to Red Bank, N.J., to participate in a reception for the Democratic National Committee. On Thursday evening, he attended another reception for the Democratic Senatorial Campaign Committee. More

WASHINGTON (Reuters) -New Federal Reserve Governor Lisa Cook on Thursday added her voice to the U.S. central bank’s broad consensus for continued interest rate hikes, as other policymakers reiterated they too see no let-up in their effort to vanquish inflation. U.S. inflation “remains stubbornly and unacceptably high, and data over the past few months show that inflationary pressures remain broad-based,” requiring further policy tightening to be sure it begins falling, Cook said in her first public remarks on monetary policy since joining the Fed’s Washington-based board. Cook, speaking to the Peterson Institute for International Economics in Washington, said recent declines in job vacancies, slowing rent increases and other data suggesting price pressures might be easing were not enough to conclude the Fed had rounded the corner in its fight against rising prices. Inflation “must come down, and we will keep at it until the job is done,” Cook said, repeating what has become the Fed’s trademark phrase to relay its willingness to raise its target policy rate to a restrictive level and slow the economy, even at the risk of less economic growth and more unemployment.Her comments put Cook, who has a doctorate in economics and is the first Black woman on the Fed’s governing board, firmly behind the central bank’s drive for continued rate increases.Fed Governor Philip Jefferson, in his debut remarks this week, said he too was “resolute” about controlling inflation.Fed officials in recent days have nodded to signs that inflation may be easing, to stress in financial markets, and to the pressure their monetary policy tightening is putting on economic conditions in other countries – and given no indication they are about to change their plans.Fed Governor Christopher Waller delivered that message with his characteristic bluntness on Thursday. “I anticipate additional rate hikes into early next year,” he said, adding the Fed should not pause rate hikes until it sees signs of inflation moderating. As for slowing rate hikes because of financial stability concerns, he said, “let me be clear that this is not something I’m considering or believe to be a very likely development.”As of the Sept. 20 to 21 policy meeting, policymakers were signaling they would deliver a fourth consecutive rate hike of three-quarters of a percentage point at their upcoming Nov. 1 to 2 meeting, and further rate increases after that. “Inflation is high right now and we need a more restrictive setting of monetary policy,” Chicago Fed President Charles Evans told the Illinois Chamber of Commerce on Thursday. Last month’s policymaker projections suggest the U.S. central bank’s benchmark overnight interest rate is headed to the 4.50%-4.75% range next year, “which given how fast we’ve been raising interest rates, is likely to be the spring,” he said.Minneapolis Fed President Neel Kashkari, speaking at a separate event on Thursday, said at this point there has been “almost no evidence” that inflation had even peaked, making a shift in the Fed’s plans unlikely.”We need to keep our eyes open for risks that can be destabilizing for the American economy as a whole,” Kashkari said at the Bremer Financial Corporation Fall Leadership Conference. “But to me, the bar to actually shifting our stance on policy is very high.”Traders are betting that the Fed will raise rates further but by late next year will reverse course. Policymakers have been pushing back. “My presumption is that we will not be cutting rates next year at all,” Cleveland Fed President Loretta Mester said Thursday. ‘SOME PAIN’The Fed is parsing through data that has begun to, at least somewhat, turn in its favor, particularly a recent drop in job vacancies that may point to a looser labor market and lower wage pressure.But top-line inflation remains lodged at a four-year high, with the measure most closely watched by the Fed still running at more than triple its 2% target. “The widespread nature of the inflation pressures suggests that the overall economy is very tight,” Cook said in her speech on Thursday. As a result, Cook said she “fully supported” the 75-basis-point rate increases approved at the three policy meetings she has attended as a Fed governor so far, agreed with the policy of “front-loading” monetary tightening to quicken its impact, and felt changes in policy needed to be rooted in inflation actually falling, not on forecasts of it doing so.Cook said the Fed’s preemptive approach was appropriate, adding that while lowering inflation will bring some pain, not doing so will make it more painful to restore price stability in the future. “In the current situation, with risks to inflation forecasts skewed to the upside, I believe policy judgments must be based on whether and when we see inflation actually falling in the data, rather than just in forecasts.”She said that while at some point it will be appropriate to slow the pace of increases, she did not hint at her preference for the Fed’s policy decision next month.”The path of policy should depend on how quickly we make progress toward our inflation goal,” Cook said.Speaking with the New York Times, San Francisco Fed President Mary Daly said on Thursday that while she is “very open” to slowing the pace of rate hikes, she could still see a 75-basis-point rate hike next month, followed by a 25-basis-point hike, depending on the data.To Waller, there is little in upcoming data releases – including the Labor Department’s monthly jobs report on Friday and its Consumer Price Index report next week – that could change his view of the economy. “I expect most policymakers will feel the same way,” Waller said. “I imagine we will have a very thoughtful discussion about the pace of tightening at our next meeting.” More

