- First Mover Asia: Bitcoin Flirts With $23.4K as Fed’s Powell Repeats Comment About Waning Inflation; Market Weighs DCG-Genesis Deal With Creditors CoinDesk
- ‘Year Of Opportunity’—Fed Chair Suddenly Sets Crypto Markets Alight After $250 Billion Bitcoin, Ethereum, BNB, XRP, Cardano, Dogecoin, Polygon And Solana Price Surge Forbes
- Bitcoin, Ethereum, Dogecoin Soar On Hopes Of Fed Dovishness Benzinga
- Bitcoin bulls stumble at $23.4K as Fed’s ‘disinflation’ sparks BTC price rally Cointelegraph
- Bitcoin Rollercoaster on Powell Speech, SAND and ROSE Rally Over 25% (Market Watch) CryptoPotato
- View Full Coverage on Google News
Tag Archives: Inflation
IMF hikes global growth forecast as inflation cools
The IMF has revised its global economic outlook upwards.
Norberto Duarte | Afp | Getty Images
The International Monetary Fund on Monday revised upward its global growth projections for the year, but warned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.
In its latest economic update, the IMF said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in October. However, that number would still mean a fall from an expansion of 3.4% in 2022.
It also revised its projection for 2024 down to 3.1%.
“Growth will remain weak by historical standards, as the fight against inflation and Russia’s war in Ukraine weigh on activity,” Pierre-Olivier Gourinchas, director of the research department at the IMF, said in a blog post.
The outlook turned more positive on the global economy due to better-than-expected domestic factors in several countries, such as the United States.
“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Gourinchas said, also noting that inflationary pressures have come down.
In addition, China announced the reopening of its economy after strict Covid lockdowns, which is expected to contribute to higher global growth. A weaker U.S. dollar has also brightened the prospects for emerging market countries that hold debt in foreign currency.
However, the picture isn’t totally positive. IMF Managing Director Kristalina Georgieva warned earlier this month that the economy was not as bad as some feared “but less bad doesn’t quite yet mean good.”
“We have to be cautious,” Georgieva said during a CNBC-moderated panel at the World Economic Forum in Davos, Switzerland.
The IMF on Monday warned of several factors that could deteriorate the outlook in the coming months. These included the fact that China’s Covid reopening could stall; inflation could remain high; Russia’s protracted invasion of Ukraine could shake energy and food costs even further; and markets could turn sour on worse-than-expected inflation prints.
IMF calculations say that about 84% of nations will face lower headline inflation this year compared to 2022, but they still forecast an annual average rate of 6.6% in 2023 and of 4.3% the following year.
As such, the Washington, D.C.-based institution said one of the main policy priorities is that central banks keep addressing the surge in consumer prices.
“Clear central bank communication and appropriate reactions to shifts in the data will help keep inflation expectations anchored and lessen wage and price pressures,” the IMF said in its latest report.
“Central banks’ balance sheets will need to be unwound carefully, amid market liquidity risks,” it added.
Fed Set to Shrink Rate Hikes Again as Inflation Slows
(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.
Most Read from Bloomberg
Federal Reserve officials are set to shift down the pace of interest-rate hikes again in the coming week amid signs of slowing inflation, while Friday’s jobs report may show steady demand for workers that improves the chances of a soft landing for the the world’s largest economy.
Policy makers are poised to raise their benchmark federal funds rate by a quarter percentage point on Wednesday, to a range of 4.5% to 4.75%, dialing back the size of the increase for a second-straight meeting.
The move would follow a slew of recent data suggesting the Fed’s aggressive campaign to slow inflation is working.
“I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed,” Philadelphia Fed President Patrick Harker said in a Jan. 20 speech. “Hikes of 25 basis points will be appropriate going forward.”
Key questions for Fed Chair Jerome Powell at his post-meeting press conference will be how much higher the central bank intends to raise rates, and what officials need to see before pausing.
Fed officials have made clear they also want to see evidence that supply and demand imbalances in the labor market are starting to improve.
Hiring probably slowed in January, according to economists surveyed by Bloomberg, who projected employers added 185,000 jobs compared with 223,000 in December. They see the unemployment rate ticking up to 3.6%, still near a five-decade low, and expect average hourly earnings rose 4.3% from a year earlier, a slowdown from the prior month, according to their median estimate.
The Fed will get another important read on inflation Tuesday when the Labor Department releases the Employment Cost Index, a broad measure of wages and benefits. Figures on job openings for December are also due Wednesday, as well as a January survey of manufacturers.
