Economy

LONDON (Reuters) – British consumers have grown more gloomy over the past month following the new Labour government’s removal of a welfare benefit for pensioners and warning of tax rises at next month’s budget, a new survey from a trade body showed on Thursday.The British Retail Consortium said households’ assessment of the general economic situation over the next three months sank to -21 in September from -8 in August. This reading – which represents the difference between the percentage of respondents with positive and negative views – is the lowest since the survey’s initial reading of -23 in March.”Negative publicity surrounding the state of the UK’s finances appears to have damaged confidence in the economic outlook, particularly among older generations,” BRC Chief Executive Helen Dickinson said.September is the first time that the BRC has published the results of its survey, which was based on a sample of 2,000 adults conducted by market research company Opinium between Sept. 10 and Sept. 13.The results chime with those last week from the much longer-running GfK consumer survey, which fell to a six-month low this month due partly to concerns about the upcoming budget.Prime Minister Keir Starmer and finance minister Rachel Reeves were elected in July, vowing to rebuild the economy after inheriting what they said were the worst economic circumstances since World War Two.Reeves has said she will remove an annual 200-pound ($265) fuel subsidy from 10 million pensioners and warned taxes were likely to rise by more than she had said was planning to before Labour’s July election victory.The BRC survey showed that households’ assessment of the outlook for their personal finances sank to -6 from -1, its lowest since the start of the survey, although spending intentions edged up marginally to -8 from -9.Last week, S&P Global reported a softening in business activity, as some companies put plans on hold until there was more clarity on changes to taxation and employment law.However, a separate survey released on Wednesday by the Recruitment and Employment Confederation showed employers’ sentiment over the third quarter of 2024 was slightly less negative than in the three months to June. More

Islamabad had been working on implementing conditions that Sharif had previously called “strict” from the IMF to complete the 37-month loan programme agreed to in July, which the country hopes will be its last.The IMF said the new program will require “sound policies and reforms” to strengthen macroeconomic stability and address structural challenges alongside “continued strong financial support from Pakistan’s development and bilateral partners.”An immediate disbursement of about $1 billion will take place. Sharif, on the sidelines of the United Nations General Assembly, told Pakistani media this week that Pakistan had fulfilled all of the lender’s conditions, with help from China and Saudi Arabia.”Without their support, this would not have been possible,” he said, without elaborating on what assistance Beijing and Riyadh had provided to get the deal over the line.Rollovers or disbursements of loans from Pakistan’s long-time allies, in addition to financing from the IMF, have helped the country meet its external financing needs in the past.The government had also vowed to increase its tax intake, in line with IMF requirements, despite protests in recent months by retailers and some opposition parties over the new tax scheme and high electricity rates. Pakistan has been struggling with boom-and-bust economic cycles for decades, leading to 22 IMF bailouts since 1958. Currently the country is the IMF’s fifth-largest debtor, owing the Fund $6.28 billion as of July 11, according to the lender’s data.The latest economic crisis has been the most prolonged and has seen Pakistan facing its highest-ever inflation, pushing the country to the brink of a sovereign default last summer before an IMF bailout. Inflation has since eased and credit ratings agency Moody’s (NYSE:MCO) has upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to ‘Caa2’ from ‘Caa3’, citing improving macroeconomic conditions and moderately better government liquidity and external positions. More

PITTSBURGH, Pa. (Reuters) -U.S. Vice President Kamala Harris said on Wednesday she would offer tax credits to domestic manufacturers and invest in sectors that will “define the next century”, as she detailed her economic plan to boost the U.S. middle class.Speaking at the Economic Club of Pittsburgh in the battleground state of Pennsylvania, the Democratic candidate in the Nov. 5 presidential election said she would give tax credits to U.S. manufacturers for retooling or rebuilding existing factories and expanding “good union jobs,” and double the number of registered apprenticeships during her first term. Harris also promised new investments in industries like bio-manufacturing, aerospace, artificial intelligence and clean energy.Harris’ speech, which lasted just under 40 minutes, did not detail how these policies would work. She highlighted her upbringing by a single mother, in contrast with Trump, the wealthy son of a New York real estate developer. “I have pledged that building a strong middle class will be the defining goal of my presidency,” Harris said, adding that she sees the election as a moment of choice between two “fundamentally different” visions of the U.S. economy held by her and her Republican opponent Donald Trump.The vice president and Trump are focusing their campaign messaging on the economy, which Reuters/Ipsos polling shows is voters’ top concern, as the election approaches.The divide between rich and poor has grown in recent decades. The share of American households in the middle class, defined as those with two-thirds to double that of median household income, has dropped from around 62% in 1970 to 51% in 2023, Pew Research shows. These households’ income has also not grown as fast as those in the top tier. Trump, Harris said, is “only interested in making life better for himself and people like himself, the wealthiest of Americans.” She said she was committed to working with the private sector and entrepreneurs to help grow the middle class. She told the audience that she is “a capitalist” who believes in “free and fair markets,” and described her policies as pragmatic rather than rooted in ideology. Harris in recent months has blunted Trump’s advantage on the economy, with a Reuters/Ipsos poll published on Tuesday showing the Republican candidate with a marginal advantage of 2 percentage points on “the economy, unemployment and jobs,” down from an 11-point lead in late July.Trump discussed his economic plan in North Carolina on Wednesday and said Harris’ role as vice president gave her the chance now to improve the economic record of the Biden administration.”Families are suffering now. So if she has a plan, she should stop grandstanding and do it,” he said.While Trump has proposed across-the-board tariffs on foreign-made goods – a proposal backed by a slim majority of voters – Harris is focusing on providing incentives for businesses to keep their operations in the U.S.Boosting American manufacturing in industries such as semiconductors and bringing back jobs that have moved overseas in recent decades have also been major goals for Biden. The Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act – all passed in 2021 and 2022 – fund a range of subsidies and tax incentives that encourage companies to place projects in disadvantaged regions. More

