BERLIN, Jan 30 (Reuters) – The German economy unexpectedly shrank in the fourth quarter, data showed on Monday, a sign that Europe’s largest economy may be entering a much-predicted recession, though likely a shallower one than originally feared.
Gross domestic product decreased 0.2% quarter on quarter in adjusted terms, the federal statistics office said. A Reuters poll of analysts had forecast the economy would stagnate.
In the previous quarter, the German economy grew by an upwardly revised 0.5% versus the previous three months.
A recession – commonly defined as two successive quarters of contraction – has become more likely, as many experts predict the economy will shrink in the first quarter of 2023 as well.
“The winter months are turning out to be difficult – although not quite as difficult as originally expected,” said VP Bank chief economist Thomas Gitzel.
“The severe crash of the German economy remains absent, but a slight recession is still on the cards.”
German Economy Minister Robert Habeck said last week in the government’s annual economic report that the economic crisis triggered by the Russian invasion of Ukraine was now manageable, though high energy prices and interest rate rises mean the government remains cautious.
The government has said the economic situation should improve from spring onwards, and last week revised up its GDP forecast for 2023 — predicting growth of 0.2%, up from an autumn forecast of a 0.4% decline.
As far as the European Central Bank goes, interest rate expectations are unlikely to be affected by Monday’s GDP figures as inflationary pressures remain high, said Helaba bank economist Ralf Umlauf.
The ECB has all but committed to raising its key rate by half a percentage point this week to 2.5% to curb inflation.
Monday’s figures showed falling private consumption was the primary reason for the decrease in fourth-quarter GDP.
“Consumers are not immune to an erosion of their purchasing power due to record high inflation,” said Commerzbank chief economist Joerg Kraemer.
Inflation, driven mainly by high energy prices, eased for a second month in a row in December, with EU-harmonized consumer prices rising 9.6% on the year.
However, analysts polled by Reuters predict annual EU-harmonized inflation will enter the double digits again in January with a slight rise, to 10.0%. The office will publish the preliminary inflation rate for January on Tuesday.
Reporting by Miranda Murray and Rene Wagner, editing by Rachel More and Christina Fincher
Our Standards: The Thomson Reuters Trust Principles.
Fourth-quarter GDP forecast to increase at a 2.6% rate
Strong consumer spending seen; other sectors to contribute
Weekly jobless claims expected to rise moderately
WASHINGTON, Jan 26 (Reuters) – The U.S. economy likely maintained a strong pace of growth in the fourth quarter as consumers boosted spending on goods, but momentum appears to have slowed considerably towards the end of the year, with higher interest rates eroding demand.
The Commerce Department’s advance fourth-quarter gross domestic product report on Thursday could mark the last quarter of solid growth before the lagged effects of the Federal Reserve’s fastest monetary policy tightening cycle since the 1980s kick in. Most economists expect a recession by the second half of the year, though mild compared to previous downturns.
Retail sales have weakened sharply over the last two months and manufacturing looks to have joined the housing market in recession. While the labor market remains strong, business sentiment continues to sour, which could eventually hurt hiring.
“This looks like it could be the last really positive, strong quarterly print we’ll see for a while,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “Markets and most people will look through this number. More recent data are suggesting that economic momentum is continuing to slow.”
According to a Reuters survey of economists, GDP growth likely increased at a 2.6% annualized rate last quarter after accelerating at a 3.2% pace in the third quarter. Estimates ranged from a 1.1% rate to a 3.7% pace.
Robust second-half growth would erase the 1.1% contraction in the first six months of the year.
Growth for the full year is expected to come in at around 2.1%, down from the 5.9% logged in 2021. The Fed last year raised its policy rate by 425 basis points from near zero to a 4.25%-4.50% range, the highest since late 2007.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, is expected to have grown at a pace faster than the 2.3% rate notched in the third quarter. That would mostly reflect a surge in goods spending at the start of the quarter.
Spending has been underpinned by labor market resilience as well as excess savings accumulated during the COVID-19 pandemic. But demand for long-lasting manufactured goods, which are mostly bought on credit, has fizzled and some households, especially lower income, have depleted their savings.
Economic growth also likely received a lift from business spending on equipment, intellectual property and nonresidential structures. But with demand for goods tanking, business spending also lost some luster as the fourth quarter ended.