What Bloomberg Economics Says:
“The Fed faces a dilemma: On the one hand, inflation data has come in softer than expected, and activity indicators have shown slowing momentum over the past month; on the other, financial conditions have eased as traders believe the Fed will soon switch to rate cuts. The data would justify smaller rate hikes, but the Fed is likely to see easier financial conditions — while inflation remains uncomfortably above-target — as a reason to act hawkishly.”
—Anna Wong, Eliza Winger and Niraj Shah, economists. For full analysis, click here
Elsewhere, the day after the Fed, the European Central Bank and the Bank of England will each probably raise rates by a half point, after euro-zone data are likely to show slowing inflation and a stagnating economy. Meanwhile, surveys from China might reveal improvement, Brazil’s central bank may keep borrowing costs unchanged, and the International Monetary Fund will publish its latest global economic forecasts.
Click here for what happened last week, and below is our wrap of what’s coming up in the global economy.
Asia
China returns to work after the Lunar New Year holiday with the strength of its economy in close focus.
Official PMIs due on Tuesday are likely to improve sharply from December’s dismal readings, but the manufacturing sector is still not expected to return to a clear expansion. They’ll be followed by PMIs from across Asia on Wednesday.
Japan releases factory output, retail sales and jobless figures that may cast doubt on the strength of the economy’s rebound from a summer contraction.
India unveils its latest budget in the middle of the week as policy makers there try to keep growth on track while reining in the deficit.
Export figures from South Korea will provide a pulse check on global commerce on Wednesday, while inflation figures the next day will be closely scrutinized by the Bank of Korea.
Trade figures are also due from New Zealand, though jobless figures will be the main concern for the RBNZ as it mulls the possibility of smaller rate hikes.
The Reserve Bank of Australia will be keeping an eye on house prices and retail sales data in the run-up to its rate decision the following week.
Europe, Middle East, Africa
Major rate decisions will dominate the news in Europe, with the first meetings of the year at central banks in both the euro zone and the UK.
Before the ECB on Thursday, key data will draw attention for clues on the path for policy. Economists are split on whether GDP for the euro area on Tuesday will show a contraction in the fourth quarter — potentially heralding a recession — or whether the region avoided a slump.
The next day, euro-zone inflation in January is anticipated to have slowed for a third month, though a small minority of forecasters predict an acceleration.
Growth and consumer-price data from the region’s three biggest economies — Germany, France and Italy — are also due in the first half of the week, making it a busy few days for investors.
The so-called core underlying measure of inflation may show just a slight weakening. That gauge is drawing more focus from officials justifying further aggression on policy tightening.
The ECB decision itself is almost certain to feature both a half-point rate increase and more details of the plan to wind down bond holdings built up over years of quantitative easing.
Given President Christine Lagarde’s penchant for hinting at future decisions, investors may focus on any outlook she divulges for March in her press conference, at a time when officials are increasingly at odds over whether to slow tightening.
The BOE decision will also take place on Thursday, and may too feature a half-point rate increase. That would extend the UK’s quickest monetary tightening in three decades. While inflation has fallen in each of the past two months, it remains five times the central bank’s 2% target.
That day, too, the Czech central bank is likely to keep rates unchanged at the highest level since 1999 and present a fresh inflation outlook.
Looking south, Ghana is expected to raise borrowing costs on Monday after faster-than-expected price growth in the last two months of 2022 and renewed volatility in the cedi, as the country negotiates a restructuring plan for its debt.
The same day, Kenyan policy makers are poised to slow tightening after inflation eased for two straight months. They’re expected to raise borrowing costs by a quarter-percentage point.
Egypt, where the yield on local Treasury bills has already widened to a record over peers in emerging markets, may hike rates again on Thursday with inflation running at a five-year high.
Latin America
Mexico this week becomes the first of the region’s big economies to post Oct-Dec output. Most analysts see GDP grinding lower for a third straight quarter, and more than a few forecast a mild recession some time in 2023.
December remittance data due at midweek are likely to comfortably push the full-2022 figure over $57 billion, easily bettering the previous record annual haul of $51.6 billion set in 2021.
Chile over the course of three days posts at least seven economic indicators, led by the December GDP-proxy reading that’s expected to be consistent with an economy tipping into recession.
In Colombia, the readout of the central bank’s Jan. 27 gathering — where policy makers extended a record hiking campaign — will be posted on Tuesday. At 12.75%, BanRep may be nearing its terminal rate.
In Brazil, look for the broadest measure of inflation to have slowed in January while industrial output continues to struggle.