Speaking on the sidelines of the U.N. General Assembly, Lula said his country was surprising investors and credit rating agencies with stronger than expected growth, and offering new stability now that tax reform has advanced in Congress.”If the EU is ready we can sign the trade agreement during the G20 meeting in Brazil,” he told reporters, referring to the Group of 20 rich nations summit in Rio de Janeiro in November.”I have never been so optimistic about the EU-Mercosur accord,” the Brazilian leader added.A European diplomatic source said there had been progress towards resolving differences at a face-to-face meeting of negotiators in Brasilia on Sept 5-6.The diplomat said the plan was to close negotiations as soon as the opportunity allowed, but added that there was “still a gap.”Brazilian diplomats have said advances have been made in overcoming differences on environmental safeguards and government procurement that had stalled negotiations.Mercosur is comprised of Brazil, Argentina, Uruguay, Paraguay and more recently Bolivia. The bloc is a sought-after destination for EU manufacturing exporters, though European farmers, especially in France, fear the competition it will bring. More

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Data released earlier this week showed that eurozone business activity contracted sharply and unexpectedly this month, with the downturn appearing to be  broad-based as Germany, Europe’s largest economy, saw its decline deepen while France – the bloc’s second biggest – returned to contraction.HCOB’s preliminary composite eurozone Purchasing Managers’ Index (PMI), compiled by S&P Global, sank to 48.9 this month from August’s 51.0, below the 50 mark that separates growth from contraction for the first time since February.“The risks of a sharper slowing in activity have clearly grown,” said analysts at HSBC, in a note dated Sept. 25. “In turn, a risk-based approach to setting monetary policy might favour earlier and (at least initially) faster easing. With the deposit rate currently at 3.50%, it can probably be cut multiple times while keeping policy restrictive.”Additionally, disinflationary news from commodities and the euro, the favorable trajectory of wages and inflation expectations, and the fact that the eurozone’s largest economies are stuttering strengthens the case for more near-term easing, the bank added.In its September forecast, the ECB projected headline inflation below target in 2026. A further weakening in the demand outlook could raise the risk of a more material inflation undershoot of target, HSBC said. “So even if the supply side of the economy remains weak and the labor market only cools gradually, more policymakers may be persuaded that some ‘insurance’ rate cuts might be necessary.”HSBC now expects the ECB to cut rates by 25 bps at every meeting from October until April 2025, when the key deposit rate reaches 2.25% “Previously we had expected cuts every other meeting until the key deposit rate hit 2.50% in September 2025.” More

The previous government had planned to cut the fiscal shortfall to 3% of GDP by 2027, but weak tax revenues and budget overruns have put that target all but out of reach, leaving a hole for the new cabinet that took office this month.”Three years is not realistic, not economically or with regards to growth. But to do it in five years is possible,” Villeroy, who is also a policymaker at the European Central Bank, told France 2 TV.Earlier this week, Finance Minister Antoine Armand said the budget deficit was one of the worst in French history. The last government had hoped to limit the 2024 budget deficit to 5.1% of GDP, but the latest estimates suggest it may spiral towards 6%.The overshot puts huge pressure on new Prime Minister Michel Barnier to come up with billions of euros in budget cuts as well as a some targeted tax increases as it races to finalise the 2025 budget.Barnier has suggested he would be open to raising taxes on the wealthy and some corporations. Spending cuts are also expected, which Villeroy said in the interview that he supported.Time is running out for the government to finalise its 2025 budget and hand it over to lawmakers, with mid-October the very latest if it is to be passed by parliament before the end of the year, the head of the Cour des Comptes public audit office Pierre Moscovici said.He added that parliament could pass special emergency laws to ensure taxes are in place by the start of the year, allowing for the overall budget bill to be dealt with later.”That would be rather unorthodox, to say the least,” Moscovici told journalists.In rare good news for the new government, consumer confidence improved for the third straight month in September, topping analysts’ expectations, official INSEE data showed.An increase in the proportion of households feeling that the present is a good time to make big purchases, as well as easing concern about unemployment, helped drive the index up two points to 95, still below the long-term average but at its highest level since February 2022.But the proportion of households considering that now is a good time to save more also increased, a possible sign that consumers want to build up a cushion of spare cash in case times get tougher ahead.While consumer confidence has improved, investors remain concerned about the new government’s ability to tackle the deficit, pushing France’s borrowing costs briefly above Spain’s on Tuesday for the first time since 2008. More