While the Bank of Japan maintains massive monetary easing, policymakers are urging firms to raise wages to kick-start a sustainable growth cycle of higher wages and greater consumer and business spending while easing the pain of inflation that has been amplified by the currency’s slide to a 24-year low.Inflation-adjusted real wages dropped 1.7% in August from a year earlier, labour ministry data showed, following a revised 1.8% fall in the prior month.The consumer price index (CPI) used by the ministry to calculate real wages, which includes fresh food prices but excludes owners’ equivalent rent, rose by an annual 3.5%. That was the fastest since the 3.9% recorded in Sept. 2014 and outpaced a 1.7% rise in nominal total cash earnings following a revised 1.3% gain in July.Overtime pay, a key indicator of strength in corporate activity, increased 4.3% in August from a year earlier, the smallest gain in five months.Special payments, which include the discretionary seasonal bonuses that firms tend to slash when they face headwinds, rose 0.7% in August after a 1.6% increase the previous month.The following table shows preliminary data for monthly incomes and numbers of workers in August:—————————————————————-Payments (amount) (yr/yr % change)Total cash earnings 279,388 yen ($1,930) +1.7-Monthly wage 266,404 yen +1.8-Regular pay 247,926 yen +1.6-Overtime pay 18,478 yen +4.3-Special payments 12,984 yen +0.7—————————————————————-Number of workers (million) (yr/yr % change)Overall 51.607 +1.1-General employees 35.309 +0.8-Part-time employees 16.298 +1.9—————————————————————-The ministry defines “workers” as 1) those who were employed for more than one month at a company that employed more than five people, or 2) those who were employed on a daily basis or had less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted, at a company that employs more than five people.To view the full tables, see the labour ministry’s website at: ($1 = 144.7300 yen) More

LONDON (Reuters) – British companies are the most downbeat about the outlook for their profits since the depths of the COVID-19 pandemic in late 2020 despite widespread plans to raise prices, a major survey showed on Thursday, adding to signs of gloom about the economy.Only one in three businesses are confident their profits will increase in the coming year, while 39% expect a decline, according to the British Chambers of Commerce’s (BCC) quarterly survey, the largest of its kind.Some 62% of companies said they planned to raise prices in the next three months, just below the record 65% that said they would have to do so in the previous quarter.Concerns that soaring inflation will become entrenched have spurred the Bank of England to hike interest rates. 37% of businesses said they were worried about the effect of rising interest rates and almost 80% expect either no change or a decrease in investment spending. “Many firms are caught in the pincer movement of soaring inflation and rising interest rates,” said David Bharier, head of research at the BCC.The survey was conducted prior to the announcements of the government’s energy support package and controversial mini-budget. The mini-budget pushed up government bond yields – a benchmark for borrowing costs in the wider economy – and briefly pushed the pound to a record low against the U.S. dollar.”The devaluation of the pound has also added a huge cost base for businesses reliant on imports,” Bharier said. Indicators trended downwards across the board. Businesses complained of shrinking cash flow, declining sales, and rocketing input prices.Amid economic and financial uncertainty throughout the economy, businesses are eager to see a long-term plan from the government to boost confidence, the BCC said. The BCC surveyed 5,200 firms between Aug. 22 and Sept. 16, mostly small and medium-sized enterprises. More