With inflation now only making glacial progress back to target, Brazilian central bankers this week have little choice but to keep the key rate at 13.75% for a fourth meeting. Economists surveyed by the bank see just 229 basis points of slowing over the next four years, which would mean missing the target for a seventh straight year in 2025.
–With assistance from Andrea Dudik, Vince Golle, Benjamin Harvey, Paul Jackson and Robert Jameson.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
Asia-Pacific stocks rise as Tokyo’s inflation nears 42-year high
Adani shares plunge further for second straight day of losses
Shares of Adani Group companies continued to see sharp losses for a second consecutive trading session in India after short seller firm Hindenburg announced its short position in the conglomerate’s firms earlier this week.
Adani refuted the claims in two separate statements, adding that the group is “evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hidenburg Research,” Adani Group’s head of legal Jatin Jalundhwala said in a statement.
Mumbai-listed shares of Adani Enterprises fell more than 5% in India’s trading session on Friday. Adani Transmission fell 16.8%, Adani Green Energy shed 14.9% and Adani Power lost 8.4%. Adani Port’s share price also dropped 8.4%.
Hindenberg doubled down on its initial stance, emphasizing that Adani has not answered any of the questions raised in their claims.
“We fully stand by our report and believe any legal action taken against us would be meritless,” it said,” it said.
— Jihye Lee
Tokyo’s inflation stays above Bank of Japan’s target
Consumer prices in Japan’s capital Tokyo rose by 4.3% in January, higher than expected by economists polled by Reuters.
The reading also maintained levels higher than the Bank of Japan’s target of 2% inflation for an eighth consecutive month after rising 2.1% in June 2022.
The Japanese yen strengthened 0.3% after the data release and last traded at 129.82 against the US dollar.
CNBC Pro: These 6 global ETFs are the only ones to have posted gains every year for the past five years
Only six global stock ETFs have consistently posted yearly gains over the past five years, according to new analysis by CNBC Pro.
They are the only funds among 7,000 equities ETFs trading worldwide to:
- Not have a single year of negative returns between Jan. 1, 2018, and Dec. 31, 2022;
- And be in positive territory this year so far.
CNBC Pro subscribers can find out which ETFs they are here.
— Ganesh Rao
Singapore home prices rose less in final quarter of 2022
Private residential property prices in Singapore rose by 0.4% in the final quarter of 2022, a release by the Urban Redevelopment Authority showed.
The reading showed home prices rose less than the previous period’s increase of 3.8% and the slowest growth since the second quarter of 2020.
Home prices rose 8.6% in the full year of 2022, the release said, also less than then 10.6% increase seen in the full year of 2021.
— Jihye Lee
Australia producer price index rises 5.8% from year ago
The producer price index in Australia rose 5.8% for the final quarter of 2022 on an annualized basis, data from the Australian Bureau of Statistics showed.
The reading was slightly lower than the previous quarter’s print of 6.4%, a signal inflation may be easing in the nation.
On a quarterly basis, the index rose 0.7%, also slower than the previous period’s reading of 1.9%.
The Australian dollar strengthened slightly during Asia’s morning session and last traded at 0.7123 against the U.S. dollar.
— Jihye Lee
GDP, other fourth-quarter data shows economic challenges are ‘beginning to clear,’ economist says
Thursday’s GDP data adds to a broadening picture of economic growth in the fourth quarter, according to Curt Long, chief economist at the National Association of Federally-Insured Credit Unions. And that signals to him the economic outlook is improving.
“The big picture view of economic growth in the fourth quarter is a positive one. Much of that growth was concentrated in inventory build, which is unlikely to grow at a similar pace in 2023,” Long said. “Nevertheless, with resilient consumer spending, low unemployment claims, and receding inflation, some of the clouds that were forming over the economy several months ago are beginning to clear.”
— Alex Harring
CNBC Pro: Buy the dip? Top Morningstar strategist names 3 stocks trading at a steep discount
U.S. stocks are around 15% undervalued, according to Dave Sekera, chief U.S. market strategist for Morningstar, who says the extent of this undervalued territory is rare.
Since the end of 2010, the market has traded at or below the current discount only 5% of the time, he said.
He picks three stocks that he says are trading at steep discounts.
CNBC Pro subscribers can read more here.
— Weizhen Tan
Tesla’s strong orders and weak margins have Wall Street analysts conflicted
Wall Street analysts are divided on Tesla after the electric car company’s latest quarterly results.
Tesla reported a beat on both earnings and revenue for the fourth quarter, and assuaged investor fears of weaker growth at the company after recently issuing a round of price cuts. While the move triggered a drop in used Tesla prices, they also supported demand for the vehicles.
