SEOUL (Reuters) – South Korea’s central bank said on Tuesday that consumer inflation was expected to maintain the current stable trend for the time being. The Bank of Korea said inflation was stabilising more quickly than in other major economies, in a statement released after data showed inflation reached the central bank’s target in August. More
LONDON (Reuters) – Ukraine announced on Wednesday that international bondholders had formally approved its plan to restructure over $20 billion of debt amid its ongoing war with Russia.Kyiv said those holding over 97% of its debt had done so by the required deadline, meaning the restructuring could go ahead.It is set to slash the face value of Ukraine’s international bonds by more than a third and keeps it onside with its key support provider, the International Monetary Fund, which had stipulated the writedown was necessary to make debt levels sustainable.While it will require the end, or at least a significant easing, of the war for Ukraine to be able to borrow from international capital markets again, finalising the restructuring was a “crucial step”, Ukraine’s Finance Minister Serhiy Marchenko said.It will “ensure Ukraine maintains the budget stability needed to continue financing our defence”, he added, and was an important move toward restoring long-term economic stability.The restructuring is the second in a decade Ukraine has been forced to undertake following a Russian invasion, the previous one in 2015 following Russia’s annexation of Crimea.This one had required the backing of at least two-thirds of Ukraine’s bondholders, along with a simple majority of more than half in each of the individual series of bonds involved.The process has moved at breakneck speed, taking just four months to negotiate, and replaces a two-year bond payment moratorium Ukraine was granted in the summer of 2022 that is now expiring. Yuriy Butsa, the head of Ukraine’s debt agency and a key figure in the negotiations, said the restructuring was not like those in other countries.”This has not been driven by any unsustainable economic policies,” he told Reuters. “It is driven solely by the Russian aggression against Ukraine,” adding that it also had been one of the quickest debt restructurings in history.The Group of Creditors of Ukraine – the country’s bilateral lenders includes Canada, France, Germany, Japan, Britain and the United States – welcomed the agreement. “The swift implementation of the exchange demonstrates substantive support for the government and people of Ukraine by providing substantial debt relief,” the group said in an emailed statement. As part of the deal, bondholders are accepting a 37% writedown, or “haircut”, to the face value of their holdings, saving Ukraine $11.4 billion over the next three years – the duration of Kyiv’s current IMF programme.In return, they get new bonds worth 40 cents of their original claim which restart interest payments immediately. The payments will start at 1.75% before rising to 4.5% in 2026, 6% in 2027 and to 7.75% from 2034 onwards.They also will receive a bond worth 23 cents that will not pay interest until August 2027, but will increase to 35 cents if Ukraine’s economy is outperforming IMF targets by at least 3% come 2028. The new bonds are expected to start trading on Aug. 30, once the final details of restructuring settle. STILL STRAINEDDespite the debt relief, Ukraine’s finances are set to remain heavily stretched by its war effort. It remains under constant attack from Russia, while over the last month it has also launched a surprise counter-offensive into Russia’s Kursk region.The now-agreed restructuring only covers its international market bonds, on which Ukraine owes $24 billion – or around 15% – of an overall debt load of more than $140 billion.Ukrainian officials also warned this month that the country could need more money than previously expected to fill the gaps in its budget. Kyiv still hopes to restructure another $2.6 billion worth of GDP warrants – instruments linked to the country’s growth – in the coming months, while its “official creditors” – Western governments and multilateral lenders – are expected to come up with a relief plan for their loans next year too.The IMF and a group of core bondholders that had negotiated the details of the deal with Ukraine did not immediately comment on its approval when contacted by Reuters. More
