Economy

WASHINGTON (Reuters) -A subsidiary of Dutch medical device maker Philips has agreed to pay over $24 million to resolve alleged false claims over respiratory-related medical equipment, the U.S. Justice Department said on Thursday.The subsidiary, Philips RS North America LLC, formerly known as Respironics Inc, resolved allegations that it misled federal healthcare programs by paying kickbacks to durable medical equipment suppliers, the Justice Department said in a statement.Respironics allegedly gave the suppliers physician prescribing data free of charge that could assist their marketing efforts to physicians, the Justice Department said.”Paying illegal remuneration to induce patient referrals undermines the integrity of our nation’s healthcare system,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department’s civil division.Respironics also entered into a five-year agreement with the U.S. Department of Health and Human Services, Office of the Inspector General to implement a compliance program that includes review of arrangements with referral sources and monitoring of Respironics’ sales force, the Justice Department said.A Philips spokesperson said its subsidiary agreed to settle the claim to avoid the required expense of litigating the allegations.”In agreeing to a settlement, Philips Respironics is not acknowledging any alleged facts, liability, or wrongdoing in the claim,” the company spokesperson said in an emailed statement.”This agreement should have no impact on our customers or the patients they serve,” the company added More

ORLANDO, Fla. (Reuters) – While the Federal Reserve and other central banks obsess over avoiding a 1970s style ‘wage-price’ spiral, U.S. GDP data last week showed that the risk of inflation remaining elevated is more nuanced. Call it a ‘profit-price’ spiral. By many measures, the U.S. labor market is as strong as it has been for decades. As labor is the biggest single input into firms’ total costs, policymakers are right to fret that ‘excessive’ wage demands may stoke or even accelerate inflation.But looked at through the prism of profits, corporate America is also in rude health, especially big business. In the second quarter this year U.S. companies raked in profits that, depending on the cut, were the highest on record, or close to levels not seen in over half a century.This is an inflationary threat too, but we hear far less from policymakers about it than the risk of wages fueling a price spiral that would only be crushed by interest rate increases like those administered by former Fed Chair Paul Volcker in the early 1980s.The battle between labor and capital, which saw capital take an ever-growing share of national income over the past 30 years, is not a new issue, certainly not politically.But with inflation at a four-decade high, it is emerging as a policymaking challenge, one the Fed has to take on board, says Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “I’m sure higher corporate profits are, indirectly, encouraging the Fed to increase interest rates. To the extent that prices are rising everywhere and corporate profits are staying high, those are a direct corollary to higher inflation,” he said.As a share of GDP, U.S. corporate profits in the second quarter rose to 12.25%, around their highest levels since 1950. Profit margins for non-financial firms rose to 15.5% in the same period, closing in on last year’s peak going all the way back to the 1960s.Less surprisingly, perhaps, nominal profits in Q2 were the highest ever. Still, the burst through the $2 trillion barrier is noteworthy. GRAPHIC: U.S. corporate profit margins (https://fingfx.thomsonreuters.com/gfx/mkt/zdvxomyblpx/USCorpProfitMargins.jpg) GRAPHIC: U.S. corporate profits as share of GDP (https://fingfx.thomsonreuters.com/gfx/mkt/znpnewdrdvl/CorpProfit1.jpg) GRAPHIC: U.S. non-financial corporate profits top $2 trillion (https://fingfx.thomsonreuters.com/gfx/mkt/gdvzyxroypw/CorpProfits2.png) This comes at the same time U.S. labor market conditions are the tightest in decades also. The unemployment rate was last lower than today’s 3.5% over half a century ago, and there are two job openings for every unemployed person. While worker strikes and labor disputes are less likely in the United States than in Europe, Fed officials would not welcome wage growth matching inflation, far less exceeding it. They would argue this would have one of two consequences, both of which go against their dual mandate of price stability: higher wages are passed onto consumers, leading to even higher inflation; or firms simply cut back on staff. UNFAIR BURDEN?Fiscal policy is more suited to curbing U.S. corporate pricing power. As Robert Reich, professor at the University of California, Berkeley, and a former Labor secretary, notes, the Biden administration passed a 1% tax on stock buybacks in the recently enacted Inflation Reduction Act, and a minimum corporate tax. This doesn’t go far enough, he argues, but recognizes that policies such as a windfall profits tax, price controls, higher taxes on corporations and the wealthy, and bolder antitrust enforcement face stiff opposition in Washington.Absent a powerful fiscal push, the onus falls on the Fed to use the blunt instrument of job-sapping and recession-seeding higher interest rates.”This is the only tool in the Fed’s tool kit. The problem is that this puts most of the burden of fighting inflation on average working people and the poor,” Reich told Reuters. GRAPHIC: U.S. real earnings growth (https://fingfx.thomsonreuters.com/gfx/mkt/egpbkrndqvq/USRealEarnings.jpg) There’s little doubt that Fed communications focus on the risks posed by wage pressures more than corporate pricing.Minutes of the Fed’s July 26-27 policy meeting reveal seven mentions of ‘wage’ or ‘wages’, 17 of ‘labor market’, eight of ‘job’ or ‘jobs’, and not one of ‘profit’.Transcripts of Fed chief Jerome Powell’s press conference on July 27 show nine references to ‘wage’ or ‘wages’, 38 mentions of ‘labor market’, 15 mentions of ‘job’ or ‘jobs’, but not a single mention of ‘profit’, ‘corporate’, ‘company’, or ‘companies’.If the political establishment in Washington is unwilling and, the Fed is unable, to cool the corporate profit boom’s potential price pressures, maybe the economy will do it for them.As tighter financial conditions slow activity and demand, profit growth should cool and companies’ margins should decline. “Earnings growth is slowing down and heading towards zero. This implies pressure on the margin, which the consensus now forecasts to decline by 5% in 2022,” equity analysts at Societe Generale (OTC:SCGLY) wrote on Thursday. (The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Andrea Ricci) More