“Thus far in January we’ve seen the strongest orders year to date than ever in our history. We’re currently seeing orders of almost twice the rate of production,” Musk said during a call with analysts.
For Goldman Sachs’ Mark Delaney, that was the “most important takeaway from the call.”
“Importantly, Tesla commented that since it lowered prices it has seen the strongest orders year-to-date in its history, with orders running about 2X production. While we believe this rate of orders may not be sustained in light of the weak macroeconomic environment, it would suggest the company is tracking well to our 1.8 mn delivery estimate,” Delaney wrote.
Other analysts were more negative on the stock outlook, however, saying that Tesla’s automotive gross margins, which was the lowest figure in the last five quarters, spelled trouble ahead.
AllianceBernstein’s Toni Sacconaghi reiterated an underperform rating on Tesla, saying the automaker’s latest results and earnings call had “something for bulls and bears,” adding he remains “torn” on the company. While the strong orders are promising, the analyst said the auto gross margins were too weak to overlook.
“Despite raising our energy storage forecast materially, our FY EPS declines from $3.80 to $3.54 amid lower margins. Moreover, while no one (including Tesla) knows what demand elasticity is, we believe it is uncertain whether surging demand will be sustained, particularly in China, where we believe more price cuts will likely be needed before year end,” Sacconaghi wrote.
CNBC Pro subscribers can read the full story here.
— Sarah Min
CNBC Pro: Morgan Stanley has a ‘simple’ tech playbook, names TSMC and others as stocks to buy right now
A recession may be coming, and the semiconductor sector — widely seen as cyclical and volatile — could be an unlikely safe refuge for investors.
Morgan Stanley says chip stocks have historically done well in past recessions. The bank named its top Asia chip stocks — giving one 40% upside.
Pro subscribers can read more here.
— Zavier Ong
U.S. GDP rose slightly more than expected in the fourth quarter
The U.S. economy expanded at an annualized pace of 2.9% in the fourth quarter, slightly outperforming a Dow Jones estimate of 2.8%. The Commerce Department’s report comes even as inflation persists and the Federal Reserve continues to raise rates.
Consumer spending rose 2.1% for the period, down slightly from 2.3% in the previous period but still positive.
— Jeff Cox
Bitcoin heading toward best month since 2020
Bitcoin’s remains in rally mode despite pulling back the past two days and the cryptocurrency is on pace for its best month since 2020. Some investors see crypto prices as a leading indicator of investors’ risk appetite.
So far this month and year, bitcoin has risen almost 40% and is poised to post its best monthly performance since December 2020, when it gained 49.47% for the month.
Meanwhile, the S&P 500 has risen about 5% this month.
— Tanaya Macheel
U.S. GDP Rose 2.9% in the Fourth Quarter After a Year of High Inflation
The U.S. economy grew at a solid 2.9% annual rate last quarter but entered this year with less momentum as rising interest rates and still-high inflation weighed on demand.
U.S. growth in the fourth quarter was down slightly from a 3.2% annual rate in the third quarter, the Commerce Department said Thursday. Consumer spending helped drive the fourth-quarter gain, while the housing market weakened and businesses cut back their spending on equipment.
The October-to-December period capped a year of economic slowdown with growth of 1% in the fourth quarter of 2022 compared with a year earlier, down sharply from 5.7% growth in 2021. The slowdown in part reflected a return to a more normal pace of growth after output surged amid business reopenings, fiscal stimulus and a waning pandemic in 2021.
Markets were mixed following Thursday’s release. Investors have been closely scrutinizing economic data for signs that U.S. growth is coming under pressure from the Federal Reserve’s campaign of interest-rate increases aimed at cooling the economy and bringing down high inflation.
So far in 2023, many traders and portfolio managers appear satisfied that economic activity remains strong enough that a recession this year is far from certain. That conclusion, together with cooling inflation readings, has helped fuel a modest rebound in U.S. stock indexes following last year’s washout.
The Fed is on track to slow interest-rate increases when it meets next week and debate how much higher to raise them this year as it tracks inflation’s trajectory and other economic developments.
The labor market has cooled some but continues to run strong. Jobless claims—a proxy for layoffs—fell last week and held near historic lows, despite the spread of layoff announcements beyond tech companies.
Workers received large wage gains through the end of last year. That helped consumer spending, the economy’s main engine, grow at a solid annual pace of 2.1% last quarter.