Despite the clear signs of a weak handover to 2023, some economists are cautiously optimistic that the economy will skirt an outright recession, but rather suffer a rolling downturn, where sectors decline in turn rather than all at once.
ROLLING RECESSION
They argue that monetary policy now acts with a shorter lag than was previously the case because of advances in technology and the U.S. central bank’s transparency, which they said resulted in financial markets and the real economy acting in anticipation of rate hikes.
“We will continue to have positive GDP numbers,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “The reason is sectors are taking turns going down, and not simultaneous declining. The rolling recession began with housing and now we are seeing the next phase which is consumption related.”
Indeed, with demand for goods slumping, factory production has declined sharply for two straight months. Job cuts in the technology industry were also seen as flagging cutbacks in capital spending by businesses.
While residential investment likely suffered its seventh straight quarterly decline, which would be the longest such streak since the collapse of the housing bubble triggered the Great Recession, there are signs the housing market could be stabilizing. Mortgage rates have been trending lower as the Fed slows the pace of its rate hikes.
Inventory accumulation was seen adding to GDP last quarter, but with demand slowing, businesses are likely to focus on reducing stock in their warehouse rather than placing new orders, which would undercut growth in the quarters ahead.
Trade, which accounted for the bulk of GDP growth in the third quarter, was seen either making a small contribution or subtracting from GDP growth. Strong growth is expected from government spending.
While the labor market thus far has shown remarkable resilience, economists argue that deteriorating business conditions will force companies to slow hiring and lay off workers.
Companies outside the technology industry as well as interest-rate sensitive sectors like housing and finance are hoarding workers after struggling to find labor during the pandemic.
A separate report from the Labor Department on Thursday is likely to show initial claims for state unemployment benefits rose to a seasonally adjusted 205,000 for the week ended Jan. 21, from 190,000 in the prior week, according to a Reuters survey of economists.
“We expect initial jobless claims will eventually start to turn back up after their recent drop, consistent with an eventual downturn in payrolls and a rise in the unemployment rate,” said Kevin Cummins, chief economist at NatWest Markets in Stamford, Connecticut. “In turn, we expect spending to slow as consumers will be less willing to run down savings in the face of a deteriorating labor market.”
Reporting by Lucia Mutikani; Editing by Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
Sales fall 17.8% in 2022, sharpest annual decline since 2008
Median house price rises 2.3% from year ago
WASHINGTON, Jan 20 (Reuters) – U.S. existing home sales plunged to a 12-year low in December, but declining mortgage rates raised cautious optimism that the embattled housing market could be close to finding a floor.
The report from the National Association of Realtors on Friday also showed the median house price increasing at the slowest pace since early in the COVID-19 pandemic as sellers in some parts of the country resorted to offering discounts.
The Federal Reserve’s fastest interest rate-hiking cycle since the 1980s has pushed housing into recession.
“Existing home sales are somewhat lagging,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “The decline in mortgage rates could help undergird housing activity in the months ahead.”
Existing home sales, which are counted when a contract is closed, fell 1.5% to a seasonally adjusted annual rate of 4.02 million units last month, the lowest level since November 2010. That marked the 11th straight monthly decline in sales, the longest such stretch since 1999.
Reuters Graphics
Sales dropped in the Northeast, South and Midwest. They were unchanged in the West. Economists polled by Reuters had forecast home sales falling to a rate of 3.96 million units. December’s data likely reflected contracts signed some two months earlier.
Home resales, which account for a big chunk of U.S. housing sales, tumbled 34.0% on a year-on-year basis in December. They fell 17.8% to 5.03 million units in 2022, the lowest annual total since 2014 and the sharpest annual decline since 2008.
Reuters Graphics
The continued slump in sales, which meant less in broker commissions, was the latest indication that residential investment probably contracted in the fourth quarter, the seventh straight quarterly decline.
This would be the longest such streak since the collapse of the housing bubble triggered the Great Recession.
While a survey from the National Association of Home Builders this week showed confidence among single-family homebuilders improving in January, morale remained depressed.
Single-family homebuilding rebounded in December, but permits for future construction dropped to more than a 2-1/2- year low, and outside the pandemic plunge, they were the lowest since February 2016.
A “For Rent, For Sale” sign is seen outside of a home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger
Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
MORTGAGE RATES RETREATING
The worst of the housing market rout is, however, probably behind. The 30-year fixed mortgage rate retreated to an average 6.15% this week, the lowest level since mid-September, according to data from mortgage finance agency Freddie Mac.