The UK government has won a High Court challenge by three major pension funds over the legality of a planned change to the calculation of inflation that they contend could leave millions of pensioners worse off.Trustees of the BT, Ford and Marks and Spencer pension schemes had brought a judicial review claim against the government over plans by the UK Statistics Authority to reformulate the retail price index inflation measure from 2030 and replace it with CPIH, a version of the Consumer Prices Index that includes housing costs and is seen as a better measure of inflation.The pension funds, which together represent nearly 450,000 members and £83bn in assets, had argued the planned change was unlawful and that it failed to properly take into account the impact on millions of pensioners with defined benefit pensions who would be worse off because their annual increases would switch from RPI to the typically lower CPIH. However on Thursday, the High Court ruled in favour of the UK government and rejected arguments that the government or UK Statistics Authority had overstepped their authority in making the changes. The ruling is significant because 10.5mn people in the UK have private sector final salary pensions, most of which are currently linked to RPI. The pension fund trustees had argued the longer term impact could be worse for women, because statistically they live longer than men. In the judicial review challenge, the pension trustees had claimed that the UK Statistics Authority and the chancellor failed to take into account the impact of the decision on holders of RPI- index linked gilts and bonds and on retirees entitled to index-linked pensions. The pension funds also claimed that the government failed to consult properly with the public about the decision.However Mr Justice David Holgate rejected these arguments. “Parliament did not find it necessary to confer or spell out an express power to change the RPI. Given the history and nature of the RPI as an index measuring consumer price inflation, it is obviously implicit in the duty . . . to compile and maintain that index that the UKSA is able to change it,” he ruled.Ian Diamond, chief executive of the UK Statistics Authority and national statistician, welcomed the ruling and said the proposed changes can legally and practically be made by the authority in February 2030.He said: “At a time of rising prices, it has never been more important to have accurate and trusted measures of inflation. We have been clear for a number of years that the Retail Prices Index is a very poor measure of inflation, at times greatly overestimating and at other times underestimating changes in consumer prices.”The Treasury said: “We welcome today’s judgment, and are committed to the publication of accurate economic data.” A spokesperson for the pension schemes said they were “disappointed” with the ruling. “Many investors, including pension funds, bought index-linked gilts in good faith and now face losses of £90 to £100 billion” said the spokesperson. “This decision will leave millions of pensioners in defined benefit schemes with RPI linked benefits poorer through no fault of their own and facing substantial decreases in their year-on-year income. Women will be particularly impacted since they live longer and retire earlier.”Additional reporting by Josephine Cumbo More