Despite some signs of resilience, recent data suggest consumers and businesses are starting to falter. Retail sales fell last month at the sharpest pace of 2022. Surveys of U.S. purchasing managers found that higher interest rates and persistent inflation weighed on demand in January in the manufacturing and service sectors. Companies cut temporary workers in December for the fifth consecutive month, a sign that broader job losses could be on the horizon.
Many economists are concerned about the possibility of a U.S. recession this year. They worry that the Fed’s efforts to curb inflation could trigger broad spending cutbacks and job losses.
“Headwinds from the big jump in interest rates, consumers cutting back on discretionary spending and weak economies overseas were big problems for the U.S. in late 2022,” said
Bill Adams,
chief economist for Comerica Bank. “I expect real GDP growth will likely turn negative in the first half of this year.”
A buildup in inventories helped drive economic growth at the end of last year. That category is volatile, though.
Final sales to private domestic purchasers, a measure of consumer and business spending that gauges underlying demand in the economy, cooled to a 0.2% annual pace in the fourth quarter from 1.1% in the third, the Commerce Department said, a sign of economic cooling in line with the Fed’s goals.
One of the most interest-rate-sensitive sectors—housing—is stumbling amid high mortgage rates. Residential investment declined throughout last year, while existing-home sales fell almost 18% in 2022 from the previous year.
Some economists say the worst of the housing downturn is over as mortgage rates are down from their peak last fall. But few expect a return to the boom times of 2021 any time soon.
The Fed had initially hoped it could bring down inflation with only a slowing in economic growth rather than an outright contraction, an outcome dubbed a “soft landing.”
“If we continue to get strong job growth and if we continue to get consumer spending on services, and companies don’t cut back on [capital expenditures], I think that adds fuel to the soft-landing story,” said Luke Tilley, chief economist at Wilmington Trust.
Consumer spending rose by 1.9% in the fourth quarter of 2022 compared with a year earlier, a slowdown from 7.2% growth in 2021 but close to 2019’s gain.
StoryBright Films, which provides photography and planning services for elopements in the Blue Ridge Mountains, photographed 16 couples’ elopements last year, down from 20 in 2021, said Mark Collett, the company’s co-owner.
Mr. Collett said his small business received many inquiries and engaged in conversations with a lot of potential clients last year. But more couples expressed concern about their financial situations and ability to pay for a big event than a year earlier.
“We would even get as far as sending them a contract to book, but then they got cold feet,” Mr. Collett said.
For 2022 marriages, clients tended to book at the bottom and top ends of the price range, rather than the middle, he added.
Purchasing power from paychecks fell for middle-income households last year, while it rose for lower-income and higher-income households. Many lower-income households benefited from wage increases and pandemic savings, while higher-income households had a large-enough savings buffer to spend aggressively.
Spending
on services
remained a
contributor.
Goods spending
(pct. pts.)
A shrinking trade
deficit continued
to drive growth,
but less so than in
the third quarter.
Residential
investment
was a drag
on growth.
Spending
on services
remained a
contributor.
Goods spending
(pct. pts.)
A shrinking trade
deficit continued
to drive growth,
but less so than in
the third quarter.
Residential
investment
was a drag
on growth.
Spending
on services
remained a
contributor.
Goods spending
(pct. pts.)
The trade deficit
continued to
drive growth, but
less so than in
the third quarter.
Residential
investment
was a drag
on growth.
Goods
spending
(pct. pts.)
Goods
spending
(pct. pts.)
Write to Sarah Chaney Cambon at sarah.chaney@wsj.com
Write to Sarah Chaney Cambon at sarah.chaney@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
There’s beeen an increase in egg smuggling attempts across the border, says San Diego Customs
CNN
—
High prices are driving an increase in attempts to bring eggs into the US from Mexico, according to border officials.
Officers at the San Diego Customs and Border Protection Office have seen an increase in the number of attempts to move eggs across the US-Mexico border, according to a tweet from director of field operations Jennifer De La O.
“The San Diego Field Office has recently noticed an increase in the number of eggs intercepted at our ports of entry,” wrote De La O in the Tuesday tweet. “As a reminder, uncooked eggs are prohibited entry from Mexico into the U.S. Failure to declare agriculture items can result in penalties of up to $10,000.”
Bringing uncooked eggs from Mexico into the US is illegal because of the risk of bird flu and Newcastle disease, a contagious virus that affects birds, according to Customs and Border Protection.
In a statement emailed to CNN, Customs and Border Protection public affairs specialist Gerrelaine Alcordo attributed the rise in attempted egg smuggling to the spiking cost of eggs in the US. A massive outbreak of deadly avian flu among American chicken flocks has caused egg prices to skyrocket, climbing 11.1% from November to December and 59.9% annually, according to the Bureau of Labor Statistics.