Barclays said consumer spending on its credit and debit cards rose by 1.0% year-on-year in August, bucking two months of decline.A separate survey from the British Retail Consortium also showed spending in shops increased by 1.0% in annual terms in August, the strongest uptick since March.Both surveys showed a surge in grocery spending, attributed to people enjoying barbecues and picnics during summery weather.The reports chimed with various consumer and business surveys that suggest Britain’s economy will expand at a solid pace through the second half of the year, albeit slowing from the rates seen earlier in the year as the economy rebounded from a shallow recession.Jack Meaning, chief UK economist at Barclays, said its survey supported its view that consumers would increasingly support the economy, which had been reliant on government spending for growth.”Growing real incomes and strengthening consumer confidence should combine with falling interest rates to increasingly allow consumers to put their spending power to work,” Meaning added.Britain’s economy emerged in early 2024 from a brief and shallow recession in the second half of last year and is expected to grow by 1.25% over 2024 as a whole, the BoE said last month, potentially outpacing France, Germany and Italy.New Prime Minister Keir Starmer has said he will aim to double that pace of economic growth. More
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A contract covering longshore workers on the East and Gulf Coasts will expire at the end of September, but talks have been stalled over the use of equipment that can function without human operators.When a dockworkers’ union broke off contract talks with management in June, raising the likelihood of a strike at more than a dozen ports on the East and Gulf Coasts that could severely disrupt the supply chain this fall, it was not over wages, pensions or working conditions. It was about a gate through which trucks enter a small port in Mobile, Ala.The International Longshoremen’s Association, which has more than 47,000 members, said it had discovered that the gate was using technology to check and let in trucks without union workers, which it said violated its labor contract.“We will never allow automation to come into our union and try to put us out of work as long as I’m alive,” said Harold J. Daggett, the union’s president and chief negotiator in talks with the United States Maritime Alliance, a group of companies that move cargo at ports.The I.L.A., which represents workers at economically crucial ports in New Jersey, Virginia, Georgia and Texas, has long resisted automation because it can lead to job losses.Longshoremen have grim memories of how past innovation reduced employment at the docks. Shipping containers, introduced in the 1960s, allowed ports to move goods with fewer workers. “You don’t have to pay pensions to robots,” said Brian Jones, a foreman at the Port of Philadelphia, who said he’d vote for a strike if it came to it. He began working at the port in 1974, when bananas from Costa Rica were unloaded box by box. Asked why he was still working at 73, Mr. Jones said, “I like the action, and the money doesn’t hurt.”Workers throughout the economy are worried that technology will eliminate their jobs, but at the ports it threatens one of the few blue-collar jobs that can pay more than $100,000. The United States has done less to automate port operations than countries like China, the Netherlands and Singapore. But the technology is now advancing more quickly, especially on the West Coast.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More
WELLINGTON (Reuters) – Lags in New Zealand’s official economic data are creating a fog for policy makers that recently forced them to veer off course and cut interest rates a whole year earlier than projected, badly wrong footing financial markets.Years of tight funding by successive governments have left statisticians struggling to keep up with a rapidly changing economy, and nowhere more so than with inflation.The more than two-decade old system they use is not able to calculate monthly data, making the country rare among developed nations in reporting consumer price indexes (CPI) quarterly, rather than monthly. This makes it harder for the Reserve Bank of New Zealand (RBNZ) to spot turning points in a timely manner.”We are behind in terms of most advanced economies,” Karen Silk, RBNZ Assistant Governor, told Reuters in an interview. “Monthly CPI…(it) would be delightful to get that.”As recently as May, the central bank was seriously considering whether it needed to hike rates further to bring inflation to heel. By its next meeting in early July, private business surveys and card spending data from banks had made it more confident cost pressures were easing.It had to wait another week for the official CPI report for the second quarter, which showed inflation slowing faster than most predicted.By August, the outlook had swung 180 degrees and it cut rates a quarter point to 5.25%, flagging a lot more to come.”We’re still waiting to find out what the June GDP is, that’s months back,” Governor Adrian Orr said after the August decision. June quarter GDP is not due until Sept. 19 almost two months after the first reading on U.S. growth.Stats NZ, the official data bureau, notes it is within the International Monetary Fund’s 90-day guideline.VOLATILE MARKETSWhile only a