The factories outside Chennai, in India’s southern state of Tamil Nadu, are home to an array of global corporate names that lend credibility to Prime Minister Narendra Modi’s “Make in India” campaign, which aims to turn Asia’s third-largest economy into a workshop to the world. The state’s industrial parks host international investors such as Renault-Nissan and Hyundai, which have large car factories; Dell makes computers there and Samsung produces TVs, washing machines and fridges. There are enough suppliers to Apple (including Taiwan’s Foxconn and Pegatron, and the Finnish contract manufacturer Salcomp) that people in Tamil Nadu’s business community commonly refer to the American tech group, which does not discuss its suppliers, as “the fruit company”. Now India wants to take a step up the manufacturing value chain, with a high-stakes bid to begin making semiconductors. The Modi government has put $10bn of incentives on the table to tempt manufacturers to set up new “fabs” (semiconductor fabrication plants) and encourage investment in related sectors such as display glass. One plant is being planned in Tamil Nadu. India’s ambition to enter the chipmaking business comes at a time of growing trade and geopolitical tension as western economies have pushed to decouple their supply chains from China, which has invested heavily to become a leader in the semiconductor industry. The Covid-19 pandemic and Beijing’s draconian lockdowns have disrupted global chip supply and sent companies and governments on a hunt for alternative sources of production. India, which has cracked down on Chinese social media apps and phone producers against the backdrop of a long-running geopolitical dispute, is offering itself as a democratic alternative tech hub to China. An employee at a Foxconn-owned phone factory in southern India. The Taiwanese giant has teamed up with Indian group Vedanta to build the first semiconductor plant in the country © Karen Dias/BloombergIf successful, an Indian chipmaking industry has the potential to be extremely lucrative for the country, feeding rapidly growing global demand as well as its domestic industry’s voracious needs for the computers, appliances and cars it already makes. “From a geopolitics point of view, India is attractive . . . We are increasingly one of the largest consumers of semiconductors outside of the US and traditional markets,” says Rajeev Chandrasekhar, India’s minister of state for electronics and information technology.Manufacturers are now lining up to take up the $10bn offer. Singaporean group IGSS Ventures has signed a memorandum of understanding with the Tamil Nadu state government for what its founder and chief executive Raj Kumar says will “very likely” be a wafer factory it wants to build within three years. The Israeli group ISMC, a joint venture between Israel’s Tower Semiconductor and Abu Dhabi-based Next Orbit Ventures, has signed a letter of intent with the state of Karnataka, home of India’s tech capital, Bangalore, to build a $3bn semiconductor chipmaking plant. And Foxconn has teamed up with Indian group Vedanta to build a semiconductor plant, surveying sites in the western Indian states of Gujarat and Maharashtra. 

Indian prime minister Narendra Modi’s “Make in India” campaign aims to turn Asia’s third-largest economy into a workshop to the world © Saurabh Das/AP