(Reuters) – Cleveland Federal Reserve Bank President Loretta Mester on Thursday said she believes the U.S. unemployment rate will likely rise a little bit as the Fed raises rates, but that won’t stop the central bank from pursuing “job one” of fighting inflation.”We have to be singularly focused on inflation,” Mester said at a virtual event held by the Council for Economic Education. “If we want to get back to healthy conditions, this is something we have to do.” More

UK businesses expect to raise their prices at the fastest pace since records began to offset higher wage costs driven by a tight labour market, according to an influential survey by the Bank of England.Business leaders in the central bank’s decision maker panel forecast in September that they would increase prices by 6.6 per cent in the year ahead, up from 6.5 per cent in August, the highest since the survey began in 2017. The findings confirm BoE concerns “that firms are finding it too easy to pass higher costs on to consumers”, said Simon Harvey, head of foreign exchange analysis at Monex Europe, a foreign exchange company. He noted that these worries have contributed to the central bank raising rates by 100 basis points at its past two monetary policy meetings.The monthly survey of chief financial officers from small, medium and large UK businesses is used by the BoE to monitor developments in the economy and supports the case for interest rate rises at the November 3 meeting of the bank’s Monetary Policy Committee. Markets are currently pricing in a combined 100 basis point increase on the current 2.25 per cent rate as the bank battles to rein in UK inflation, which is at a near 40-year high. Interest rates are expected to rise to 5.7 per cent by June next year, according to market expectations. The survey revealed that business leaders predict inflation will hit 4.8 per cent in the medium term, up from 4.2 per cent in the previous month’s survey.Harvey noted that the more hawkish members of the MPC will consider this “de-anchoring of medium-term inflation expectations as particularly concerning”. Businesses also expect wages to increase by a record 5.9 per cent in the year ahead, up from 5.5 per cent in August. They reported that wages were already rising by 6.5 per cent in September, a full percentage point higher than in July. Some 84 per cent reported they were finding it harder than usual to recruit new employees, down only marginally from 86 per cent in August.The level of overall business uncertainty also increased, with more than two-thirds of respondents reporting that concern for their business was “high” or “very high”, 6 percentage points higher than in August. Businesses are less likely to invest in periods of high uncertainty, which could limit growth.

In a separate survey of 5,200 firms conducted by the British Chambers of Commerce, close to 40 per cent of businesses warned that they expected their profits to fall in the next 12 months. This is the worst level since the height of the Covid crisis in 2020. Only a third of firms reported increased domestic sales, down from 41 per cent last quarter, while more than four in five firms said inflation remained a growing concern. Almost two-thirds expected their own prices to rise over the coming months.The BCC said the survey, conducted before the government’s energy support package for firms and its mini-Budget, showed weakening structural business conditions and confidence from the second quarter.One in three firms reported reduced cash flow over the last three months, while less than half expected their turnover to increase over the next 12 months. The outlook was particularly bleak for the retail and wholesale sector, which is in its second quarter of negative territory, the BCC said. Shevaun Haviland, BCC director-general, said the findings “paint a worrying picture of the state of affairs at many UK firms”.“Some firms are telling us that they have been forced to cancel otherwise viable projects due to soaring costs,” she said. “The current volatility in the financial and currency markets must be speedily addressed to return stability to the economy and give business some certainty to plan.”Separate data published by S&P Global/Cips on Thursday showed that activity in the construction sector improved in September, with the output index rising to 52.3 in September, up from 49.2 in August. However, Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey, cautioned that the modest increase in business activity “was fuelled by delayed projects and easing supply shortages rather than a flurry of new orders”.“Forward-looking survey indicators took another turn for the worse in September, with new business volumes stalling and output growth expectations for the year ahead now the lowest since July 2020,” he said. More