small economy of 5.3 million people, the New Zealand dollar is widely traded and investors globally follow its markets. As a result, the RBNZ’s sudden turn last month sliced a whole cent off the currency and sent bond prices surging.Even the size of the island’s population is in doubt as the government did away with paper departure cards in 2018, making the data less reliable and regularly revised. Stats NZ says COVID-19 had affected their modelling and that they were working to fix this.This is made more important given the role migration has played in this economic cycle.Andrew Lilley, chief rates strategist at Barrenjoey in Sydney, said statistics departments often had tight budgets as data was usually a low priority politically.”For every 10 basis points that unemployment goes up unnecessarily because you have the wrong read on the data, that’s 2,000 people who are out of work,” Lilley said.”If people knew this, they might be more willing to pay for good data collection and good statistics.”Funding of the bureau has jumped around 60% since 2020 to NZ$258 million ($160.76 million) to deal with new initiatives and cost pressure but took a hit this year as the government cut spending to reduce the budget deficit.”There is always a case to increase funding to do more,” said statistics minister Andrew Bayly. He added improving economic datasets was one of his priorities.The system that Stats NZ currently uses to produce CPI was built more than 20 years ago where either someone went to stores to collect data or retailers were sent surveys. An improved system is being designed but completion remains some way off, Stats NZ said.Economists use several methods to get a better read on where money is and isn’t being spent, including internal bank card data.ANZ Bank recently added extra questions to its business outlook survey to better gauge conditions.Sharon Zollner, chief economist at ANZ Bank, said while more data was always better, there is a risk that monthly CPI could be volatile whereas quarterly figures can cut through that noise.Stats NZ has worked to improve data, releasing selected indexes monthly that equate to roughly 45% of the CPI and include the more volatile components.In 2019, it started a monthly jobs indicator. Jason Attewell, general manager of economic and environmental insights at Stats NZ, said there were current constraints to getting new systems up and running or speeding up data publications.”Stats does pretty well punching above our weight as a small, relatively speaking, national statistical office,” he said, noting they produce more than 250 releases each year.Grant Williamson, an investment advisor at Christchurch’s Hamilton Hindin Green, said a monthly CPI with less lag would help. “A little bit of money spent having more up to date data would be beneficial for everyone, including, obviously, the Reserve Bank,” he said. “Having more up to date data could influence (investment) decision making on time a little.”($1 = 1.6049 New Zealand dollars) More
Speaking at a press conference, the ministry’s executive secretary, Dario Durigan, said the plan aligns with discussions on global tax cooperation that Brazil has been addressing as chair of the G20 forum of the world’s largest economies.”They take time to be implemented given the difficulties in obtaining approvals from various countries, but the idea is to bring the lessons learned,” he said of the tax discussions.In a presentation on the 2025 budget bill sent to Congress on Friday, which projects a primary surplus of 3.7 billion reais next year, the Finance Ministry estimated potential revenue of 17.9 billion reais from the increase in certain income taxes. In a separate bill submitted on Friday to lawmakers, the government proposed changes to the social contribution tax on corporate income (CSLL) and interest on equity payments (JCP).According to Durigan, the government is counting on these revenues for next year as part of a package worth 46.7 billion reais that also includes the end or the due compensation of tax waivers on payrolls for companies in some sectors and smaller municipalities – a controversial tax advantage that the government has already tried, but failed, to eliminate.A bill passed by the Senate but that pends greenlight from the Lower House maintains the tax benefits but only brings due fiscal compensation to 2024, said During, highlighting that the Supreme Federal Court had already stated that, without this balance, these tax waivers could not be granted.The ministry estimated raising 58.5 billion reais from tax negotiations next year, including 30 billion reais from a new dispute resolution program for large taxpayers to be launched in 2025 following an agreement made this year with state-owned oil giant Petrobras. “Companies that approached us estimated paying 130 billion reais in settlements, but we included 30 billion reais in the 2025 