The rate was down from 6.33% in the prior week and has declined from an average of 7.08% early in the fourth quarter, which was the highest since 2002. It, however, remains well above the 3.56% average during the same period last year.
The median existing house price increased 2.3% from a year earlier to $366,900 in December, with NAR Chief Economist Lawrence Yun noting that “markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year.”
The smallest price gain since May 2020, together with the pullback in mortgage rates, could help to improve affordability down the road, though much would depend on supply. Applications for loans to buy a home have increased so far this year, a sign that there are eager buyers waiting in the wings.
House prices increased 10.2% in 2022, boosted by an acute shortage of homes for sale. Housing inventory totaled 970,000 units last year. While that was an increase from the 880,000 units in 2021, supply was the second lowest on record.
“Home price growth is likely to continue to decelerate and we look for it to turn negative in 2023,” said Nancy Vanden Houten, a U.S. economist at Oxford Economics in New York. “The limited supply of homes for sale will prevent a steep decline.”
In December, there were 970,000 previously owned homes on the market, down 13.4% from November but up 10.2% from a year ago. At December’s sales pace, it would take 2.9 months to exhaust the current inventory of existing homes, up from 1.7 months a year ago. That is considerably lower than the 9.6 months of supply at the start of the 2007-2009 recession.
Though tight inventory remains an obstacle for buyers, the absence of excess supply means the housing market is unlikely to experience the dramatic collapse witnessed during the Great Recession.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand. Properties typically remained on the market for 26 days last month, up from 24 days in November.
Fifty-seven percent of homes sold in December were on the market for less than a month. First-time buyers accounted for 31% of sales, up from 30% a year ago. All-cash sales made up 28% of transactions compared to 23% a year ago. Distressed sales, foreclosures and short sales were only 1% of sales in December.
“While the stabilization of affordability will be good news for potential home buyers, a lack of available inventory could remain a constraint for home buying activity,” said Orphe Divounguy, a senior economist at Zillow.
Reporting by Lucia Mutikani;
Editing by Dan Burns and Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
BENGALURU, Jan 20 (Reuters) – The U.S. Federal Reserve will end its tightening cycle after a 25-basis-point hike at each of its next two policy meetings and then likely hold interest rates steady for at least the rest of the year, according to most economists in a Reuters poll.
Fed officials broadly agree the U.S. central bank should slow the pace of tightening to assess the impact of the rate hikes. The Fed raised its benchmark overnight interest rate by 425 basis points last year, with the bulk of the tightening coming in 75- and 50-basis-point moves.
As inflation continues to decline, more than 80% of forecasters in the latest Reuters poll, 68 of 83, predicted the Fed would downshift to a 25-basis-point hike at its Jan. 31-Feb 1 meeting. If realized, that would take the policy rate – the federal funds rate – to the 4.50%-4.75% range.
The remaining 15 see a 50-basis-point hike coming in two weeks, but only one of those was from a U.S. primary dealer bank that deals directly with the Fed.
The fed funds rate was expected to peak at 4.75%-5.00% in March, according to 61 of 90 economists. That matched interest rate futures pricing, but was 25 basis points lower than the median point for 2023 in the “dot plot” projections issued by Fed policymakers at the end of the Dec. 13-14 meeting.
“U.S. inflation shows price pressures are easing, yet in an environment of a strong jobs market, the Federal Reserve will be wary of calling the top in interest rates,” noted James Knightley, chief international economist at ING.
The expected terminal rate would be more than double the peak of the last tightening cycle and the highest since mid-2007, just before the global financial crisis. There was no clear consensus on where the Fed’s policy rate would be at the end of 2023, but around two-thirds of respondents had a forecast for 4.75%-5.00% or higher.
The interest rate view in the survey was slightly behind the Fed’s recent projections, but the poll medians for growth, inflation and unemployment were largely in line.
Inflation was predicted to drop further, but remain above the Fed’s 2% target for years to come, leaving a relatively slim chance of rate cuts anytime soon.
In response to an additional question, more than 60% of respondents, 55 of 89, said the Fed was more likely to hold rates steady for at least the rest of the year than cut. That view lined up with the survey’s median projection for the first cut to come in early 2024.
