Economy

The bank’s economists note that while market reactions to the latest Bank of Japan (BoJ) decisions and softer U.S. payrolls data have been strong, they do not signify a fundamental shift in economic conditions.Specifically, the increased market focus on central bank actions, particularly the Bank of Japan’s (BoJ) surprising tone on future rate hikes, set the stage for an increased perception of risk around U.S. economic growth. In the unexpected decision on July 31, the BoJ hiked its short-term policy target to 0.25%, its highest in 15 years, from a zero-to-0.1% range“The market’s initial reaction to the decision itself was relatively calm, but in the press conference following the decision, Gov. Ueda surprised the markets by talking about future hikes,” Morgan Stanley economists explained.This move was compounded by the downside surprise in July’s U.S. payrolls, which missed expectations with a print of 114,000.Despite the subsequent pullback in global markets, economists remain firm in their forecast.”We keep our longstanding call for a 25bps cut by the Fed in September,” they said in a Monday note.Morgan Stanley believes that the Fed’s dual mandate—balancing inflation with economic growth—has come into sharper focus as inflationary pressures have softened. This shift has led the market to expect a more growth-sensitive approach from the Fed, further bolstering the case for a rate cut.Economists also pointed out that the U.S. economy continues to show resilience, with Q2 2024 GDP growth at 2.6% and consumer spending up 2.3%. The unemployment rate, though slightly higher at 4.3%, still reflects a relatively healthy labor market. These indicators, according to Morgan Stanley, suggest that the U.S. is on track for a “soft landing,” not a recession.“We think the economy is on its way to a soft landing, but the market is on alert for all signs of more dramatic weakness. The data do not yet indicate an accelerated deterioration of the economy,” the note states.Looking ahead, the bank highlighted that a potential interplay between Fed cuts and BoJ hikes could bolster the Japanese yen. However, economists said that their initial view remains unchanged, predicting that the BoJ will hike rates in January “and indeed our forecast implies that real rates will stay negative through the end of 2025.” More

WUHAN (Reuters) -Liu Yi is among China’s 7 million ride-hailing drivers. A 36-year-old Wuhan resident, he started driving part-time this year when construction work slowed in the face of a nationwide glut of unsold apartments.Now he predicts another crisis as he stands next to his car watching neighbours order driverless taxis.”Everyone will go hungry,” he said of Wuhan drivers competing against robotaxis from Apollo Go, a subsidiary of technology giant Baidu (NASDAQ:BIDU).China’s Ministry of Industry and Information Technology declined comment.Ride-hailing and taxi drivers are among the first workers globally to face the threat of job loss from artificial intelligence as thousands of robotaxis hit Chinese streets, economists and industry experts said.Self-driving technology remains experimental but China has moved aggressively to green-light trials compared with the U.S which is quick to launch investigations and suspend approvals after accidents.At least 19 Chinese cities are running robotaxi and robobus tests, disclosures showed. Seven have approved tests without human-driver monitors by at least five industry leaders: Apollo Go, Pony.ai, WeRide, AutoX and SAIC Motor.Apollo Go said in May it planned to deploy 1,000 robotaxis in Wuhan by year-end. In 2022, it had forecast it would be operating in 100 cities by 2030.In a statement issued on Aug. 12, Apollo Go said it expected the transition to autonomous transport in China to be “gradual and well-regulated.””Our robotaxi fleet currently complements, rather than replaces, existing transport options,” the company said.It added that the rollout of autonomous taxis would also create jobs at Apollo Go in monitoring and testing and in analysing the data gleaned from the ongoing trials.Pony.ai, backed by Japan’s Toyota Motor (NYSE:TM), operates 300 robotaxis and plans 1,000 more by 2026. Its vice president has said robotaxis could take five years to become sustainably profitable, at which point they will expand “exponentially”.WeRide is known for autonomous taxis, vans, buses and street sweepers. AutoX, backed by e-commerce leader Alibaba (NYSE:BABA) Group, operates in cities including Beijing and Shanghai. SAIC has been operating robotaxis since the end of 2021.”We’ve seen an acceleration in China. There’s certainly now a rapid pace of permits being issued,” said Boston Consulting Group managing director Augustin Wegscheider. “The U.S. has been a lot more gradual.”Alphabet (NASDAQ:GOOGL)’s Waymo is the only U.S. firm operating uncrewed robotaxis that collect fares. The company has a total of about 700 cars operating in San Francisco, Los Angeles, Phoenix and Austin, Texas, but not all of them are in service at all times, a company spokesperson said.Cruise, backed by General Motors (NYSE:GM), restarted testing in April after one of its vehicles hit a pedestrian last year. Cruise said it operates in three cities with safety its core mission.”There’s a clear contrast between U.S. and China” with robotaxi developers facing far more scrutiny and higher hurdles in the U.S., said former Waymo CEO John Krafcik.Robotaxis spark safety concerns in China, too, but fleets proliferate as authorities approve testing to support economic goals. Last year, President Xi Jinping called for “new productive forces”, setting off regional competition.Beijing announced testing in limited areas in June and Guangzhou said this month it would open roads citywide to self-driving trials.Some Chinese firms have sought to test autonomous cars in the U.S. but the White House is set to ban vehicles with China-developed systems, said people briefed on the matter.Boston Consulting’s Wegscheider compared China’s push to develop autonomous vehicles to its support of electric vehicles.”Once they commit,” he said, “they move pretty fast”.’STUPID RADISHES’China has 7 million registered ride-hailing drivers versus 4.4 million two years ago, official data showed. With ride-hailing providing last-resort jobs during an economic slowdown, the side effects of robotaxis could prompt the government to tap the brakes, economists said.In July, discussion of job losses from robotaxis soared to the top of social media searches with hashtags including, “Are driverless cars stealing taxi drivers’ livelihoods?”In Wuhan, Liu and other ride-hailing drivers call Apollo Go vehicles “stupid radishes” – a pun on the brand’s name in local dialect – saying they cause traffic jams.Liu worries, too, about the impending introduction of Tesla (NASDAQ:TSLA)’s “Full Self-Driving” system – which still requires human drivers – and the automaker’s robotaxi ambitions.”I’m afraid that after the radishes come,” he said, “Tesla will come.”Wuhan driver Wang Guoqiang, 63, sees a threat to workers who can least afford disruption.”Ride-hailing is work for the lowest class,” he said, as he watched an Apollo Go vehicle park in front of his taxi. “If you kill off this industry, what is left for them to do?”Baidu declined to comment on the drivers’ concerns. In response to a question about the profitability of the service, Baidu referred Reuters to comments in May by Chen Zhuo, Apollo Go’s general manager. Chen said the firm would become “the world’s first commercially profitable” autonomous-driving platform.Apollo Go loses almost $11,000 a car annually in Wuhan, Haitong International Securities estimated. A lower-cost model could enable per-vehicle annual profit of nearly $16,000, the securities firm said. By contrast, a ride-hailing car earns about $15,000 total for the driver and platform.’ALREADY AT THE FOREFRONT’Automating jobs could benefit China in the long run given a shrinking population, economists said.”In the short run, there must be a balance in speed between the creation of new jobs and the destruction of old jobs,” said Tang Yao, associate professor of applied economics at Peking University. “We do not necessarily need to push at the fastest speed, as we are already at the forefront.”Eastern Pioneer Driving School has more than halved its instructor number since 2019 to about 900. Instead, it has teachers at a Beijing control centre remotely monitoring students in 610 cars equipped with computer instruction tools.Computers score students on every wheel turn and brake tap, and virtual reality simulators coach them on navigating winding roads. Massive screens provide real-time analysis of driver tasks, such as one student’s 82% parallel-parking pass rate.Zhang Yang, the school’s intelligent-training director, said the machines have done well.”The efficiency, pass rate and safety awareness have greatly improved.” More

