Economy

The bank still sees modified domestic demand (MDD), its preferred economic growth measure, expanding by 2.3% next year and also revised up its forecast for this year to 6.4% due to a large, likely one-off increase in investment in the first half.However, it had forecast MDD growth of 4.2% for 2023 three months ago, before a more prolonged period of price pressure from increased energy costs forced it to push up its inflation forecast for next year to 6.3% versus 4.2% previously.With inflation currently estimated at 8.6%, the bank also nudged up its forecast for 2022 to 8% from 7.8% and said there remain upside risks to the inflation outlook and downside risk to the growth forecast. “These developments will dampen the expected pace of economic growth over this winter and into next year as households and firms delay less-essential spending and investments in light of uncertainty and more constrained real incomes,” the central bank said in its quarterly bulletin.Its inflation forecasts were lower than those published by Ireland’s finance ministry last week. The finance ministry was also more pessimistic on the outlook for the economy, predicting MDD growth of just 1.2% next year.The central bank said the impact of the energy crisis would likely cut average real household incomes by 3.3% this year, the largest reduction in just over a decade. A more pronounced pickup in wages – forecast to rise by 5.8% in 2023 – is expected to begin to mitigate the impact somewhat in the second half of next year, it added.On the recent economic turmoil in neighbouring Britain, the central bank said a less favourable growth path there would have only slightly negative implications for Ireland’s outlook while a larger appreciation of the euro vis-a-vis sterling would lead to weaker inflation, given the level of imports from Britain. More

WASHINGTON (Reuters) – U.S. job openings fell by the most in nearly 2-1/2 years in August, suggesting that the labor market was starting to cool as the economy grapples with higher interest rates aimed at dampening demand and taming inflation.Despite the fifth month of decreases in job openings this year reported by the Labor Department in its Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday, vacancies remained above 10 million for the 14th straight month.While there were 1.7 job openings for every unemployed person in August, down from two in July, this closely watched measure of supply-demand balance in the labor market remained above its historical average. Layoffs also stayed low, signs of a still-tight labor market, which likely keep the Federal Reserve on its aggressive monetary policy tightening path.”Even as higher interest rates and inflation, and weaker business and consumer confidence are beginning to tamp down labor market activity, the labor market still remains healthy,” said Sophia Koropeckyj, a senior economist at Moody’s (NYSE:MCO) Analytics in West Chester, Pennsylvania. “We expect that the Fed is not yet ready to pause.”Job openings dropped 1.1 million to 10.1 million on the last day of August, the lowest level since mid-2021. August’s decline was the largest since April 2020, when the economy was reeling from the first wave of the COVID-19 pandemic. Economists polled by Reuters had forecast 10.775 million vacancies.The broad decrease in job openings was led by healthcare and social assistance, with a decline of 236,000. There were 183,000 fewer job openings in other services, while vacancies decreased by 143,000 in the retail trade industry. Fewer job openings were also reported in the financial activities, professional as well as leisure an hospitality industries.Vacancies in the healthcare and leisure industries declined even though employment in the two sectors remains below its pre-pandemic levels, leading some economists to speculate that other factors besides higher borrowing costs were behind the cool off in demand for workers.”The drop in openings could reflect healthcare providers becoming more accustomed to operating under labor shortages and forgoing hiring,” said Veronica Clark, an economist at Citigroup (NYSE:C) in New York.All four regions saw decreases, with a big decline in the Midwest. The job openings rate fell to 6.2% from 6.8% in July. Hiring increased moderately, keeping the hiring rate at 4.1%.Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury prices rose. Graphic: JOLTS – https://graphics.reuters.com/USA-STOCKS/byprjzmebpe/jolts.png WORKERS STILL QUITTINGThe Fed is trying to cool demand for labor and the overall economy to bring inflation down to its 2% target. The U.S. central bank has since March hiked its policy rate from near zero to the current range of 3.00% to 3.25%, and last month signaled more large increases were on the way this year.The drop in job openings was accompanied by an increase in the unemployment rate to 3.7% from 3.5% in July. The jobs-workers gap fell to 2.5% of the labor force, or 4.0 million workers, from 3.4% in July, which could slow wage inflation. It has decreased from 3.6% of the labor force in March.”The Fed will welcome this apparent decline in excess demand for labor in the hope that it eases wage pressures,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “However, the ratio of job openings to unemployment in August was at about the same level as seen in the fourth quarter of 2021, which at that time was a record high.”  Graphic: Job openings unemployment and wage growth – https://graphics.reuters.com/USA-STOCKS/akpezdexxvr/jobopenings.png The number of people voluntarily quitting their jobs climbed to 4.2 million from 4.1 million in July. Resignations increased in the accommodation and food services industry, where 119,000 more people quit, but decreased by 94,000 in the professionaland business services sector. The quits rate, viewed by policymakers and economists as a measure of job market confidence, was unchanged at 2.8%.Layoffs rose to 1.5 million from 1.4 million in July. There were increases in retail trade, accommodation and food services as well as professional services. Layoffs, however, fell in the construction industry. There were fewer layoffs in the Northeast and Midwest. But the South reported an increase, while the West saw a jump, likely reflecting job cuts in the technology sector. The layoffs rate rose to 1.0% from 0.9% in the prior month. “The heat of the labor market is slowly coming down to a slow boil as demand for hiring new workers fades,” said Nick Bunker, head of economic research at Indeed Hiring Lab. “This is still very much a job seekers’ labor market, just one with fewer advantages for workers than a few months ago.” More

The writer is a finance professor at Peking University and a senior associate at the Carnegie China CenterChina’s export growth has been the brightest spot in an otherwise gloomy economic performance this year as the country heads towards the Communist party’s 20th national congress this month.Industrial output in the first eight months of 2022 was up a relatively weak 3.6 per cent over the same period in 2021, while total consumption stagnated, with retail sales up just 0.5 per cent. In contrast, exports grew a generous 14.2 per cent, and China’s trade surplus rocketed 57.7 per cent.Economists are worried, however, that China may have reached the end of this period of rapid export growth, posing difficult policy choices for Beijing. Container-shipping costs for the next few months are way down, signalling what may become a contraction in exports as American and European consumers — struggling with weak economies — cut back on imports for the all-important Christmas season.Unfortunately, the growing importance of exports will magnify the impact on the Chinese economy of any sharp slowdown in their growth. Like any country that saves more than it invests, China runs trade surpluses to absorb its excess production.This means that any contraction in the trade surplus must necessarily be balanced by a reduction in the gap between domestic savings and investment. In turn, this requires either that Chinese investment rises or that domestic savings fall.There are a limited number of ways either can happen. One unwelcome way China’s savings can fall is with a rise in domestic unemployment. As Chinese manufacturers export less, they may cut production and fire workers. Unemployed workers have negative savings rates, making this one of the ways in which a contracting trade surplus is balanced.There are other ways. All income is either saved or consumed, so a surge in domestic consumption would also reduce Chinese savings, and would allow local manufacturers to shift sales from exports to domestic consumption.There are, however, only two ways to increase consumption. One involves expansion in household debt, which Chinese financial authorities are trying to discourage. The other requires a major redistribution of income to ordinary households, something Beijing has been trying to do for more than a decade but has so far found politically too difficult.But if savings won’t decline through a surge in consumption, the only way Beijing can keep savings from declining though rising unemployment is with an increase in investment. This also creates problems.The best form of new investment, an increase in private sector investment in manufacturing and distribution capacity, is a very unlikely response by private businesses to slower export growth. On the contrary, they will probably cut back investment as exports fade.In that case, any increase in investment must be driven by expansion in government investment, which mainly means more spending on infrastructure. In fact, this is already happening as