Economy

It said an increase in private consumption and higher capacity utilisation rates had helped private-sector capital expenditure reach one of its highest levels in the last decade.Business investment has been encouraged by government spending which climbed 35% in April-August compared to the same period a year ago, the report said, adding that tax revenue growth for the government had been buoyant.The report also said high levels of foreign exchange reserves, sustained foreign direct investment and strong export earnings have provided a reasonable buffer against monetary policy normalisation in advanced economies and the widening of the current account deficit arising from geopolitical conflict.The Reserve Bank of India on Friday forecast the country’s current account deficit would remain within 3% of gross domestic product in the current fiscal year to March 2023 and said it was “eminently financeable”.India is in a better position to calibrate its liquidity levels without abruptly stalling growth, the report said, adding that inflationary pressures in the country appear to be declining. But it also said that in winter months, geopolitical tensions could climb amid a heightened international focus on energy security and that could test “India’s astute handling of its energy needs so far.” “In these uncertain times, it may not be possible to remain satisfied and sit back for long periods. Eternal macroeconomic vigilance is the price for stability and sustained growth,” it added. More

Many families can borrow most of the cost of college using a Parent PLUS loan. This will not end well.If you want your kids to go to college but you can’t afford the bills, the federal government has a deal for you that will blow your mind.You can borrow the entire cost — minus any other aid your child receives — through something called a Parent PLUS loan. Moreover, your income — and thus your ability to repay the debt — doesn’t matter. As long as you don’t have one of a handful of black marks in your recent credit history, you can borrow six figures even if your take-home pay puts you below the federal poverty level.This is totally bananas. But don’t take my word for it.“The honest truth is that Congress created a subprime lending program unintentionally,” said Rachel Fishman of New America, the left-leaning think tank.“I absolutely hate them,” said Beth Akers, of the American Enterprise Institute, the right-leaning think tank, referring to these loans.“It’s gone completely off the rails,” said Justin Draeger, the president of the National Association of Student Financial Aid Administrators.Most parents don’t pay for college using this loan. But about 3.6 million of them — with about $107 billion in outstanding debt — have. Within that group are a number of low-income Black families at schools that may not have given their kids enough help in the way of scholarships. Many of those families are struggling to repay the money that the federal government so freely offered up.And, really, why wouldn’t moms and dads use a PLUS loan if it appears to be the least horrible option? For many people, parenting means keeping the American promise that children should do better than family members from previous generations. A college degree is a rocket booster that can help make that possible.When Congress created parent PLUS loans in 1980, there were decent reasons for doing so. College costs had increased, and many middle-income families struggled to pay for tuition out of their income. At the time, interest rates were also very high.The PLUS loan, which came with a lower-than-market interest rate, solved a worsening problem. It also made it easier for parents to pay a larger share of the bill and perhaps help their children borrow less.At the time, you could borrow only $3,000 per year. In 1992, that cap went away, thanks, it seems, to a successful push by a higher education lobbying association, according to a report from the Urban Institute report in 2019.What to Know About Student Loan Debt ReliefCard 1 of 5Many will benefit. More

If Jay Powell is the most powerful central banker in the world you would not know it by his pay cheque. Even the worst-paid chief is in no position to lecture workers about curbing wage demands, though inflation-linked settlements have central bankers badly rattled. Powell collects the same $226,000 salary as the secretary of state, attorney-general and other top officials. That is modest by comparison with central banking peers let alone the near-$100mn that JPMorgan Chase boss Jamie Dimon took home last year. But it is a multiple of the average US wage. Powell would be tin-eared if he called on workers to tighten their belts. The Bank of England’s Andrew Bailey whipped up a storm in February when he advised workers to rein in wage demands, especially when he later told MPs he could not remember his exact salary. His basic pay is £495,000 or $730,000 at purchasing power parity exchange rates. That puts Bailey near the top of a league table of central bankers’ pay. Swiss National Bank’s Thomas Jordan is the highest paid in nominal terms, collecting almost $1mn last year. Switzerland, though, is a pricey place to live. If salary is measured as a multiple of average earnings, Jordan slips behind Bailey. Top of the rankings using that measure is the Bank of Italy’s Ignazio Visco, who earned almost 18 times the average Italian worker. That was the case even after Mario Draghi’s efforts to curb excessive pay when he ran the bank up to 2011. Agustín Carstens of the Bank for International Settlements squeezes into the middle of the pack. The BIS, the central banker’s bank, is particularly anxious about workers protecting living standards with index-linked pay deals. Wage indexation is less common than in the past. So is union membership. Those factors lessen the risk of a self-reinforcing wage-price spiral. But labour markets are tight. Businesses with pricing power will be able to pass wage increases on to customers. Central bankers wanting to earn their keep need to crack that conundrum, rather than chastise workers asking for more. More