The future path of U.S. interest rates continues to be investors’ main focus, and thus the release of U.S. consumer price data on Wednesday will be the week’s key economic data number.Federal Reserve Governor Michelle Bowman noting some further “welcome” progress on inflation in the last couple months in an interview on Saturday, softening her usually hawkish tone, but still added inflation remains “uncomfortably above” the central bank’s 2% goal.The Fed at the end of July kept the policy rate in the same 5.25%-5.50% range it has been for more than a year, but signaled that a rate cut could come as soon as September if inflation continued to cool. July CPI data is expected to show that that inflation continued to edge closer to the Fed’s 2% annual target, with forecasts tipping annual core inflation to fall a tick to 3.2%, the lowest since April 2021. Fed fund futures imply a 49% chance of a half-point rate cut in September, after climbing as high as 100% at one point last week.U.S. stock futures edged higher Monday, with investors cautious at the start of the week that includes the release of key inflation data as well as important earnings from the retail sector. By 04:00 ET (08:00 GMT), the Dow futures contract was 40 points, or 0.1%, higher, S&P 500 futures climbed 11 points, or 0.2%, and Nasdaq 100 futures rose by 60 points, or 0.3%.The main Wall Street indices ended last week with minor losses, representing something of a recovery after the rout at the start of the week.The jobless claims data helped alleviate investors’ concerns about the strength of the labor market and state of the U.S. economy, and now attention turns to the second part of the Federal Reserve’s mandate – the consumer price index [see above].Investors will also get the chance to hear from several Fed officials including Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker and Chicago Fed President Austan Goolsbee.Comments from a trio of Fed policymakers indicated on Thursday that they were more confident that inflation is cooling enough to cut rates.The quarterly earnings season is in the final stages, with the majority of companies having already reported their quarterly financial results.But there are still a few U.S. notable names due to report in the coming week including retailers Home Depot (NYSE:HD) and Walmart (NYSE:WMT).Investors will be on the lookout for what retailers have to say about the resilience of consumer spending, a major driver of growth in the economy, particularly given some recent signs of weakness in economic data.Other big names on the earnings docket are Cisco Systems (NASDAQ:CSCO) and Fox Corporation (NASDAQ:FOXA).In Europe, Switzerland’s largest bank UBS (SIX:UBSG) reports earnings on Wednesday, while it’s a big week for the insurance sector, with Hannover Re (OTC:HVRRY), Aviva (LON:AV), NN Group (AS:NN) (NASDAQ:NNBR) and Admiral (LON:ADML) set to report. Some of China’s biggest internet firms are also set to report their June quarter results this week, including Tencent Holdings (OTC:TCEHY), Alibaba (NYSE:BABA) Group and JD (NASDAQ:JD).com.The U.K. has a busy economic data calendar this week, as investors look for clues as to whether the Bank of England will continue its rate-cutting cycle next month.The BoE cut rates for the first time since 2020 at the start of this month and markets are currently pricing in a roughly 33% chance of another quarter point cut at its September meeting.Data on wage growth is due out on Tuesday, followed a day later by inflation figures, which will be closely watched for indications of lingering price pressures, particularly in the still hot services sector.Catherine Mann, an external member of the Bank of England’s Monetary Policy Committee, said in a podcast released on Monday that goods and services prices were set to rise again and wage pressures in the economy could take years to dissipate.”There is an upwards ratchet to both the wage setting process and the price process and  …  it may well be structural, having been created during this period of very high inflation over the last couple of years,” she said.”That ratchet up will take a long time to erode away,” she added.Mann voted against this month’s cut in interest rates, in what was a tight 5-4 decision.Crude prices rose Monday, climbing for the fifth successive session as concerns over the U.S. economy waned while geopolitical tensions in the Middle East remained a support. By 04:00 ET, the U.S. crude futures (WTI) climbed 0.9% to $77.55 a barrel, while the Brent contract rose 0.7% to $80.25 a barrel.Both crude benchmarks gained more than 3% last week, the first positive week in five.Iran and Hezbollah have vowed to retaliate for the assassinations of Hamas leader Ismail Haniyeh and Hezbollah military commander Fuad Shukr.Axio reported on Sunday that Israeli intelligence believes Iran will attack Israel directly and within days. Fears that a bigger war in the Middle East will disrupt oil supplies from the crude-rich region have seen traders attach a greater risk premium to oil prices. Encouraging economic data from the U.S., suggesting that a recession in the world’s biggest fuel consumer may not be imminent, helped the oil market last week. More