Beijing tries to counter a contraction in the property sector. But given China’s already excessive infrastructure spending, many economists worry that this will simply result in even more unnecessary projects than China already has and, with it, a rapidly deteriorating debt burden.Unfortunately, these are literally the only ways in which China can balance a contraction in its trade surplus. There are no other options. Beijing will probably consider rising unemployment as the greater evil, and it will be unable to boost domestic consumption quickly enough except through an unwanted surge in household debt. So Beijing will most likely respond to a contraction in the trade surplus with more government investment in infrastructure.This underlines how vulnerable the Chinese economy is to external events, with its export success largely the obverse of its weak domestic demand. The bad news is that Beijing may respond to weaker foreign demand for Chinese imports by taking further steps to support the very important export sector.These necessarily involve explicit or implicit subsidies to manufacturing at the expense of the household sector, and so will probably only further weaken domestic demand while escalating China’s excess reliance on exports and government investment. The good news is that depressed exports may force Beijing into the difficult adjustment towards greater domestic consumption that it has long postponed. More

BRUSSELS (Reuters) -Philip Morris International expects EU antitrust approval for its $16 billion bid for tobacco and nicotine products maker Swedish Match in late October, the company said on Tuesday.Marlboro-maker Philip Morris (NYSE:PM) announced its cash offer for the Stockholm-based group at 106 crowns per share in May, seeking to expand in the fast-growing market for cigarette alternatives. Philip Morris, which was spun off from Swedish Match rival Altria (NYSE:MO) in 2008, has said it wants smoke-free products to account for more than half of sales by 2025.”PMHH’s current assessment is that the process with the European Commission will instead be completed late October 2022,” Philip Morris said in a statement, as it extended the acceptance period for its offer to Swedish Match shareholders to Nov.4.”We believe our offer remains very compelling, particularly given the current market environment,” Chief Executive Jacek Olczak said in a statement.”We look forward to completing the transaction, while also continuing to actively progress on our strategic alternatives to Swedish Match, should the offer ultimately prove unsuccessful,” the CEO said.The extension of the EU competition enforcer’s preliminary review from its scheduled Oct. 11 deadline would suggest that Philip Morris may have to offer remedies. The Commission declined to comment.Earlier on Tuesday, sources had told Reuters that the EU antitrust enforcer does not see any competition issues arising from the deal, but that a final decision has not been made. More

Elon Musk has offered to buy Twitter for the initially agreed price of $44bn, in a move that could put an end to one of the most high-profile corporate legal battles in decades. The Tesla chief sent a letter to Twitter on Monday night offering to go ahead with the deal, less than two weeks before the two parties were set to go to trial in Delaware Chancery Court. According to a regulatory filing on Tuesday, Musk’s lawyers said in the letter that the entrepreneur intended to close the deal at the previously agreed price of $54.20 a share, once debt financing is received, provided the court halted the legal action and adjourned the upcoming trial and related proceedings. “The Musk parties provide this notice without admission of liability and without waiver of or prejudice to any of their rights,” the letter said. In a statement, a Twitter spokesperson acknowledged that it had received the letter and said that the “intention of the company is to close the transaction at $54.20 per share”.Catch up with the latest on the Twitter deal saga here. Do you think Twitter should go ahead with the deal? Email your thoughts to [email protected] or reply to this email. Here is the rest of today’s news — Emily Five more stories in the news1. US to impose export controls on Chinese chipmakers The US commerce department is preparing to introduce sweeping export controls in an effort to slow Chinese efforts to obtain semiconductors and chipmaking equipment for supercomputers and other military-related applications. According to those familiar with the situation, the restrictions would essentially bar US companies from selling cutting-edge technology to Chinese groups.2. North Korea fires ballistic missile over Japan The launch from Pyongyang over Japan, the first since 2017, sparked emergency public alerts amid a sharp rise in provocations by North Korea. Officials