Supermarkets in Spain are in the line of fire over inflation as the country’s deputy leader wages a campaign to press shops into cutting prices in an effort to help struggling families.Yolanda Díaz, one of Spain’s deputy prime ministers and a contender for the top job, has intensified a political battle over living costs by pushing big supermarkets to offer an affordable “basket” of 20 to 30 staples.Food and energy inflation sparked by the war in Ukraine is stretching family budgets across Europe and leaving governments struggling to limit the damage. Spain is hit especially hard because its relatively low average salaries mean people spend a higher proportion of their income on basics.In an interview with the Financial Times, Díaz said: “Families are telling me they’re only giving their kids pastas and rice. They can’t access fish or meat. The fruit is very expensive. For a family that has two or three kids, it’s extremely complicated. That’s the urgent issue this country has.”She said retailers had a duty to cut prices to help consumers, not least because the government had used public funds to support them and other businesses during coronavirus pandemic lockdowns.“They have profit margins that permit them to reduce their profits a little and contribute to their country,” she added. “If they don’t act in this grave moment for Spain, the reputational risk for them is very high.”Consumer price inflation stood at 10.5 per cent in Spain in August but prices of food and drink rose 13.8 per cent year-on-year, the biggest increase since the data series began in 1994, according to official figures this week. Milk inflation is running at 26 per cent.Yolanda Díaz, Spain’s deputy prime minister, said retailers had a duty to cut prices to help consumers © Juan Carols Hidalgo/EPA-EFE/ShutterstockDíaz, a longstanding member of the Communist party, stressed that she was not proposing legislation or state-mandated price controls, but was instead pushing for an “agreement” between business and government to ensure the prices of good-quality basic goods are accessible. Her efforts have run into firm opposition. The supermarket sector says they are unhelpful even as Díaz invites its representatives for more meetings next week. Spain’s competition regulator, meanwhile, put out a statement recalling that fixing maximum prices between companies is prohibited by national and EU law.In addition to being criticised by the reliably hostile opposition People’s party, Díaz has also been upbraided by members of her own coalition government.Díaz, who is also labour minister, is one of Spain’s most watched politicians. She is a junior partner in the government led by Socialist prime minister Pedro Sánchez, but has already signalled a potential challenge to him in elections next year by launching a new political movement called Sumar.Commenting on her move, Sánchez this week said there was a need for shared responsibility in business. “We have to have a balanced analysis between what the production chain represents and, logically, retail.” Ignacio García Magarzo, head of Asedas, a group representing supermarkets and distributors, acknowledged the “grave” cost challenge facing companies and consumers but said Díaz’s proposal was “not useful for solving the problems”. He added that her analysis of profit margins in the food supply chain was not scientific.García Magarzo said trying to press only the biggest supermarkets into action created unwarranted division in the sector. It failed to recognise the fragmented nature of much of Spanish retail and risked leaving shoppers who did not have access to the largest chains abandoned.He called on the government to instead temporarily slash or eliminate sales tax to tame inflation — and noted that Germany reduced its sales tax in 2020.The only supermarket to go some way towards complying with Díaz has been the Spanish branch of Carrefour, which said it would offer a basket of 30 “essential” products for €30 until January — replicating something it has been doing in France since June.The products include Carrefour-branded canned food, pasta, cooking oil and coffee along with a selection of drugstore items and cleaning materials.But after its announcement, Díaz said: “The basket has to contain products that are fresh — meat, fish, fruit, vegetables and dairy products.” Spain’s other big chains are Mercadona, Lidl and Dia.Agriculture minister Luis Planas, a member of Sánchez’s Socialist party, rebuked his fellow cabinet member, citing the need to protect smaller retail chains. “We must avoid price wars that would lead to a restructuring of the sector that is not in anyone’s interest,” he said.Defence minister Margarita Robles accused Díaz of straying into an area beyond her ministerial remit. “I know that [Díaz] does it with the best will, but there are technical and economic aspects that need to be known.”Farmers across the continent are under immense pressure because of the surging cost of energy and fertiliser, which adds to the difficulty of keeping prices low. Alberto Núñez Feijóo, leader of the People’s party, said: “We have seen once again the frivolity with which people’s important issues are treated. The meat, dairy and vegetable producers can no longer cope because they have to pay more for everything . . . Not taking into account that producers can no longer manage seems to me to be the opposite of any reasonable proposal from the government.”  More