budget bill,” the ministry said. The ministry also forecast an additional 28.5 billion reais through rulings by Brazil’s Federal Administrative Council of Tax Appeals (CARF), which handles taxpayer administrative cases.According to the ministry, correcting tax distortions will add another 20 billion reais in revenue next year.Rafaela Vitoria, chief economist at Inter Bank, said the 2025 budget bill includes tax increase measures, the approval of which is unlikely, and others that may be frustrated.”Our estimate for 2025 is a deficit of 110 billion reais or 0.9% of GDP,” she wrote in a note to clients.Economists surveyed weekly by the central bank are also skeptical of the government’s fiscal efforts, projecting a primary deficit equivalent to 0.76% of gross domestic product (GDP) in 2025, following a 0.6% shortfall this year, compared with a deficit target of zero in both years. More
BERLIN (Reuters) -Volkswagen is considering closing factories in Germany for the first time, in a move that shows the mounting price pressure Europe’s top carmaker faces from Asian rivals.Monday’s move marks the first major clash between Chief Executive Oliver Blume, who analysts have described as more of a consensus builder than his often combative predecessor Herbert Diess, and unions that command substantial influence at VW.VW considers one large vehicle plant and one component factory in Germany to be obsolete, said its works council as it vowed “fierce resistance” to the executive board’s plans.Chief Financial Officer Arno Antlitz will speak to staff alongside Volkswagen (ETR:VOWG_p) brand chief Thomas Schaefer at a works council meeting on Wednesday morning.Volkswagen’s works council head Daniela Cavallo, a member of the powerful IG Metall union, said she expects CEO Blume to get involved in negotiations too, adding that Wednesday’s meeting would be “very uncomfortable” for the group’s management.IG Metall has thwarted previous attempts at more deep-rooted changes, most recently in 2022 when Diess departed as CEO.Analysts have in the past named VW sites in Osnabrueck, in Lower Saxony and Dresden, in Saxony, as potential targets for closure. The state of Lower Saxony is Volkswagen’s second-largest shareholder and on Monday supported its review.Volkswagen, which employs around 680,000 staff, said that it also felt forced to end its job security programme, which has been in place since 1994 and prevents job cuts until 2029, adding all measures would be discussed with its works council.IG Metall says the job security covers Volkswagen plants in Wolfsburg, Hanover, Braunschweig, Salzgitter, Kassel and Emden.”The situation is extremely tense and cannot be overcome by simple cost-cutting measures,” Schaefer said in a statement.VW, which drives most of Volkswagen’s unit sales, is the first of its brands to undergo a cost-cutting drive targeting 10 billion euros ($11 billion) in savings by 2026 as it attempts to streamline spending to survive the transition to electric cars.’WAKE-UP CALL’A difficult economic environment, new rivals in Europe, and the falling competitiveness of the German economy meant Volkswagen needed to do more, Blume told its management.Volkswagen, whose shares closed 1.2% higher after the news, has lost almost a third of its value over the past five years, making it the worst performer among major European carmakers.It faces a challenging landscape of challenges in Europe, the U.S. and especially China, where domestic EV makers led by BYD (SZ:002594) are grabbing its market share. It has lost more stock value than any major competitor over the past two years.Volkswagen’s plans are the latest blow to German Chancellor Olaf Scholz, whose three-way coalition was slammed in regional votes on Sunday that saw the far-right Alternative for Germany party top the poll in one state and come second in Saxony.Carsten Brzeski, global head of macro at ING Research, said the decision highlighted the consequences of years of economic stagnation and structural change without growth.”If such an industrial heavyweight has to close factories, it may be the long overdue wake-up call that (Germany’s) economic policy measures need to be stepped up considerably.”Germany’s economy ministry said VW management must act responsibly within a challenging market environment, but declined to comment specifically on planned cuts.IG Metall said the decision “shakes the foundation” of Volkswagen, which is Germany’s largest industrial employer and Europe’s top carmaker by revenue.Cavallo said in an interview on Volkswagen’s intranet that its management had made “many wrong decisions” in recent years, including not investing in hybrids or being faster at developing affordable battery-electric cars.Instead of plant closures, the board should be reducing complexity and taking advantage of synergies across the Volkswagen group’s plans, said Cavallo.($1 = 0.9034 euros) More