in Seoul and Tokyo said the missile was launched from North Korea’s Jagang province early yesterday and fell outside Japan’s exclusive economic zone, which stretches 200 nautical miles from the coast.3. Dalio hands over reins at Bridgewater Ray Dalio, 73, the billionaire founder of hedge fund Bridgewater Associates, has given up control of the firm, ending a drawn-out transition of power that had come to define the industry’s succession problems. Dalio will remain on the board as founder and CIO mentor.4. RBA delivers smaller-than-expected rate rise Australia’s central bank’s 0.25 percentage point interest rate increase came as most analysts had expected the Reserve Bank of Australia to deliver a fourth consecutive 50 basis point increase. The country’s benchmark S&P/ASX 200 rose on the news of the smaller rise.5. Naver shares slump after acquiring Poshmark Shares in South Korea’s biggest internet group Naver dropped yesterday after it announced a $1.2bn deal to buy Poshmark, a US clothing reseller, as it pushes into the booming second-hand fashion market. The deal is Naver’s biggest acquisition and its first foray into Silicon Valley.The day aheadOpec+ meets Riyadh, Moscow and other producers are set to announce deep cuts at a meeting of the Opec+ cartel today, according to people with knowledge of the discussions.Indian home minister visits Kashmir region Indian home minister Amit Shah is set to speak before a rally in Indian-administered Kashmir today. The visit comes amid growing tension in the region. (Indian Express) Tory conference UK prime minister Liz Truss will deliver the closing speech at her party’s annual conference in Birmingham.What else we’re readingChina’s property crash What began as a property crisis — with slumping apartment sales and developer debt defaults — is morphing into a financial crunch for local governments. Read the first part of a new series examining the impact of the crisis brewing in the world’s second-largest economy.Opinion: Xi Jinping will shortly be confirmed for a third term as general secretary of the Communist party and head of the military. But his achievement of such is dangerous for China and the world, writes Martin Wolf. Japan moves to fill Asia’s energy funding gap Japan is ready to exploit a sharp decline in China’s overseas lending by helping Asia-Pacific countries address the $40tn cost of combating climate change. Tokyo’s efforts to take the lead in rulemaking for green financing in Asia come amid a global debate about how quickly countries should shift to cleaner forms of energy.Which nuclear weapons could Putin use against Ukraine? It has been called the biggest nuclear threat to world safety since the 1962 Cuban missile crisis: as Vladimir Putin seeks to salvage his invasion of Ukraine, the Russian president has stepped up his threats to use nuclear weapons. This is what we know about the nuclear weapons Putin could be tempted to use.

The quiet ascent of Chinese high-tech start-ups Following a bruising regulatory onslaught by Beijing on its internet giants and a flurry of US sanctions against Chinese technology companies, many investors have curbed their exposure to China tech. But foreign capital is still flowing into high-tech sectors.How big is the capital hole at Credit Suisse? The cost of buying insurance against Credit Suisse defaulting on its debt soared to a record level yesterday, as analysts and investors questioned the strength of the Swiss bank’s balance sheet. Just how big is the capital hole at the bank? Our reporters investigate.Food and drinkOur FT Globetrotter guide shares where to feast on Japan’s regional flavours — without leaving Tokyo. Let the capital take you on a culinary journey around the nation, sampling everything from the north’s “soup curry” to the far south’s Spam and tofu speciality. More

NEW YORK (Reuters) – Investors suffering through a bruising year for markets are hoping that recent signs of wobbling economic growth will force the Federal Reserve and other global central banks to take their foot off the gas in the fight against inflation, sparking sharp rebounds in stocks and bonds.The S&P 500 is up nearly 6% over the last two days, following a brutal September in which it fell 9.3% alongside declines in other global equity benchmarks. Yields on U.S. Treasuries, which move inversely to prices, have plummeted by 33 basis points in October from multi-year highs hit last month. Investor expectations of how high the Fed will raise rates in its battle against inflation have slipped in recent days, amid signs that growth in the U.S. may finally be slowing. Investors in the futures markets now expect the fed fund rate to peak at 4.5% next year, compared to the expected peak of about 4.7% they were pricing in last week. “The markets are sniffing out a blink by the