NEW YORK (Reuters) – A tough year in markets is leading some investors to seek refuge in cash, as they capitalize on higher interest rates and await chances to buy stocks and bonds at cheaper prices.The Federal Reserve has roiled markets in 2022 as it implements huge rate hikes in an effort to moderate the steepest inflation in 40 years. But higher rates are also translating into better rates for money market funds, which had returned virtually nothing since the pandemic began in 2020.That’s made cash a more attractive hideout for investors seeking shelter from market gyrations – even though the highest inflation in forty years has dented its appeal. Fund managers increased their average cash balances to 6.1% in September, the highest level in more than two decades, a widely followed survey from BofA Global Research showed.Assets in money market funds have stayed elevated since jumping after the pandemic began, coming in at $4.44 trillion as of last month, not far from their peak of $4.67 trillion in May 2020, according to Refinitiv Lipper.”Cash is now becoming a viable asset class because of what has happened to interest rates,” said Paul Nolte of Kingsview Investment Management, who said the portfolios he manages have 10 to 15% in cash versus less than 5% typically.”It gives me the opportunity in a couple months to look around in the financial markets and redeploy if the markets and the economy look better,” said Nolte.Investors are looking to next week’s Fed meeting, at which the central bank is expected to enact another jumbo rate hike, following this week’s consumer price index report that came in hotter than expected.The S&P 500 fell 4.8% in the past week and is down 18.7% this year. The ICE (NYSE:ICE) BofA U.S. Treasury Index is on pace for its biggest annual drop on record.Meanwhile, taxable money market funds had returned 0.4% so far this year as of the end of August, according to the Crane 100 Money Fund index, an average of the 100 largest such funds. The average yield in the Crane index is 2.08%, up from 0.02% at the start of the year and the highest level since July 2019.”They are looking better and their competition is looking worse,” said Peter Crane, president of Crane Data, which publishes the money fund index.Of course, sitting in cash has its drawbacks, including the possibility of missing a sudden reversal that takes prices for stocks and bonds higher. Inflation, which stood at 8.3% on an annual basis last month, has also dented the appeal of cash.”Certainly you are losing some purchasing power with inflation running at 8-plus percent, but… you are taking some money off the table at a risky time for equity markets,” said Peter Tuz, president of Chase Investment Counsel. “Your equities could be down 8% in two weeks.”While an obvious sign of caution among investors, extreme levels of cash are sometimes viewed as a so-called contrarian indicator that bodes well for equities, said Mark Hackett, Nationwide’s chief of investment research, especially when taken in concert with other measures of investor pessimism.Hackett believes stocks may stay volatile in the near-term, amid various risks including potential earnings weakness along with high inflation and the hawkish Fed, but he is more upbeat about the outlook for equities over the next six months.”There’s a degree of a coiled spring developing where if everybody is already on the sidelines at some point there is nobody left to go on the sidelines and that leads you to potentially any piece of good news resulting in a very outsized move,” Hackett said. David Kotok, chief investment officer at Cumberland Advisors, said his U.S. equity portfolio made up of exchange-traded funds is currently 48% in cash after being almost fully invested in equity markets last year.Stocks are too expensive given risks including rising interest rates, the potential for a Fed-induced recession and geopolitical tensions, Kotok said.”So I want cash,” Kotok said. “I want the cash to be able to deploy back into the stock market at lower prices or substantially lower prices, and I don’t know which opportunity I’ll have but the only way I can seize it is to be holding that amount of cash.” More