The increase has been reported at the Tijuana-San Diego crossing as well as “other southwest border locations,” Alcordo said.
For the most part, travelers bringing eggs have declared the eggs while crossing the border. “When that happens the person can abandon the product without consequence,” said Alcordo. “CBP agriculture specialists will collect and then then destroy the eggs (and other prohibited food/ag products) as is the routine course of action.”
In a few incidents, travelers did not declare their eggs and the products were discovered during inspection. In those cases, the eggs were seized and the travelers received a $300 penalties, Alcordo explained.
“Penalties can be higher for repeat offenders or commercial size imports,” he added.
Alcordo emphasized the importance of declaring all food and agricultural products when traveling.
“While many items may be permissible, it’s best to declare them to avoid possible fines and penalties if they are deemed prohibited,” he said. “If they are declared and deemed prohibited, they can be abandoned without consequence. If they are undeclared and then discovered during an exam the traveler will be subject to penalties.”
U.S. Retail Sales Fell 1.1% in December
Purchases at stores, restaurants and online, declined a seasonally adjusted 1.1% in December from the prior month, the Commerce Department said Wednesday. Sales were also revised lower in November and have fallen three of the past four months. The department seasonally adjusts monthly data to make it comparable over time. On an unadjusted basis, December is typically the peak sales month for the year.
A Federal Reserve report Wednesday found economic activity was relatively flat at the start of the year and businesses are pessimistic about growth in the months ahead. A separate Fed report showed U.S. industrial production slumped in December, led by weakness in manufacturing. A Labor Department report showed inflation was cooling.
Stocks fell Wednesday after the data releases. The S&P 500 shed 1.6%. The Dow Jones Industrial Average was down 1.8%, while the Nasdaq Composite Index lost 1.2%. The yield on the benchmark 10-year Treasury note declined 0.16 percentage point to 3.374%.
The latest data add to signs that the U.S. economy is slowing as the Fed pushes up interest rates to combat inflation. Hiring and wage growth eased in December, U.S. commerce with the rest of the world declined significantly in November, and existing-home sales have fallen for 10 straight months.
S&P Global downgraded its estimate for fourth-quarter economic growth Wednesday by a half percentage point to a 2.3% annual rate. Economists surveyed by The Wall Street Journal this month expect higher interest rates to tip the U.S. economy into a recession in the coming year.
“The lag impact of elevated inflation weighs heavily on U.S. households, it’s very clear that the median American consumer is still reeling from the loss of wages in inflation-adjusted terms,” said
Joseph Brusuelas,
chief economist at RSM US LLP. “We’re moving towards what I would expect to be a mild recession in 2023,” he added.
Federal Reserve Bank of St. Louis President
James Bullard
said Wednesday the central bank should keep on rapidly raising interest rates and supported a half-percentage-point increase at the Jan. 31-Feb. 1 meeting.
“We want to err on the tighter side to make sure we get the disinflationary process to take hold in the economy,” he said at a Wall Street Journal Live event.
Mr. Bullard’s position is at odds with several of his colleagues, who have suggested that a slower pace of rate increases would be appropriate to allow Fed officials to gauge how their aggressive pace of policy tightening has affected the economy.
Inflation, while still historically high, is showing signs of cooling as demand eases. Unlike many government reports, retail sales aren’t adjusted for inflation.
Consumer prices advanced 6.5% from a year earlier in December, the sixth straight month of deceleration. The producer-price index, which generally reflects supply conditions in the economy, fell in December from the prior month, and increased at the slowest annual pace since March 2021, the Labor Department said Wednesday.
The National Retail Federation said Wednesday holiday sales were disappointing. The trade group said November and December sales rose 5.3% compared with the same period last year to $936.3 billion. In November, the NRF said it expected holiday sales to rise between 6% and 8%. The NRF figures aren’t adjusted for inflation and exclude fuel, auto and restaurant spending.
Somewhat slower inflation at the end of the year didn’t offset weaker demand, said NRF Chief economist
Jack Kleinhenz.
Consumers are “hit with higher food prices, they are getting hit with higher service prices and they are having to make choices,” he said. Some spending was likely pulled into October as retailers kicked off deals early this year, he added. Retailers discounted heavily and early to clear excess stock from their shelves and warehouses.
Zach Carney, of Boston, said he has been cutting back on eggs and red meat because the prices are so high. “The price of eggs really jumps out at you,” the 28-year-old publicist said. Instead, he has been stocking up on value packs of chicken and buying more store-brand cereal and olive oil, which cost less than national brands.
