Economy

NEW DELHI (Reuters) – Indian household spending on non-food items such as transport, garments and entertainment rose in both rural and urban areas in 2023/24 while outlays on staples like wheat and rice dropped, a government report showed on Friday.The Household Consumption Expenditure Survey for 2023/24, conducted from August 2023 to July 2024, showed non-food items accounted for about 53% of per capita spending in rural areas, up from about 47% in 2011/12, and 60% in urban areas, up from about 57%.The shift in spending patterns is expected to lead to a decrease in the weighting of food items in the consumer price index (CPI), which is used by the central bank to frame monetary policy.Officials from the Ministry of Statistics and Programme Implementation have previously indicated plans to revise the base year for the retail inflation data from 2012 to 2024, incorporating these findings.Analysts said food is likely to have a smaller weighting in India’s consumer price index in the near future.The urban-rural monthly per capita consumer spending gap narrowed to 70% in 2023/24 from 84% in 2011/12, the report noted.In nominal terms, rural consumer spending climbed 9.55% year on year to 4,122 rupees ($48.23) per month in the year through July from 3,773 rupees the previous year, while urban spending rose 8.31% to 6,996 rupees from 6,459 rupees, the report showed.Adjusted for inflation, rural spending grew just 3.5%, while urban spending remained subdued due to retail inflation of about 5.5% in the fiscal year that ended in March.Compared with 2011/12, rural consumer spending rose 45.4%, outpacing the 38.1% increase in urban areas, reflecting a slight convergence in consumption patterns.Consumer spending, which accounts for about 58% of India’s economic activity, remains a critical driver of economic growth in Asia’s third-largest economy.($1 = 85.4710 Indian rupees) More

MOSCOW (Reuters) – The Russian rouble is expected to keep changing hands for around 100 per U.S. dollar at the start of 2025 and gradually weaken to 108 towards the end of the year, a Reuters poll of 10 economists showed on Friday.The rouble fell to its lowest level in about 2-1/2 years in November as the U.S. imposed new financial sanctions on Russia, but it has regained some ground since then after the central bank intervened to support it.Most analysts believe that the 100 mark against the dollar is the new equilibrium level as the situation with foreign trade transactions, disrupted by sanctions, stabilises, while other factors will support the rouble.Analysts noted that the first quarter of the year is traditionally favourable for the rouble as imports, overseas travel and external debt payments decrease.The rouble slumped to 103.7 against the U.S. dollar on Friday after the central bank announced it would withdraw some support for the currency in the first working week of 2025 following the New Year break.Analysts predicted that the central bank would hold its benchmark interest rate at 21% throughout the first half of 2025 after it surprised markets on Dec. 20 by keeping rates unchanged.”We expect the central bank to keep the key rate at 21% at the meeting on Feb. 14. We believe that lending will continue to slow down, aligning with the regulator’s forecast for 2025,” said Mikhail Vasilyev from Sovcombank.Russia’s central bank has hiked its key rate to the highest level in more than 20 years as it seeks to curb inflation, which analysts expect to be at 9.8% this year, and to counter economic overheating as a consequence of excessive government spending.Analysts are estimating GDP growth of 3.9% in 2024, slightly above their previous call of 3.8%. In 2025, economic growth is forecast to slow sharply to 1.6% due to the central bank’s monetary tightening.Analysts foresee inflation rates falling to 6.6%, closer to the regulator’s target of 4%, towards the end of next year, creating room for the central bank to reduce its benchmark rate to 18% in the fourth quarter of 2025. More

The bank said in a note Friday that the move is expected to be followed by two additional cuts of the same magnitude in June and September.”We expect the Fed to deliver its next 25bp cut in March followed by two more 25bp cuts in June and September to a terminal rate range of 3.5-3.75%,” the bank wrote.Goldman also anticipates that the Fed will slow its balance sheet runoff in January 2025 and halt it entirely by the second quarter.Goldman Sachs projects above-consensus U.S. real GDP growth of 2.4% year-over-year in 2025, citing robust real income growth and easing financial conditions as key drivers.Core personal consumption expenditures (PCE) inflation is expected to decelerate to 2.4% by the end of 2025, aided by cooling shelter inflation and easing wage pressures. However, tariffs are forecasted to provide a moderate inflationary boost.Meanwhile, the bank says the unemployment rate in the U.S. is projected to decline gradually, reaching 4.0% by the end of 2025, reflecting continued strength in the labor market despite the economic shifts.Goldman notes that global growth is expected to reach 2.7% year-over-year in 2025, driven by easing financial conditions and rising disposable incomes.However, the firm highlights risks from geopolitical developments, particularly U.S. policy shifts, including higher tariffs on China and autos, lower immigration, and new tax cuts under the incoming Trump administration.In the Eurozone, Goldman expects the European Central Bank (ECB) to continue rate reductions until mid-2025, while China’s GDP growth is forecast to slow to 4.5% amid domestic challenges. More