PARIS (Reuters) -France’s two biggest private broadcasters, M6 Group and TF1, gave up their merger plan to fend off the rise of U.S. streaming platforms, saying antitrust requests made the deal irrelevant. If successful, the deal would have transformed the French TV landscape and redefined competition rules related to the advertising market, creating a precedent in Europe and potentially paving the way for similar deals among traditional broadcasters. “It appears that only structural remedies involving at the very least the divestment of the TF1 TV channel or of the M6 TV channel would be sufficient to approve the proposed merger,” the two companies said in a statement on Friday, with reference to talks it held with the French antitrust authority. They added that the proposed merger no longer had any strategic rationale, even though they continue to believe that a merger would have made sense in view of “the challenges resulting from the increased competition from the international platforms.” “The transaction could have created major competitive risks, particularly in the television advertising and television service distribution markets,” the French competition authority said in a statement online. The merger, which would have given the combined entity sway over three quarters of the country’s TV advertising, would also offer it greater bargaining power with distributors, such as internet service providers, the antitrust watchdog’s president Benoit Coeuré said. “The proposed commitments included in particular a separation of the advertising agencies of the TF1 and M6 channels,” Coeuré said, but added that the incentives to compete against each other would have been limited by the control of TF1 by its main shareholder, Bouygues (EPA:BOUY).Under the initial merger plan, French conglomerate Bouygues would have ended up controlling the merged group with a 30% stake while M6’s parent, German media group Bertelsmann, would be the second biggest shareholder with 16%.The companies have been facing stiff opposition in recent months, including from media group Vivendi (OTC:VIVHY), the owner of France’s biggest pay-TV group Canal Plus, and the founder of telecoms maverick Iliad, Xavier Niel. The controlling shareholders of TF1 and M6 announced their merger ambitions in May 2021. More

Hispanic workers will likely be disproportionately affected in a recession, Wells Fargo said in a report.
The firm is projecting a mild recession to occur in 2023.
Job composition and age are contributing factors.

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Turbulent times may be ahead for Hispanic workers, a new report from Wells Fargo found.
The firm expects Latino workers to take an outsized hit if a mild recession happens in 2023, like it is projecting.

“The Hispanic unemployment rate tends to rise disproportionately higher than the national average during economic downturns,” Wells Fargo chief economist Jay Bryson wrote.
For example, from 2006 to 2010, the Hispanic unemployment rate rose about 8 percentage points, while the non-Hispanic jobless rate climbed about 3 percentage points, the firm found. It also was higher than the non-Hispanic jobless rates in the early 1990s and in 2020, Bryson noted.

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Job composition and age are to blame, the data indicates.
In construction, for instance, Hispanics account for one-third of workers, compared to 18% of total household employment. That interest rate sensitive sector will face “acute challenges in the year ahead,” Bryson said. Mortgage rates have jumped to over 6% and building permits have already fallen by more than 10% since the end of last year, he pointed out.
There will also be a steeper drop in goods spending over the next year as a consequence of the pent-up demand for services, he said. Right now, overall consumer spending is 14% higher than February 2020 and real services spending is up less than 1% during the same time period.

“The rotation in spending is likely to lead to sharper job cuts in goods-related industries beyond construction, including transportation and warehousing, retail and wholesale trade, and manufacturing — all industries in which Hispanics represent a disproportionate share of the workforce,” Bryson said.

However, job concentration in the leisure and hospitality sector, which was hit hard during the pandemic, may offset some of those losses.
Not only will consumers prioritize spending on missed vacations or eating out in the coming year, but employment in the industry is still about 7% below its pre-Covid levels, Bryson wrote.
The age factor also works against Hispanics, because workers tend to be younger than non-Hispanics.
“Junior workers tend to be laid off at a higher rate than workers with more seniority,” Bryson said. “Fewer years of experience makes it harder to find new employment in a weak jobs market.”
However, Bryson said he doesn’t expect the next downturn to be as damaging to the job market as the previous two recessions.
“Employers have spent the better part of the past five years struggling to find workers,” he said. “We anticipate employers will hold on more tightly to workers than during past recessions, having a better appreciation of how difficult it may be to hire them back.”
— CNBC’s Michael Bloom contributed reporting.