Young Liu, Foxconn’s chair, said on an investor call in August that the group “will be actively expanding” in India. While declining to comment on specific products, he noted “improvements in the overall industry environment in India” adding: “We think India will play a very important role in the future.”Even given its geopolitical advantages, the road ahead will not be smooth for India as it tries to market itself abroad as an alternative to China. There are risks inherent in the push, not least that Europe, the UK, the US and many other countries are simultaneously laying out billions to subsidise the onshoring of chipmaking, in a move that analysts say is bound to increase global chip capacity. To have any chance of achieving its goal, India will need to move exceptionally quickly and decisively.‘A whole lot of deficiencies’The complexity of semiconductor production and supply chains means that manufacturers in a handful of east Asian countries, led by China, Taiwan and South Korea, have been responsible for much of global supply. That is now changing. In July, the US passed the Chips and Science Act that includes $52bn of grants to support chipmaking and research and development. Meanwhile the EU is looking to build semiconductor resilience with its own €43bn Chips Act. While India does not yet make microchips commercially, it does contribute to the design of semiconductors because of its strong software base, says Mahinthan Joseph Mariasingham, a statistician and researcher with the Asian Development Bank. “When it comes to manufacturing, India has lagged behind many of the other countries, partly because of its lack of facilitating infrastructure,” he says. “It was easy for them to get into the software market because it doesn’t require elaborate physical infrastructure.” A push into microchip production, which demands some of the most exacting factory conditions of any in manufacturing, would mark a major shift for India. The country has built a reputation as one of the world’s foremost producers (and exporters) of engineering talent, but has struggled to capture a share of top-notch tech manufacturing relative to its 1.4bn population that would come close to that of either China or Vietnam. Multinationals in lower-tech sectors have long struggled with the country’s at times erratic transport and public utilities. Making silicon chips requires the utmost precision: an interruption in power or water supply lasting just a few seconds can lead to multimillion-dollar losses. Power cuts are common in much of India, prompting many companies to build their own electricity supply. India’s traditional competitive advantage in low wages will give it little or no edge in the capital-intensive business of making chips. There are also questions about whether the $10bn will be money well spent. India has a tradition, dating back to its post-independence years, of disastrous import substitution policies — measures put in place to protect or promote local industries that instead ended up wasting money and holding back the broader economy. Some analysts believe India could spend state money better by applying its proven advantages in nurturing skilled IT talent to designing chips for the world to manufacture rather than making its own.“It’s an attempt to follow the China path and create manufacturing in India,” says Raghuram Rajan, a professor of finance at the University of Chicago Booth School of Business and former governor of the Reserve Bank of India. “But you have to ask why people aren’t manufacturing in India . . . There are a bunch of reasons the government itself accepts: we don’t have the logistics, we don’t have the utilities. Sometimes we don’t have the R&D and the workers . . . There are a whole lot of deficiencies.” Reviving an industryIf manufacturers in India harbour any doubts about a national foray into chipmaking, they are not voicing them. Instead, the generous central government and local incentives that will defray their initial costs — and a blast of nationalistic, can-do rhetoric from the government — has been welcomed by Indian business. “This is India’s moment,” wrote Anil Agarwal, chair of the natural resources group Vedanta in a LinkedIn post marking the 75th anniversary of Indian independence in August.Anil Agarwal, chair of India’s Vedanta, describes the forthcoming tie-up with Foxconn to manufacture chips in India as “a beautiful partnership” © Simon Dawson/Bloomberg“In the next 25 years, we will build the world’s leading technology hub, even better than Silicon Valley,” claimed the industrialist, who began his career as a Mumbai scrap-metal trader. His subsequent rise through the metals and mining business to sit at the helm of a globally diversified conglomerate is sometimes seen as an exemplar of India’s rise up the business value chain. Vedanta is now set to be one of the country’s first to make chips, in what Agarwal describes as “a beautiful partnership” with Foxconn of Taiwan, the world’s largest contract electronics manufacturer. “Most of the technology work will be done by Foxconn,” says Agarwal. The operation, he adds, will produce both semiconductors and display glass, which Vedanta already makes in Japan, South Korea and Taiwan. For its part, Foxconn is giving little information about its plans for the venture, but points out that it has been an early mover in new markets before. “Foxconn goes to places no one thinks of going at the time,” says Jimmy Huang, acting spokesperson for the company, whose trading name is Hon Hai Technology Group. “Look at our global footprint and consider when we set up shop in each location . . . Today no one believes that India can build up a semiconductor supply chain, but Foxconn is working with the government to set up a semiconductor industry.” Madhav Kalyan, chief executive of JPMorgan India, says the bank is advising some companies discussing financing operations for chip ventures in India. “They do believe, based on their interactions with the government and this dedicated body, that there is a nuanced understanding of what it takes — and that the government is willing to invest to make it happen,” he says. India’s IT minister Ashwini Vaishnaw unveiled New Delhi’s pitch to chipmakers last December with the India Semiconductor Mission © Nathan Laine/BloombergNew Delhi laid out its pitch to chipmakers last December with the India Semiconductor Mission, unveiled by the IT Minister Ashwini Vaishnaw. “We have a strategy of broadening and deepening our electronics ecosystem. It’s about laying out the red carpet and bringing in a lot of companies who are seeking to diversify their manufacturing away from being only in China to other places,” says Chandrasekhar. When Modi came to power in 2014, he says, India had “an almost moribund, nothing electronics industry”, which had been “cannibalised and devastated” by years of free trade agreements. Today, he says, India’s ambition is to more than triple its revenues from the electronics industry to $300bn by 2026, up from $75bn in 2021, and to export $120bn of this amount. Aside from the central government subsidies, business-friendly states in India’s south and west are vying with one another to capture investments, with tax and other incentives, as well as assurances on land, water, power and other production inputs. 