The median estimate of 10 economists saw annual inflation falling to 45.2% in December from 47.09% in November, standing closer to the upper end of central bank’s year-end prediction range. Forecasts ranged from 44.9% to 45.54%. Monthly inflation is expected to slow from previous readings due to easing food price rises and a limited rise in energy, economists said. Forecasts ranged between 1.4% and 1.84%.Economists will also look at the course of services inflation, which showed signs of slowing in recent months, following the announcement of 30% increase in minimum wage for 2025, a level far less than requested by workers.In November, inflation was higher than expected at 47.09% annually and 2.24% on a monthly basis on the back of food, housing and health-related prices.The central bank, having kept its key interest rate steady at 50% since March, cut it by 250 basis points to 47.5% on Thursday. The central bank said it will set policy “prudently on a meeting-by-meeting basis with a focus on the inflation outlook,” and respond to any expected “significant and persistent deterioration”.The Reuters poll showed annual inflation falling to 26.5% by year-end, based on the median estimate. Forecasts ranged between 25% and 29%. The central bank sees inflation falling to 21% in the same period, and is expected to cut rates further next year.The Turkish Statistical Institute will release December inflation data at 0700 GMT on Jan 3. More

LONDON, SINGAPORE (Reuters) – The U.S. dollar was headed for an almost 7% annual gain while Japan’s yen was set for a fourth consecutive year of losses on Friday, as traders anticipated robust U.S. growth would make the Federal Reserve cautious on rate-cutting well into 2025.The dollar index, which measures the currency against major rivals, rose 0.08% to 108.06 to approach a 2.2% monthly rise and was on course to close 2025 6.6% higher. The dollar was also nearing a 5.5% gain this month against the yen and an 11.8% advance for 2024 against the weakened Japanese currency, while the euro stayed close to two-year lows. Fed Chair Jerome Powell said earlier this month that U.S. central bank officials “are going to be cautious about further cuts” after an as-expected quarter-point rate reduction.The U.S. economy also faces the impact of President-elect Donald Trump, who has proposed deregulation, tax cuts, tariff hikes and tighter immigration policies that economists view as both pro-growth and inflationary.Traders, meanwhile, anticipate the Bank of Japan will keep its monetary policy settings loose and the European Central Bank will deliver further rate cuts. The yen on Friday hovered around levels last seen in July, at 157.75 per dollar, while the euro traded at $1.042, just above a low of about $1.04 struck on Dec. 18. Traders are pricing in 37 bps of U.S. rate cuts in 2025, with no reduction fully priced into money markets until June, by which time the ECB is expected to have lowered its deposit rate by a full percentage point to 2% as the euro zone economy slows. The BoJ held back from a rate hike this month. Governor Kazuo Ueda said he preferred to wait for clarity on Trump’s policies, underscoring rising angst among central banks worldwide of U.S. tariffs hitting global trade.For now, the dominance of U.S. equities in world indices and weaker currencies in Asia and Europe helping to boost exporters have prevented tighter U.S. monetary policy from weighing on global stocks.MSCI’s broad global share index traded 0.1 higher on Friday to remain 1.5% higher for the week, with Wall Street’s S&P 500 on course for a 1.8% weekly gain.Futures trading indicated the S&P would start the New York session about 0.4% lower. MSCI’s broadest index of Asia-Pacific shares outside Japan was heading for a 1.5% weekly rise and Tokyo’s Nikkei closed the week 2% higher. European stocks lagged, with the Stoxx 600 flat on Friday and 0.3% higher this week. Analysts said stock markets could change direction as investors returned from holiday and reassessed the risks of elevated U.S. inflation under Trump for richly-valued Wall Street equities. “There is some potential upside left for this bull market, but it is limited,” said Pictet Asset Management chief strategist Luca Paolini. “(Trump’s) inauguration day is a potential inflection point and all the (prospective) good news will be in the price by then,” Paolini added. In debt markets, higher U.S. rate expectations pulled the 10-year Treasury yield, which rises as the price of the fixed income security falls, to its highest since early May on Friday, at 4.611%. The two-year Treasury yield, which tracks interest rate forecasts, traded around 4.34%. U.S. debt trends also sent euro zone yields higher, with Germany’s benchmark 10-year bund yield rising 7 basis points (bps) to 2.392% on Friday. Elsewhere in markets, gold prices dipped 0.3% to $2,626 per ounce, set for about a 27% rise for the year and the strongest yearly performance since 2011 as geopolitical and inflation concerns boosted the haven asset. Oil prices were also set for a weekly rise as investors awaited news of economic stimulus efforts in China, the world’s biggest crude importer. Brent crude futures rose 0.7% on the day to $73.78 a barrel, 1.1% higher for the week. More