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NEW YORK (Reuters) – The dollar index was down slightly on Friday but registered a gain for the week as investors expected the U.S. Federal Reserve to remain aggressive when it hikes interest rates next week, while China’s yuan eased past the key threshold of 7 per dollar.The dollar mostly held a slight gain following U.S. data showing consumer sentiment improved moderately in September. The University of Michigan’s preliminary September reading on the overall index on consumer sentiment came in at 59.5, up from 58.6 in the prior month. Economists polled by Reuters had forecast a preliminary reading of 60.0 in September.The dollar, measured against a basket of currencies, declined 0.1% on the day to 109.68. It reached a two-decade high of 110.79 earlier this month. For the week, it was up 0.6%, and it is up about 15% for the year so far.”This belief that we’re very close to a peak dollar, very close to peak yields,… is getting pushed back. We’re seeing a lot of strong bullish dollar calls,” said Edward Moya, senior market analyst at Oanda in New York.”That positioning will probably be strongly reflected post-FOMC next week.”Investors expect a high chance of a 75-basis-point rate hike at next week’s meeting and some chance of a 100-bps increase.In crypto markets, ether, the token used in the Ethereum network, hit its lowest level since late July, and was last down 2.8%. Bitcoin last fell 0.47% to $19,598.00.Earlier, the rising dollar pushed the offshore yuan past the critical threshold of 7 per dollar for the first time in more than two years overnight.The onshore unit similarly broke the key level soon after markets opened on Friday. Data showed China’s economy was surprisingly resilient in August, with factory output and retail sales both growing more than expected. But a deepening property slump weighed on the outlook.Sterling fell against the dollar to a new 37-year low of $1.1351 and was last down 0.5% at $1.1416, while the euro was up 0.1% at $1.0008.British retail sales fell much more than expected in August, in another sign that the economy is sliding into a recession as the cost of living crunch squeezes households’ disposable spending.While the Fed takes center stage next week, the Bank of Japan (BOJ) and the Bank of England are also expected to have monetary policy meetings. The dollar was 0.4% lower against the yen at 142.87, but was up 0.2% for the week in its fifth straight week of gains.Three sources familiar with the thinking of the BOJ said the central bank has no intention of raising rates or tweaking its dovish policy guidance to prop up the yen.”With the risk of the Fed that possibly could go a full point on Wednesday and with the Japanese holiday on Monday … you’re probably going to see a little bit more patience in deciding when to make a move,” Moya said. “Any intervention now could be crushed by a Fed decision.” ========================================================Currency bid prices at 3:38PM (1938 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index 109.6800 109.7900 -0.08% 14.652% +110.2600 +109.4600 Euro/Dollar $1.0008 $0.9995 +0.14% -11.96% +$1.0036 +$0.9945 Dollar/Yen 142.8700 143.4900 -0.43% +24.11% +143.6850 +142.8300 Euro/Yen 142.99 143.48 -0.34% +9.72% +143.5300 +142.5200 Dollar/Swiss 0.9647 0.9619 +0.28% +5.74% +0.9660 +0.9603 Sterling/Dollar $1.1416 $1.1472 -0.50% -15.59% +$1.1479 +$1.1351 Dollar/Canadian 1.3279 1.3226 +0.43% +5.06% +1.3307 +1.3228 Aussie/Dollar $0.6714 $0.6701 +0.18% -7.65% +$0.6724 +$0.6670 Euro/Swiss 0.9653 0.9613 +0.42% -6.91% +0.9666 +0.9579 Euro/Sterling 0.8765 0.8720 +0.52% +4.35% +0.8784 +0.8715 NZ Dollar/Dollar $0.5989 $0.5965 +0.39% -12.51% +$0.5992 +$0.5940 Dollar/Norway 10.2015 10.1770 +0.49% +16.08% +10.2870 +10.1790 Euro/Norway 10.2136 10.1668 +0.46% +1.98% +10.2420 +10.1589 Dollar/Sweden 10.7594 10.7200 +0.34% +19.31% +10.8213 +10.7159 Euro/Sweden 10.7691 10.7325 +0.34% +5.23% +10.7940 +10.7230 More