Business-friendly Indian state Tamil Nadu is already home to multinationals including Tata © Arun sankar/AFP/Getty Images

“We give so many incentives, starting with land, the biggest thing in short supply,” says P Thiaga Rajan, Tamil Nadu’s finance minister and a former Standard Chartered and Lehman Brothers banker, who has been active in luring investors to the state. “We have a very proactive policy.” He points to Tamil Nadu’s past support for investors, including Tata and Foxconn, in building their operations in the state: “We have figured out how to put all the pieces of the puzzle together.” The lagging edgeSome observers of India’s ambitions to push into semiconductors argue that its heavy emphasis on building up local chip fabrication misses the mark, in a fiercely competitive global industry. They ask how much the industry will have to show for itself when the subsidy money runs out. “In the semiconductor value chain, there are a lot of steps in the process, and the actual fabrication of chips is only one,” says Christopher Miller, a professor at Tufts University’s Fletcher School and author of Chip War: The Fight for the World’s Most Critical Technology, a book about global rivalry in semiconductors. “Many countries that play a big role in the process don’t make chips — and that can still be a lucrative role to play.” While India might plausibly set up factories making “lagging edge” chips of the kind usable in cars and appliances — which are much in demand in places such as Chennai — it will still struggle to compete against efficient Taiwanese producers or the heavily subsidised Chinese, he says. Instead of trying to take on longer-established producers in China and elsewhere and setting up “fabs” producing lagging-edge chips made using legacy technology, Miller argues, India might better use its money in chip assembly and packaging facilities, where labour costs are more important. If India were to direct its subsidies, he says, “$10bn could go a long way”. Workers at Siliconware Precision Industries factory in Taiwan. The country currently leads the world in semiconductor manufacturing © Maurice Tsai/BloombergRajan, the former central banker, argues that India should be focusing on building human capital rather than chip factories. “Wouldn’t it make more sense to build the software rather than focus on the hardware — and educate 10,000 Indians who can do chip design?” he says.Rather than trying to direct investment into chip fabrication capabilities, Rajan says, India could channel $100mn into 100 new universities that would train graduates — not just in engineering — and “seed many sectors”. “Even if you were interested in chips alone, training software and design engineers can be the road toward [a major chip designer such as the US’s] Qualcomm, which might be far easier and cheaper”, he says, than imitating a leading manufacturer like Taiwan’s TSMC.But early investors in the sector echo the government’s view that demand from a growing domestic electronics industry, coupled with the government’s help in defraying producers’ start-up costs, will inevitably support a full value chain, given India’s pool of engineering talent. Kumar, of IGSS Ventures, who formerly worked for chipmaking giant Global Foundries, points out that Singapore, with a population of less than 6M and where the domestic consumption of semiconductors is “peanuts”, already hosts several wafer fabs.“Imagine the potential of India,” he says. “For a country that’s going to be a top economic nation, it needs some minimum semiconductor capabilities domestically.” More