Mann voted against this month’s cut in interest rates and said in the Financial Times podcast that she put her hawkishness at 7 out of 10, down from 10 out of 10 earlier this year when she voted to raise rates further from their 16-year high of 5.25%.”There is an upwards ratchet to both the wage setting process and the price process and  …  it may well be structural, having been created during this period of very high inflation over the last couple of years,” she said.”That ratchet up will take a long time to erode away,” she added.British inflation returned to its 2% target in May but data this week is likely to show it rose back above it to 2.3% and the BoE has forecast it will reach about 2.75% later this year as the effect of last year’s fall in energy prices fades.Mann said she saw upward pressure on wages from the fact that wages had risen fastest for the lowest paid, compressing pay scales and creating a potential demand over the coming years from better-paid workers to restore the earnings premium they previously enjoyed.Britain’s new Labour Party government has said it will continue the previous Conservative government’s goal – achieved last year – of keeping the minimum wage at two thirds of median earnings, one of the highest in the world.Some businesses too would seek to match competitors’ past price rises and solid demand also meant they would feel less pressure to pass on cost savings from recent strengthening of sterling, she added.Figures out on Monday from the Chartered Institute of Personnel and Development showed that employers expected to raise pay by 3% over the coming year, the lowest amount in two years and below the 4.1% in a similar BoE survey. More

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The 2028 Games will be the third for Los Angeles as host, but it will be a challenge to repeat the success of 1984.What Paris Olympics? Los Angeles is already looking ahead.As the city prepares to host the 2028 Games, construction crews have fanned out, racing to bolster the area’s infrastructure to accommodate hundreds of thousands of visitors.Three main projects — expanding the rail system, revamping the airport and renovating the downtown convention center, which will be the competition venue for five sports — will have lasting effects on the region. The projects are funded through a mix of federal and city dollars as well as airport fees. And there will also be the tourist dollars spent while the Games take place.The city sees the Olympics as a revenue producer, not an expense. Now it must disprove the skeptics who say it could be a boondoggle.In 2019, two years after Los Angeles was awarded the Games, Eric Garcetti, then the mayor, said he expected the city to turn a $1 billion profit.For the current mayor, Karen Bass, hosting the Olympics is more than an opportunity to showcase familiar attractions like Hollywood or Venice Beach. It’s also about connecting visitors with small businesses citywide.“What determines success is for everybody to benefit,” Ms. Bass said in an interview. “They need to know about Little Bangladesh and Little Ethiopia and Little Armenia.”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

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More