However, a significant minority, 34, said rate cuts this year were more likely than not, with 16 citing a plunge in inflation as the biggest reason. Twelve said a deeper economic downturn and four said a sharp rise in unemployment.
“The Fed has prioritized inflation over employment, therefore only a sharp decline in core inflation can convince the FOMC (Federal Open Market Committee) to cut rates this year,” said Philip Marey, senior U.S. strategist at Rabobank.
“While the peak in inflation is behind us, the underlying trend remains persistent … we do not think inflation will be close to 2% before the end of the year.”
Reuters Poll- U.S. Federal Reserve outlook
In the meantime, the Fed is more likely to help push the economy into a recession than not. The poll showed a nearly 60% probability of a U.S. recession within two years.
While that was down from the previous poll, several contributors had not assigned recession probabilities to their forecasts as a slump was now their base case, albeit a short and shallow one as predicted in several previous Reuters surveys.
The world’s biggest economy was expected to grow at a mere 0.5% this year before rebounding to 1.3% growth in 2024, still below its long-term average of around 2%.
With mass layoffs underway, especially in financial and technology companies, the unemployment rate was expected to rise to average 4.3% next year, from the current 3.5%, and then climb again to 4.8% next year.
While still historically low compared to previous recessions, the forecasts were about 1 percentage point higher than a year ago.
(For other stories from the Reuters global economic poll:)
Reporting by Prerana Bhat; Polling by Milounee Purohit; Editing by Ross Finley and Paul Simao
Our Standards: The Thomson Reuters Trust Principles.
BEIJING/HONG KONG, Jan 17 (Reuters) – China’s population fell last year for the first time in six decades, a historic turn that is expected to mark the start of a long period of decline in its citizen numbers with profound implications for its economy and the world.
The drop, the worst since 1961, the last year of China’s Great Famine, also lends weight to predictions that India will become the world’s most populous nation this year.
China’s population declined by roughly 850,000 to 1.41175 billion at the end of 2022, the country’s National Bureau of Statistics said.
Long-term, U.N. experts see China’s population shrinking by 109 million by 2050, more than triple the decline of their previous forecast in 2019.
That’s caused domestic demographers to lament that China will get old before it gets rich, slowing the economy as revenues drop and government debt increases due to soaring health and welfare costs.
“China’s demographic and economic outlook is much bleaker than expected. China will have to adjust its social, economic, defense and foreign policies,” said demographer Yi Fuxian.
He added that the country’s shrinking labour force and downturn in manufacturing heft would further exacerbate high prices and high inflation in the United States and Europe.
Kang Yi, head of the national statistics bureau, told reporters that people should not worry about the decline in population as “overall labour supply still exceeds demand”.
China’s birth rate last year was just 6.77 births per 1,000 people, down from a rate of 7.52 births in 2021 and marking the lowest birth rate on record.
The number of Chinese women of childbearing age, which the government defines as 25 to 35, fell by about 4 million, Kang said.
The death rate, the highest since 1974 during the Cultural Revolution, was 7.37 deaths per 1,000 people, which compares with rate of 7.18 deaths in 2021.
ONE-CHILD POLICY IMPACT
Much of the demographic downturn is the result of China’s one-child policy imposed between 1980 and 2015 as well as sky-high education costs that have put many Chinese off having more than one child or even having any at all.
The data was the top trending topic on Chinese social media after the figures were released on Tuesday. One hashtag,”#Is it really important to have offspring?” had hundreds of millions of hits.
“The fundamental reason why women do not want to have children lies not in themselves, but in the failure of society and men to take up the responsibility of raising children. For women who give birth this leads to a serious decline in their quality of life and spiritual life,” posted one netizen with the username Joyful Ned.
China’s stringent zero-COVID policies that were in place for three years have caused further damage to the country’s demographic outlook, population experts have said.
Local governments have since 2021 rolled out measures to encourage people to have more babies, including tax deductions, longer maternity leave and housing subsidies. President Xi Jinping also said in October the government would enact further supportive policies.
The measures so far, however, have done little to arrest the long-term trend.
Online searches for baby strollers on China’s Baidu search engine dropped 17% in 2022 and are down 41% since 2018, while searches for baby bottles are down more than a third since 2018. In contrast, searches for elderly care homes surged eight-fold last year.