The retail sales report showed spending declined in a number of gift-giving categories in December, including at electronics, clothing and department stores, and with online retailers, a category which includes companies such as Amazon.com Inc.
Dining out at bars and restaurants dropped 0.9% in December. Sales of furniture and vehicles, which are sensitive to higher borrowing costs, both fell sharply. The only categories to post slight growth in December were grocery, sporting goods and home improvement stores, as winter storms battered many parts of the U.S.
Some retailers have said the recently completed holiday shopping season turned out to be weaker than expected. Macy’s Inc. warned of softer sales, and Lululemon Athletica Inc. said its profit margins were squeezed as shoppers bought more items on sale.
Many retailers had benefited from surging sales earlier in the pandemic as shoppers stocked up on everything from toilet paper to home electronics and furniture, supported by government stimulus dollars. Those tailwinds have cooled, leaving retailers and product manufactures to confront slower spending in some categories and the longer term dynamics of the industry, such as a gradual shift to online spending.
Apparel retailers are especially exposed to the current pullback in discretionary spending, said Kelly Pedersen, the U.S. retail leader at PwC, a consulting firm. “Buying fashion items at department stores is discretionary,” said Mr. Pedersen. Many apparel retailers are still working to sell through excess inventory and offering deep discounts amid weak demand, he said.
Department stores, which saw a 6.6% sales drop in December, struggled to boost sales before the pandemic quickly shifted buying habits. In 2020, a string of department stores filed for bankruptcy, including Lord & Taylor, J.C. Penney Co., Neiman Marcus Group Ltd. and Stage Stores Inc.
Party City Holdco Inc. filed for chapter 11 bankruptcy this week while noting inflationary pressures have hampered customers’ willingness to spend. Bed Bath & Beyond Inc. said this month it plans more layoffs and cost cuts amid falling sales.
The retail sales report offers a partial picture of consumer demand because it doesn’t include spending on many services such as travel, housing and utilities. The Commerce Department will release December household spending figures covering goods and services later this month.
Corporate reports out in February will add to that picture. Walmart Inc., Target Corp. and other large retailers—which sell a variety of goods such as food, clothes and décor—report quarterly earnings next month, which will include December sales.
—Suzanne Kapner and David Harrison contributed to this article.
Write to Harriet Torry at harriet.torry@wsj.com and Sarah Nassauer at Sarah.Nassauer@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Exclusive: ECB union says staff losing faith in leadership over inflation, pay
FRANKFURT, Jan 18 (Reuters) – (This Jan. 17 story has been corrected to restore the dropped words in paragraph 11)
European Central Bank staff are losing confidence in the institution’s leadership following the ECB’s failure to control inflation and a pay award that lagged the leap in prices, according to a survey by trade union IPSO.
The responses underline that even central banks, whose primary responsibility is fighting inflation, are not immune to staff dissatisfaction with the sharply rising cost of living.
The survey was organised in the context of a dispute between IPSO, which holds six out of nine seats on the ECB’s staff committee, and the central bank’s board over pay and remote-working arrangements.
An ECB spokesperson did not comment directly on IPSO’s findings when asked but pointed to a separate staff survey, run by the ECB itself last year, showing that 83% of nearly 3,000 respondents were proud to work for the ECB and 72% would recommend it.
Results of IPSO’s survey, which largely focused on pay and remote-working arrangements but also included questions about trust in the board, were sent to ECB staff on Tuesday in an email, seen by Reuters.
They showed two-thirds of roughly 1,600 respondents said their trust in Lagarde and the rest of the six-member ECB board had been damaged by recent developments such as high inflation and a pay increase that did not match the rise in prices.
Asked how much trust they had in Lagarde and the board when it comes to leading and managing the ECB, the central bank for the 20 countries that use the euro, just under half of respondents said “moderate” (34.3%) or “high” (14.6%).
But over 40% of respondents said they had “low” (28.6%) or “no” (12%) trust, while 10.5% could not say.
“This is a serious concern for our institution, as no one can correctly lead an organisation without the trust of its workforce,” the union said in its email.
INFLATION SURGE, PAY BATTLES
The survey was the first by IPSO to ask about trust in top management since Christine Lagarde took over as ECB President in late 2019.
A similar IPSO survey of ECB staff, taken just before her predecessor Mario Draghi stepped down, showed 54.5% of 735 respondents rated his presidency “very good” or “outstanding”, with support for his policy measures even higher.