The Argentine peso strengthened more in real terms than any other currency in 2024, boosting the popularity of libertarian President Javier Milei even as economists question the sustainability of high prices in Argentina.The peso strengthened 44.2 per cent in the first 11 months of the year against a basket of trading partners’ currencies, adjusting for Argentina’s triple digit annual inflation, according to data from the Bank for International Settlements analysed by Argentine consultancy GMA Capital. That far outpaces the 21.2 per cent gain for the Turkish lira in second place.The gains for the government-set exchange rate have been replicated on several legal and illegal parallel markets where Argentines buy dollars because access to the official rate is restricted.The trend is popular with Argentines, who have seen average salaries almost double in dollar terms to $990 from December 2023 to this October at the parallel rate, after seven years of near-constant depreciation.But it has come at a cost. Argentina’s central bank has struggled to rebuild its virtually empty hard currency reserves as it spends dollars to keep the peso strong. Now, some analysts warn the rapid depreciation of the real in neighbouring Brazil and a potential tariff spree by incoming US president Donald Trump could leave Argentina vulnerable to a sudden devaluation.“Milei’s programme is working, but the peso’s appreciation is the greatest risk going forward,” said Ramiro Blázquez, head of research at investment bank BancTrust. “If the peso continues to appreciate, or if there is a big external shock, demand for cheap dollars could surge, increasing the risk of devaluation.”The stronger currency — dubbed the “super peso” in local media — is making itself felt in Argentina as prices in dollars soar. A Big Mac hamburger costs $7.90 compared with $3.80 a year ago, at the official exchange rate. Earlier this month, steelmaker Ternium warned that labour costs in Argentina had become “60 per cent more expensive” than in Brazil.Business leaders fret privately that the dynamic could soon begin to hurt the competitiveness of Argentine exports. The stronger peso is a side effect of Milei’s effort to stabilise an economy that was on the brink of hyperinflation when he took office a year ago. Alongside a severe austerity programme, he maintained the strict currency controls he inherited. After an initial big devaluation last December he kept the peso mostly stable throughout 2024. Overall, the value of the currency fell by just 18 per cent in the first 11 months, even though inflation for the same period was 112 per cent.The stronger peso is a side effect of Javier Milei’s effort to stabilise an economy that was on the brink of hyperinflation a year ago More

The Dow closed higher for the sixth consecutive session on Thursday in thin year-end trading, while higher U.S. Treasury yields weighed on some heavyweight tech and growth stocks.At 05:09 a.m. ET on Friday, Dow E-minis were down 119 points, or 0.27%, and S&P 500 E-minis were down 22 points, or 0.36%. Futures tracking the tech-laden Nasdaq 100 were down 92.25 points, or 0.42%, as Nvidia (NASDAQ:NVDA) dropped 0.8% in premarket trading and Tesla (NASDAQ:TSLA) shed 1.4%. The S&P 500 has recouped most of last week’s losses that stemmed from the U.S. Federal Reserve projecting fewer interest rate cuts in 2025 and hurting risk appetite.The benchmark index is now eyeing its best week in seven, and is about 1% below its all-time high of 6,099.97 points clinched on Dec. 6.With three sessions left to close out the year, investors are hoping for new all-time highs in the stock-buying season called the “Santa Claus rally” – the last five sessions of December and the first two of January. Since 1969, the S&P 500 has climbed 1.3% on average in the seven-day trading period, according to the Stock Trader’s Almanac.Trading volume in this holiday-shortened week has been below the average of the last six months and is likely to remain subdued until Jan. 6. The next major focus for markets will be the December employments report due on Jan. 10. More

The bank cites several factors contributing to the expected slowdown, including the impact of tariffs planned by US President-elect Trump, structural headwinds in manufacturing, and ongoing fiscal consolidation across the euro area.Goldman projects the euro area to see a growth of 0.8% and the UK 1% in 2025, both figures falling below the consensus.The labor market in the euro area has shown more resilience than anticipated this year, according to the bank, but wage growth has decelerated as pay adjustments align with past price increases.Underlying inflation also cooled significantly post-summer, prompting the European Central Bank (ECB) to cut policy rates by 100 basis points over the year. Goldman strategists anticipate further 25 basis point reductions sequentially to 1.75% by next July, with the possibility of more aggressive cuts if economic conditions deteriorate beyond expectations.In contrast, the UK has experienced persistently high wage growth and services inflation, leading the Bank of England (BoE) to adopt a more cautious stance than other major central banks.The BoE has reduced the Bank Rate only twice this year, with Goldman Sachs expecting additional quarterly rate cuts throughout 2025 “as a weaker labor market cools underlying inflation, more than currently priced,” the report said.2024 was a year of sluggish growth for both the euro area and the UK. Early in the year, economic activity showed promise as real incomes rose, financial conditions improved, and hopes for recovery grew.However, from mid-year onward, growth fell short of expectations as cautious consumer behavior, elevated energy prices, and mounting competition from China weighed on performance. As a result, economic expansion in the euro area and the UK lagged behind the U.S. once again. More