The reverse is playing out in India, where Google Trends shows a 15% year-on-year increase in searches for baby bottles in 2022, while searches for cribs rose almost five-fold.
Reuters Graphics
Reporting by Albee Zhang in Beijing and Farah Master in Hong Kong; Additional reporting by Kevin Yao and Ella Cao in Beijing; Editing by Edwina Gibbs
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, Jan 12 (Reuters) – U.S consumer prices fell for the first time in more than 2-1/2 years in December amid declining prices for gasoline and motor vehicles, offering hope that inflation was now on a sustained downward trend, though the labor market remains tight.
Americans also got more relief at the supermarket last month, with the report from the Labor Department on Thursday showing food prices posting their smallest monthly increase since March 2021. But rents remained very high and utilities were more expensive.
Cooling inflation could allow the Federal Reserve to further scale back the pace of its interest rate increases next month. The U.S. central bank is engaged in its fastest rate hiking cycle since the 1980s.
“The mountain peak of inflation is behind us but the question is how steep the downhill is,” said Sung Won Sohn, finance and economics professor at Loyola Marymount University in Los Angeles. “To be sure, the efforts by the Fed have begun to bear fruit, even though it will be a while before the promised land of a 2% inflation rate is here.”
The consumer price index dipped 0.1% last month, the first decline since May 2020, when the economy was reeling from the first wave of COVID-19 cases. The CPI rose 0.1% in November.
Economists polled by Reuters had forecast the CPI unchanged. It was third straight month that the CPI came in below expectations and raised buying power for consumers as well as hopes the economy could avoid a dreaded recession this year.
“The current trajectory could deliver a softer landing, stronger jobs market and a less aggressive stance from the Fed but only time will tell,” said James Bentley, director at Financial Markets Online.
Gasoline prices tumbled 9.4% after dropping 2.0% in November. But the cost of natural gas increased 3.0%, while electricity rose 1.0%.
Food prices climbed 0.3%, the smallest gain in nearly two years, after rising 0.5% in the prior month. The cost of food consumed at home increased 0.2%, also the least since March 2021. Fruit and vegetable prices fell as did those for dairy products, but meat, poultry and fish cost more. Egg prices surged 11.1% because of avian flu.
In the 12 months through December, the CPI increased 6.5%. That was the smallest rise since October 2021 and followed a 7.1% advance in November. The annual CPI peaked at 9.1% in June, which was the biggest increase since November 1981. Inflation remains well above the Fed’s 2% target.
President Joe Biden welcomed the disinflationary trend, saying it was “giving families some real breathing room,” and “proof that my plan is working.”
Price pressures are subsiding as higher borrowing costs cool demand, and supply chains ease.
The Fed last year raised its policy rate by 425 basis points from near zero to a 4.25%-4.50% range, the highest since late 2007. In December, it projected at least an additional 75 basis points of hikes in borrowing costs by the end of 2023.
Excluding the volatile food and energy components, the CPI climbed 0.3% last month after rising 0.2% in November. In the 12 months through December, the so-called core CPI increased 5.7%. That was the smallest gain since December 2021 and followed a 6.0% advance in November.
Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury prices rose.
Reuters Graphics
GOODS DEFLATION
Prices for used cars and trucks fell 2.5%, recording their sixth straight monthly decline. New motor vehicles slipped 0.1%, falling for the first time since January 2021.
Core goods prices slipped 0.3%, declining for a third straight month. Apparel prices rose despite retailers offering discounts to clear excess inventory. While goods deflation is becoming entrenched, services, the largest component of the CPI basket, accelerated 0.6% after gaining 0.3% in November.
Core services, which exclude energy, rose 0.5% last month after increasing 0.4% in November.
They are being driven by sticky rents. Owners’ equivalent rent, a measure of the amount homeowners would pay to rent or would earn from renting their property, jumped 0.8% after rising 0.7% in November. Independent measures, however, suggest rental inflation is cooling.
The rent measures in the CPI tend to lag the independent gauges. Healthcare costs gained 0.1% after two straight monthly declines. Stripping out rental shelter, services inflation shot up 0.4% after being unchanged in November.
The moderation in inflation will be welcomed by Fed officials, though they will probably want to see more compelling evidence of abating prices pressures before pausing rate hikes.
Labor costs account for about two-thirds of the CPI. The labor market remains tight, with the unemployment rate back at a five-decade low of 3.5% in December, and 1.7 jobs for every unemployed person in November.