ROME (Reuters) – The Italian government is preparing a new multi-billion euro package to help shield firms and families from surging energy costs and rising consumer prices, Foreign Minister Luigi Di Maio said on Thursday.The measures are likely to be worth at least 10 billion euros ($10.01 billion), a government source told Reuters.They come on top of some 52 billion euros already budgeted this year to soften the impact of sky-high electricity, gas and petrol costs, and will be approved a few weeks ahead of a Sept. 25 national election.”Next week, the cabinet will adopt a new decree to curb the increase in energy bills,” Di Maio told reporters.Italian inflation jumped to 9.0% in August from 8.4% the month before, driven up by electricity and gas prices, preliminary data showed on Wednesday.Business lobby Confcommercio and several retail bodies have called on outgoing Prime Minister Mario Draghi to extend tax relief to help firms tackle the energy crunch, and to rule that bills can be paid in smaller instalments.Draghi has so far financed his anti-inflation packages with increased revenue from value added tax as a result of the higher energy costs and by adjusting other areas of the state budget, without increasing borrowing.He has so far refused to hike this year’s fiscal deficit above the target of 5.6% of national output which was set in April, despite pressure from several parties for him to do so.Before finalising next week’s package, the government wants to assess how much it will garner from a 25% windfall tax on energy groups that have benefited from surging oil and gas prices, political sources said.Under the windfall tax scheme, a 40% down-payment was due by the end of June but thousands of companies refused to pay, leaving the government facing a potential revenue shortfall of more than 9 billion euros.In response, Draghi said last month the down-payment would carry a 30% surcharge if paid by Aug. 31, after which it would rise to 60%.As part of the relief package, the Treasury plans to fund an extraordinary layoff scheme to help firms hit by energy costs to furlough staff rather than sack them, the sources said.($1 = 0.9988 euros) More

Jobless claims totaled a seasonally adjusted 232,000 for the week ended Aug. 27, below the estimate for 245,000.
Continuing claims increased to 1.44 million, up 26,000 from the previous week.
Unit labor costs increased 9.3% over the past four quarters, the highest level since the first quarter of 1982.

Initial filings for unemployment insurance fell to their lowest level since late June last week, a sign that the labor market is resilient amid a slowing economy.
Claims totaled a seasonally adjusted 232,000 for the week ended Aug. 27, a decline of 5,000 from the previous period and the lowest since June 25, the Labor Department reported Thursday.

Economists surveyed by Dow Jones had been looking for 245,000.
Continuing claims increased to 1.44 million, up 26,000 from the previous level in data that runs a week behind the headline number.
The numbers come a day ahead of the closely watched nonfarm payrolls report for August, though it is outside the survey week the Bureau of Labor Statistics uses to compile that count. Wall Street is expecting that report to show that job gains in August, a notoriously volatile month statistically, will total 318,000.
Amid worries that the U.S. is teetering on recession, the jobs market has provided a bulwark indicating that hiring demand is strong and consumer spending has held up despite soaring inflation.
Earlier this week, the BLS reported that job openings rose past 11.2 million and outnumber the available worker pool by just shy of 2 to 1. Data on Wednesday from payroll processing firm ADP indicated that private companies added just 132,000 jobs in August, but most economists thus far have held with their forecast for solid growth for the month.

Federal Reserve officials have been trying to bridge the jobs gap and slow down inflation through a series of aggressive interest rate increases. Despite those moves, inflation remains near its highest level in more than 40 years.
Over the past several days, multiple Fed officials have indicated the rate moves are likely to continue. In a speech Wednesday, Cleveland Fed President Loretta Mester said she expects the fed funds rate, a benchmark used by banks in overnight lending but also tied to many consumer debt instruments, to rise above 4% by early 2023. The rate is currently targeted in a range of 2.25%-2.5%.
Separate data the BLS released Thursday showed that the productivity decline in the second quarter wasn’t as sharp as initially reported. The revised productivity level showed a drop of 4.1%, an upward revision of half a percentage point from the initial reading. Economists had been expecting a reading of minus-4.3%.
Unit labor costs, or the amount of compensation compared to output, rose 10.2% for the quarter, 0.4 percentage point less than the estimate. However, the four-quarter increase of 9.3% is the highest level since the first quarter of 1982.
This is breaking news. Please check back here for updates.