Fed,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “If they pause here, not only does the rate pressure suddenly drop but maybe you end up with a mid-cycle slowdown, rather than a recession.”Markets have rallied on the hopes of a Fed pivot several times this year only to reverse and crumble to fresh lows, making investors wary of the current bounce. This time around, a series of weaker-than-expected data on manufacturing and job openings in the United States are among the factors fueling hopes that weakening growth will push the Fed to slow its market-punishing rate hikes. Some investors have also taken Tuesday’s smaller-than-expected rate increase from Australia’s central bank and a decision by the Britain’s new government to scrap planned tax cuts as signs that governments and monetary authorities are being increasingly responsive to signs of weakening growth and market instability. “There is a growing sense that financial markets are showing sufficient stress as to warrant a collective pivot away from the global trend toward tighter policy,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. Graphic: Rebounds: https://fingfx.thomsonreuters.com/gfx/mkt/mopanxwrkva/Pasted%20image%201664912803406.png Plenty of market participants are skeptical the rebounds in stocks and bonds will last. Mark Haefele, chief investment officer at UBS Global Wealth Management, attributed the stock rebound to “oversold” conditions in the S&P 500, exacerbated by month-end rebalancing by money managers at the end of September that drove stocks lower. The sentiment was shared by Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions, who believes the bounce was helped by bearish investors covering their positions after September’s deep declines.“Toward the end of last month sentiment got pretty bearish and it doesn’t take much to spook some of these guys to come in and cover their positions,” he said.Analysts at BofA Global Research on Tuesday pointed out that retail traders have shown few signs of capitulation, one signal they say would represent a potential market bottom. Meanwhile, the Cboe Volatility Index, known as Wall Street’s fear gauge, has not climbed to levels that have marked past turning points in past sell-offs. “It’s not clear to me that you’ve seen panic yet,” said Ashwin Alankar, head of Global Asset Allocation at Janus Henderson Investors. “Until you see panic it’s not the best time to start adding risk to a portfolio at a rapid clip.” The signs of softening in the labor market shown by JOLTS data, meanwhile, may not be enough for the Fed to feel comfortable pausing in its pace of rate hikes, analysts at Capital Economics wrote on Tuesday.While the data “won’t prevent further aggressive interest rate hikes in the near term … it supports our view that inflation will drop back more quickly than Fed officials expect,” they wrote. More

America’s borrowing binge has long been viewed as sustainable because of historically low interest rates. But as rates rise, the nation’s fiscal woes are getting worse.WASHINGTON — America’s gross national debt exceeded $31 trillion for the first time on Tuesday, a grim financial milestone that arrived just as the nation’s long-term fiscal picture has darkened amid rising interest rates.The breach of the threshold, which was revealed in a Treasury Department report, comes at an inopportune moment, as historically low interest rates are being replaced with higher borrowing costs as the Federal Reserve tries to combat rapid inflation. While record levels of government borrowing to fight the pandemic and finance tax cuts were once seen by some policymakers as affordable, those higher rates are making America’s debts more costly over time.“So many of the concerns we’ve had about our growing debt path are starting to show themselves as we both grow our debt and grow our rates of interest,” said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction. “Too many people were complacent about our debt path in part because rates were so low.”The new figures come at a volatile economic moment, with investors veering between fears of a global recession and optimism that one may be avoided. On Tuesday, markets rallied close to 3 percent, extending gains from Monday and putting Wall Street on a more positive path after a brutal September. The rally stemmed in part from a government report that showed signs of some slowing in the labor market. Investors took that as a signal that the Fed’s interest rate increases, which have raised borrowing costs for companies, may soon begin to slow.Higher rates could add an additional $1 trillion to what the federal government spends on interest payments this decade, according to Peterson Foundation estimates. That is on top of the record $8.1 trillion in debt costs that the Congressional Budget Office projected in May. Expenditures on interest