A separate report from the Labor Department showed initial claims for state unemployment benefits fell 1,000 to a seasonally adjusted 205,000 for the week ended Jan. 7.
Economists had forecast 215,000 claims for the latest week. Claims have remained low despite high-profile layoffs in the technology industry as well as job cuts in interest rate-sensitive sectors like finance and housing.
Economists say companies are for now reluctant to send workers home after difficulties finding labor during the pandemic. The number of people receiving benefits after an initial week of aid, a proxy for hiring, dropped 63,000 to 1.634 million in the week ending Dec. 31, the claims data showed
The government reported last week the economy created 223,000 jobs in December, more than double the 100,000 that the Fed wants to see to be confident inflation is cooling.
“Until labor supply and demand show better harmony, the Fed will worry higher inflation is just around the corner,” said Will Compernolle, a senior economist at FHN Financial in New York.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
TAIPEI, Jan 4 (Reuters) – Taiwan plans to give cash payouts of nearly $200 to every citizen this year, Premier Su Tseng-chang announced on Wednesday, saying the island’s economic growth will be shared by everyone.
The export-reliant economy, a global tech powerhouse for products including semiconductor chips, grew 6.45% in 2021, the fastest rate since it expanded 10.25% in 2010.
While economic growth is expected to slow in 2022 and 2023, the government has made plans to plough an extra T$380 billion ($12.4 billion) in tax revenue from last year back into the economy to help protect the island from global economic shocks, including subsidies for electricity prices and labour and health insurance.
Su said a total of T$140 billion, part of the tax revenue, would be spent as cash payouts and each citizen would get T$6,000 ($195.61).
“The fruit of economic achievements will be shared by all citizens, from young to old,” Su told reporters, adding the potential payout requires approval from parliament, where the ruling Democratic Progressive Party has a majority.
“We wish to give all citizens a New Year blessing after the beginning of the Lunar New Year,” Su told reporters, referring to the week-long holiday that starts on Jan. 20.
He did not give details of how the government would deliver the payouts.
Taiwan is a major producer of semiconductors used in everything from cars and smartphones to fighter jets. Its economy continued to grow stably during the COVID-19 pandemic in recent years helped by strong chip demand for consumer electronics as more people worked from home.
Taiwan’s central bank in December cut its 2022 estimate for gross domestic product (GDP) growth to 2.91% from its previous forecast of 3.51% in September.
For 2023, it projected GDP would grow 2.53%. The economy grew 4.01% in the third quarter from a year earlier.
$1 = 30.6740 Taiwan dollars)
Reporting By Yimou Lee and Jeanny Kao; Editing by Jacqueline Wong
Our Standards: The Thomson Reuters Trust Principles.
Jan 4 (Reuters) – General Motors Co (GM.N) reclaimed the top spot in U.S. auto sales from rival Toyota Motor Corp (7203.T) in 2022 as it was able to better meet strong demand for cars and trucks despite industry-wide supply disruptions.
Shares of GM rose 2.7% in afternoon trade on Wednesday to $34.75, after the company posted a 2.5% rise in 2022 sales to 2,274,088 vehicles, higher than Toyota’s 2,108,458 units, in a closely watched race.
Inventory shortages stemming from surging material costs and a persistent chip crunch had hobbled production at many automakers, keeping car and truck prices elevated. Asian brands were hit hardest.
“Toyota is still among the tightest when it comes to inventory,” Cox Automotive senior economist Charlie Chesbrough said.
The Japanese automaker cut its full-year production target in November. Sales of its SUVs, a key segment, fell 8.6% in 2022, data on Wednesday showed.
However, Toyota executives said there were some positive signs emerging, and the rate of inventory buildup was slow but steady.
“We’re optimistic our inventory levels will continue to improve in the first quarter and for the remainder of the year,” said Andrew Gillel, senior vice president of automotive operations at Toyota.
Reuters Graphics
Other brands such as Hyundai Motor America, Kia Motors America, Mazda North American Operations and American Honda all posted a drop in sales on Wednesday.
Industry-wide, last year’s U.S. auto sales are forecast to be about 13.9 million units, down 8% from 2021 and 20% from the peak in 2016, according to industry consultant Cox Automotive.