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The number of unemployed people in the eurozone fell below 11mn for the first time, or an all-time low of 6.6 per cent of the workforce, underlining the resilience of the bloc’s labour market despite the energy crisis caused by Russia’s invasion of Ukraine. The official count of jobless people in the 19-country bloc dropped by 77,000 in July, according to data published by the European Commission’s statistics unit on Thursday. The bloc’s unemployment rate stood at 6.7 per cent in June. In the wider EU, the number of unemployed people fell 113,000 in July, taking it below 13mn for the first time and its jobless rate to a new low of 6 per cent.The strength of the eurozone labour market and the subsequent risk that wages will rise sharply have been cited by several European Central Bank policymakers as a reason for seeking to accelerate the pace of interest rate rises with a 0.75 percentage point move next week. “Against the backdrop of record high inflation and record low unemployment, the ECB at its meeting next week will see little reason to hold back on policy tightening,” said Jessica Hinds, an economist at research group Capital Economics.Dutch central bank governor Klaas Knot, who sits on the ECB governing council, said he visited six eurozone countries in his summer holidays, “and in almost every shop I went into in all these countries there were signs saying ‘we’re hiring’ or ‘staff needed’.”“This should be quite some concern on the back of the persistent inflation we are seeing,” said Knot, who has called for the ECB to discuss speeding up rate increases to curb inflation.ECB executive board member Isabel Schnabel told the Jackson Hole meeting of central bankers last weekend that “tight labour markets” were one of the “significant risks” that “threaten to feed an inflationary process that is becoming harder to control the more hesitantly we act on it”.However, Hinds said the latest fall in eurozone jobless numbers was “likely to be as good as it gets”. “The region faces a difficult winter and recession looms. So the jobless rate is likely to rise from here, even if short-time working schemes cushion the blow,” she added.In response to record eurozone inflation, unions are demanding higher pay and several governments are increasing minimum wages sharply. Meanwhile, workers in some countries, such as Belgium, have indexation agreements linking pay to inflation. Paul Hollingsworth, senior European economist at French bank BNP Paribas, said: “There is evidence that firms are having to pay over-and-above the negotiated wage — eg via bonuses, to attract and retain workers given the tightness of the labour market.”Yet, so far, there have been few signs of a wage-price spiral taking hold in the eurozone. The ECB’s tracker of negotiated wage growth in the eurozone showed it slowed to 2.14 per cent in the second quarter, down from 2.84 per cent in the first quarter. More

LONDON (Reuters) – British businesses have increasingly high expectations for inflation and wage costs over the coming year, according to a Bank of England survey which is likely to boost policymakers’ concerns that it will be hard to get inflation back to target.Last month the Bank of England raised interest rates by half a percentage point – its biggest increase since 1995 – and said it would “act forcefully” if it saw risks that inflation pressures were becoming persistent.Consumer price inflation hit a 40-year high of 10.1% in July and the BoE forecast it will peak above 13% in October.Financial markets expect another half-point rate rise from the BoE this month – which would take Bank Rate to 2.25% – and see a 29% chance of a 75-basis-point rise which would be the biggest rise since 1989.The BoE pays particularly close attention to its monthly Decision Maker Panel survey of chief financial officers at British businesses with a range of sizes.Thursday’s release showed businesses expect consumer price inflation in a year’s time to be 8.4%, up from a forecast of 7.3% in July’s survey. Expectations for inflation in three years were also well above the BoE’s 2% target at 4.2%.Businesses plan to raise their own prices by an average of 6.4% over the next 12 months – down slightly from 6.7% in July, which was the highest in more than five years – while they intend to raise employees’ wages by 5.5%, up from 5.2%.Wages had risen by an average of 6.4% over the past 12 months, the survey showed.The results from the BoE survey match the trend in a broader survey of households released on Wednesday by U.S. bank Citi and polling company YouGov, which showed inflation expectations for five to 10 years’ time hit a record high of 4.8%.However, there was some evidence of easing price pressure in parts of the economy in S&P Global (NYSE:SPGI)’s monthly manufacturing Purchasing Managers’ Index. Manufacturers’ overall input costs – which include wages and raw materials – rose at the slowest pace since November 2020, despite surging energy bills, while prices charged rose by the least since March 2021. More