Then, however, inflation in the euro zone had been low for a decade. Its recent surge to multi-decade highs in countries around the world has seen a revival in battles over pay between workers and the companies and institutions that employ them.
And a majority of respondents in the October 2019 survey also complained about a lack of transparency in recruitment and perceived favouritism under Draghi.
The most recent Bank of England staff survey, also conducted in 2019, showed 64% of respondents had “trust and confidence in the Bank’s leadership”.
A 2022 U.S. government survey of employees at departments and federal agencies found that 61% of respondents had “a high level of respect” for their organisation’s senior leaders – roughly stable compared to the previous two years.
The ECB spokesperson also pointed to internal surveys in 2020-21 that found roughly 80% of respondents were satisfied with health-and-safety measures taken by the ECB in response to the coronavirus pandemic.
The latest IPSO survey showed 63% of staff who responded were worried about the ECB’s ability to protect their purchasing power after being handed a pay increase of just 4% last year – or roughly half the rise in consumer prices.
The ECB has been criticised by politicians, bankers and academics for initially underestimating a surge in the cost of living and then making up for it with large and painful increases in borrowing costs.
Lagarde, who is not an economist and had not been a central banker before joining the ECB, colourfully defended her board at an event with staff last month.
“If it wasn’t for them I’d be a sad, lonely cowgirl lost somewhere in the Pampa of monetary policy,” Lagarde said, according to a recording of the Dec. 19 town hall seen by Reuters.
She and fellow board members have long worried about the risk of a potential “wage-price spiral”, where higher salaries feed into prices, which they argue would make it harder for the ECB to bring inflation back down to its 2% target.
But IPSO said that concern is misplaced and workers should not be made to bear the brunt of the current bout in inflation.
“The ECB might be preaching lower real wages, but this is not our stance as your staff union,” it wrote in its message to ECB employees.
Editing by Catherine Evans
Our Standards: The Thomson Reuters Trust Principles.
UK inflation rate dips for second straight month to hit 10.5%
MichelleMitha | iStock / 360 | Getty Images
LONDON — U.K. inflation eased on the month, in line with economists’ expectations, as fuel, clothing and recreational costs dragged down the index.
Inflation softened to 10.5% in December, down from the 10.7% of November, the British Office for National Statistics said Wednesday. A panel of economists polled by Reuters had projected the British consumer price index would reach 10.5% in December, down from the 41-year-high of 11.1% achieved in October.
The core CPI, which excludes food, energy, alcohol and tobacco, was steady on the month at 6.3% in December, the ONS found.
The agency said the largest downward contribution came from the transport, clothing and recreation sectors, offsetting hikes in housing and household services, food and non-alcoholic beverages.
Inflation rates have spiked across 2022, fueled by surges in energy prices as Western sanctions bite into access to Russian oil and gas supplies. Policymakers have been combatting rising inflation with a spate of interest rate increases, with British premier Rishi Sunak on Jan. 4 pledging to halve U.K. headline inflation to “ease the cost of living and give people financial security.”
The Bank of England most recently lifted its main interest rate by 0.5 percentage points to 3.5% on Dec. 15. Financial markets anticipate a further rise to 4% when it meets to determine its next monetary policy steps on Feb. 2, according to Reuters.
The U.K. has been rocked by waves of industrial action since the end of last year, with teachers, train transport staff, civil service professionals and nurses set to strike this month and in early February. The government has responded with an anti-strike bill proposal intended to mandate “minimum service regulations.”
Worker pay remains dwarfed by the pace of inflation, with average U.K. wages recording a 6.4% year-on-year increase over the September-November 2022 period, the ONS said on Jan. 17.
“While there is some indication that inflation may have reached its peak, prices will remain high in the coming months,” warned Helen Dickinson, chief executive of the British Retail Consortium.
“Retailers are determined to support their customers throughout this cost-of-living crisis. They are keeping the price of many essentials affordable, expanding their value ranges, raising pay for their own staff, and offering discounts for vulnerable groups.”
Bitcoin Surges on Inflation Tailwinds, Hovers Near $21K
Ether followed a similar pattern to bitcoin, continuing its late-week momentum into Saturday to hit a two-month high before falling slightly. ETH was recently changing hands above $1,550, approximately where it stood same time, a day earlier. Other major cryptos were mixed with some rising a couple of percentage points and others dropping, although FTT, the token of embattled crypto exchange FTX, recently jumped 35% to trade just over $2. Seven months ago, FTT was trading over $35. SOL, the token of the Solana blockchain, which has been rallying over the past few weeks despite its intertwining with the FTX debacle, fell back about 5%.