Some analysts are also concerned that price hikes by automakers to blunt inflationary pressures and rising interest rates will take a toll on new vehicle sales in 2023.
Affordability is a “very real issue,” Toyota executive David Christ said. Nonetheless, the company expects demand to be robust this year.
Automakers will need to begin incentivising buyers, a trend that was paused during the pandemic, automotive marketplace TrueCar said.
Reporting by Aishwarya Nair, Nathan Gomes and Abhijith Ganapavaram in Bengaluru; Editing by Shilpi Majumdar and Devika Syamnath
Our Standards: The Thomson Reuters Trust Principles.
China overcame unprecedented difficulties in COVID battle: Xi
Still a time of struggle for controlling COVID: Xi
In Wuhan, surge in new cases shows signs of easing
Shanghai has 10 million infections, health official says
End of zero-COVID curbs prompts global concern
WUHAN/BEIJING, Dec 31 (Reuters) – Chinese President Xi Jinping called on Saturday for more effort and unity as the country enters a “new phase” in its approach to combating the pandemic, in his first comments to the public on COVID-19 since his government changed course three weeks ago and relaxed its rigorous policy of lockdowns and mass testing.
China’s abrupt switch earlier this month from the “zero-COVID” policy that it had maintained for nearly three years has led to infections sweeping across the country unchecked. It has also caused a further drop in economic activity and international concern, with Britain and France becoming the latest countries to impose curbs on travellers from China.
The switch by China followed unprecedented protests over the policy championed by Xi, marking the strongest show of public defiance in his decade-old presidency and coinciding with grim growth figures for the country’s $17 trillion economy.
In a televised speech to mark the New Year, Xi said China had overcome unprecedented difficulties and challenges in the battle against COVID, and that its policies were “optimised” when the situation and time so required.
“Since the outbreak of the epidemic … the majority of cadres and masses, especially medical personnel, grassroots workers braved hardships and courageously persevered,” Xi said.
“At present, the epidemic prevention and control is entering a new phase, it is still a time of struggle, everyone is persevering and working hard, and the dawn is ahead. Let’s work harder, persistence means victory, and unity means victory.”
New Year’s Eve prompted reflection online and by residents of Wuhan, the epicentre of the COVID outbreak nearly three years ago, about the zero-COVID policy and the impact of its reversal.
People in the central city of Wuhan expressed hope that normal life would return in 2023 despite a surge in cases since pandemic curbs were lifted.
Wuhan resident Chen Mei, 45, said she hoped her teenage daughter would see no further disruptions to her schooling.
“When she can’t go to the school and can only have classes online it’s definitely not an effective way of learning,” she said.
VIDEO REMOVED
Across the country, many people voiced similar hopes on social media, while others were critical.
Thousands of users on China’s Twitter-like Weibo criticised the removal of a video made by local outlet Netease News that collated real-life stories from 2022 that had captivated the Chinese public.
Many of the stories included in the video, which by Saturday could not be seen or shared on domestic social media platforms, highlighted the difficulties ordinary Chinese faced as a result of the previously strict COVID policy.
Weibo and Netease did not immediately reply to a request for comment.
One Weibo hashtag about the video garnered almost 4 million hits before it disappeared from platforms at about noon on Saturday. Social media users created new hashtags to keep the comments pouring in.
“What a perverse world, you can only sing the praises of the fake but you cannot show real life,” one user wrote, attaching a screenshot of a blank page that is displayed when searching for the hashtags.
The disappearance of the videos and hashtags, seen by many as an act of censorship, suggests the Chinese government still sees the narrative surrounding its handling of the disease as a politically sensitive issue.
HOSPITALS OVERWHELMED
The wave of new infections has overwhelmed hospitals and funeral homes across the country, with lines of hearses outside crematoriums fuelling public concern.
China, a country of 1.4 billion people, reported one new COVID death for Friday, the same as the day before – numbers that do not match the experience of other countries after they reopened.
UK-based health data firm Airfinity said on Thursday that about 9,000 people in China were probably dying each day from COVID. Cumulative deaths in China since Dec. 1 have likely reached 100,000, with infections totalling 18.6 million, it said.
Zhang Wenhong, director of the National Centre for Infectious Diseases, told the People’s Daily in an interview published on Saturday that Shanghai had reached a peak of infections on Dec. 22, saying there were currently about 10 million cases.