could exceed what the United States spends on national defense by 2029, if interest rates on public debt rise to be just one percentage point higher than what the C.B.O. estimated over the next few years.The Fed, which slashed rates to near zero during the pandemic, has since begun raising them to try to tame the most rapid inflation in 40 years. Rates are now set in a range between 3 and 3.25 percent, and the central bank’s most recent projections saw them climbing to 4.6 percent by the end of next year — up from 3.8 percent in an earlier forecast.Federal debt is not like a 30-year mortgage that is paid off at a fixed interest rate. The government is constantly issuing new debt, which effectively means its borrowing costs rise and fall along with interest rates.Inflation F.A.Q.Card 1 of 5What is inflation? More

BIRMINGHAM, England (Reuters) – Prime Minister Liz Truss will on Wednesday press her message that Britain needs “to do things differently” to kickstart stagnant growth, using her first speech to the party faithful as Conservative leader to try to restore her dwindling authority.Weakened after being forced into a U-turn on one of her tax cuts less than 24 hours into her Conservative conference, Truss will double down on her message that her plan is the right one to tackle the long list of problems facing Britain. But with lawmakers empowered after forcing one reversal of her policy to scrap the top rate of tax, she faces a fight to get other, as yet ill-defined, planks of her agenda through parliament, possibly not only diluting her “radical” agenda but also raising suggestions of an early election. Seemingly undeterred, Truss will tell party members and lawmakers that she will build a “new Britain for the new era”, repeating that her government believes that decisive action — never mind the “disruption” – is the right route to take.”For too long, the political debate has been dominated by how we distribute a limited economic pie. Instead, we need to grow the pie so that everyone gets a bigger slice,” she will tell the party in the central English city of Birmingham.”That is why I am determined to take a new approach and break us out of this high-tax, low-growth cycle.”The conference, once expected to be her crowning glory after being appointed prime minister on Sept. 6, has quickly become more of a nightmare after her plan of 45 billion pounds ($51 billion) of unfunded tax cuts triggered market turmoil and she was forced to reverse course on scrapping the highest tax rate.The markets have largely stabilised after Britain’s central bank, the Bank of England, stepped in with a package worth billions of pounds to shore up the bond market, though borrowing costs remain higher than before the tax plans were set out on Sept. 23.A government source also suggested her finance minister, Kwasi Kwarteng, was considering bringing forward his medium-term fiscal plan – showing how the so-called “growth plan” of tax cuts and spending will be funded to try to calm the markets.CHANGE MEANS DISRUPTIONTruss will reiterate on Wednesday that her government will keep “an iron grip” on Britain’s finances, and will set out her belief in fiscal responsibility, value for money for the taxpayer, sound money and a smaller state, her office said.Her critics say she is relying on the discredited ideology of “trickle-down” economics that will only widen inequality in society and fail to provide investment in the short term. It is not an argument Truss accepts and she will admit on Wednesday that “not everyone will be in favour” of her changes, a possible warning that the reforms she intends to bring in to spur investment and cut spending might not be palatable to all.Some lawmakers fear she will break a commitment to increase benefit payments in line with inflation, something they argue would be inappropriate at a time when thousands of families are struggling with soaring prices.Truss has said her government has yet to take a decision on benefits payments and ministers say they are obliged to look at the numbers later this month. With opinion polls showing the Conservative Party trailing the main opposition Labour Party badly and facing a possible wipeout if there was an early election, several lawmakers feel there is no easy option to restore their standing. Some say the risk is that the Conservatives again become “the nasty party” – a moniker coined by a senior party figure 20 years ago when it was in a long period of opposition.But Truss will again say there is one way to boost the party, and that is “to do things differently” to secure growth.”Whenever there is change, there is disruption. Not everyone will be in favour,” she will say. “But everyone will benefit from the result – a growing economy and a better future. That is what we have a clear plan to deliver.” ($1 = 0.8757 pounds) More