He said those numbers indicated that some 50,000 people in the city of 25 million would need to be hospitalized in the next few weeks.
At the central hospital of Wuhan, where former COVID whistleblower Li Wenliang worked and later died of the virus in early 2020, patient numbers were down on Saturday compared with the rush of the past few weeks, a worker outside the hospital’s fever clinic told Reuters.
“This wave is almost over,” said the worker, who was wearing a hazmat suit.
A pharmacist whose store is next to the hospital said most people in the city had now been infected and recovered.
“It is mainly old people who are getting sick with it now,” he said.
In the first indication of the toll on China’s giant manufacturing sector from the change in COVID policy, data on Saturday showed factory activity shrank for the third straight month in December and at the sharpest pace in nearly three years.
Reporting by Martin Quinn Pollard, Tingshu Wang and Xiaoyu Yin in Wuhan, Eduardo Baptista in Beijing; Writing by Sumeet Chatterjee
Editing by Helen Popper and Frances Kerry
Our Standards: The Thomson Reuters Trust Principles.
NEW YORK, Dec 30 (Reuters) – Just over half of the 50 U.S. states are exhibiting signs of slowing economic activity, breaching a key threshold that often signals a recession is in the offing, new research from the St. Louis Federal Reserve Bank report said.
That report, released Wednesday, followed another report from the San Francisco Fed from earlier in the week that also delved into the rising prospect that the U.S. economy may fall into recession at some point in coming months.
The St. Louis Fed said in its report that if 26 states have falling activity within their borders, that offers “reasonable confidence” that the nation as a whole will fall into a recession.
Right now, the bank said that as measured by Philadelphia Fed data tracking the performance of individual states, 27 had declining activity in October. That’s enough to point to a looming downturn while standing short of the numbers that have been seen ahead of some other recessions. The authors noted that 35 states suffered declines ahead of the short and sharp recession seen in the spring of 2020, for example.
Meanwhile, a San Francisco Fed report, released Tuesday, observed that changes in the unemployment rate can also signal a downturn is on the way, in a signal that offers more near-term predictive value than the closely-watched bond market yield curve.
The paper’s authors said that the unemployment rate bottoms out and begins to move higher ahead of recession in a highly reliable pattern. When this shift occurs the unemployment rate is signaling the onset of recession in about eight months, the paper said.
The paper acknowledged its findings are akin to those of the Sahm Rule, named for former Fed economist Claudia Sahm, who pioneered work linking a rise in the jobless rate to economic downturns. The San Francisco Fed research, written by bank economist Thomas Mertens, said its innovation is to make the jobless rate change a forward-looking indicator.
Unlike the St. Louis Fed state data that is tipping toward a recession projection, the U.S. jobless rate has thus far remained fairly stable, and after bottoming at 3.5% in September, it held at 3.7% in both October and November.
The San Francisco Fed paper noted that the Fed, as of its December forecasts, sees the unemployment rate rising next year amid its campaign of aggressive rate hikes aimed at cooling high levels of inflation. In 2023, the Fed sees the jobless rate jumping up to 4.6% in a year where it sees only modest levels of overall growth.
If the Fed’s forecast comes to pass, “such an increase would trigger a recession prediction based on the unemployment rate,” the paper said. “Under this view, low unemployment can lead to a heightened probability of recession when the unemployment rate is expected to rise.”
Tim Duy, chief economist with SGH Macro Advisors, said he believes that to achieve what the Fed wants on the inflation front, the economy would likely “lose roughly two million jobs, which would be a recession like 1991 or 2001.”
Anxiety over the prospect of the economy falling into recession has been driven by the Fed’s forceful actions on inflation. Many critics contend that the central bank is focusing too much on inflation and not enough on keeping Americans employed. Central bank officials have countered that without a return to price stability, the economy will struggle to meet its full potential.
What’s more, in the press conference following the most recent Federal Open Market Committee meeting earlier this month, central bank leader Jerome Powell said that he didn’t view the current Fed outlook as a recession prediction given the expectation growth will remain positive. But he added much remains uncertain.
“I don’t think anyone knows whether we’re going to have a recession or not and, if we do, whether it’s going to be a deep one or not. It’s just, it’s not knowable,” Powell said.
Reporting by Michael S. Derby;
Editing by Dan Burns and Aurora Ellis
Our Standards: The Thomson Reuters Trust Principles.
