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Tag: Economic outlook

  • The richest 1% of people amassed almost two-thirds of new wealth created in the last two years, Oxfam says

    The richest 1% of people amassed almost two-thirds of new wealth created in the last two years, Oxfam says

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    Over the last two years, the richest 1% of people have accumulated close to two-thirds of all new wealth created around the world, a new report from Oxfam says.

    A total of $42 trillion in new wealth has been created since 2020, with $26 trillion, or 63%, of that being amassed by the top 1% of the ultra-rich, according to the report. The remaining 99% of the global population collected just $16 trillion of new wealth, the global poverty charity says.

    “A billionaire gained roughly $1.7 million for every $1 of new global wealth earned by a person in the bottom 90 percent,” the report, released as the World Economic Forum kicks off in Davos, Switzerland, reads.

    It suggests that the pace at which wealth is being created has sped up, as the world’s richest 1% amassed around half of all new wealth over the past 10 years.

    Oxfam’s report analyzed data on global wealth creation from Credit Suisse, as well figures from the Forbes Billionaire’s List and the Forbes Real-Time Billionaire’s list to assess changes to the wealth of the ultra-rich.

    The research contrasts this wealth creation with reports from the World Bank, which said in October 2022 that it would likely not meet its goal of ending extreme poverty by 2030 as the Covid-19 pandemic slowed down efforts to combat poverty.  

    Gabriela Bucher, executive director of Oxfam International, called for taxes to be increased for the ultra-rich, saying that this was a “strategic precondition to reducing inequality and resuscitating democracy.”

    In the report’s press release, she also said changes to taxation policies would help tackle ongoing crises around the world.

    “Taxing the super-rich and big corporations is the door out of today’s overlapping crises. It’s time we demolish the convenient myth that tax cuts for the richest result in their wealth somehow ‘trickling down’ to everyone else,” Bucher said.

    Coinciding crises around the world that feed into each other and produce greater adversity together than they would separately are also referred to as a “polycrisis.” In recent weeks, researchers, economists and politicians have suggested that the world is currently facing such a crisis as pressures from the cost-of-living crisis, climate change, and other pressures are colliding.

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  • How the Fed affects the stock market

    How the Fed affects the stock market

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    When members of the Federal Reserve make public statements, investors tend to listen. Over the past two decades, central bankers have consistently shared key information about the future trajectory of important inputs like interest rates. The Fed’s forward guidance on interest rates amid historic inflation has taken stock markets for a ride in 2022. As investors wait for a pivot, a panel of experts explains why many in the market choose not to fight the Fed.

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  • Asian shares lower as strong data hit hopes for dovish Fed

    Asian shares lower as strong data hit hopes for dovish Fed

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    BANGKOK — Stocks were mostly lower in Asia on Tuesday after Wall Street pulled back as surprisingly strong economic reports highlighted the difficulty of the Federal Reserve’s fight against inflation.

    Tokyo rose while other regional markets declined. U.S. futures gained and oil prices also advanced.

    Adding to worries over the potential for recession, Fitch Ratings revised its forecasts for world economic growth downward on Tuesday to reflect the Fed and other central banks’ interest rate hikes.

    Its Global Economic Outlook report estimated global growth at 1.4% in 2023, revised down from 1.7% in its September forecast. It put U.S. growth in 2023 at 0.2%, down from 0.5%, as the pace of monetary policy tightening increases.

    China’s growth forecast was cut to a 4.1% annual pace from 4.5%.

    Markets have been lifted by expectations China will press ahead with easing its stringent pandemic restrictions, relieving pressures on trade, manufacturing and consumer spending.

    But investors are also eyeing the Fed, hoping it might slow the pace of interest rate hikes aimed at curbing stubbornly high inflation.

    The services sector, which makes up the biggest part of the U.S. economy, showed surprising growth in November, the Institute for Supply Management reported Monday. Business orders at U.S. factories and orders for durable goods in October also rose more than expected, other reports said.

    That news is positive for the broader economy, but it complicates the Fed’s fight against inflation because it likely means the central bank will have to keep raising interest rates to bring down price pressures.

    “Inflation will likely prove to be stickier and with the service part of the economy refusing to weaken. The risks that the Fed might need to do more remain elevated,” Edward Moya of Oanda said in a statement.

    The Fed is meeting next week and is expected to raise interest rates by a half-percentage point, which would mark an easing of sorts from a steady stream of three-quarters of a percentage point rate increases. It has raised its benchmark rate six times since March, driving it to a range of 3.75% to 4%, the highest in 15 years. Wall Street expects the benchmark rate to reach a peak range of 5% to 5.25% by the middle of 2023.

    The aim is to cool growth without slamming on the brakes and causing a recession that would cascade through the global economy, slowing trade and consumer spending .

    Russia’s ongoing invasion of Ukraine continues agitating an already volatile global energy market. U.S. crude oil prices bounced around before settling 3.8% lower after a group of world leaders agreed to a boycott of most Russian oil. They also committed to a price cap of $60 per barrel on Russian exports.

    In Asian trading, Hong Kong’s Hang Seng fell 1.1% to 19,300.90 and the Kospi in South Korea fell 0.6% to 2,404.39. The Shanghai Composite index edged 0.1% lower to 3,209.27.

    Tokyo’s Nikkei 225 index picked up 0.3% to 27,909.65. Shares also fell in Bangkok and Thailand.

    The S&P 500 fell 1.8% Monday to 3,998.84. The Dow Jones Industrial Average lost 1.4% to 33,947.10 and the tech-heavy Nasdaq gave back 1.9%, closing at 11,239.94. Small-company stocks fell even more, sending the Russell 2000 index 2.8% lower to 1,840.22.

    Oil and gas company stocks fell amid a broad pullback in energy prices, including an 11.2% slump in natural gas. Exxon Mobil fell 2.7%.

    All told, roughly 95% of the stocks in the benchmark S&P 500 index were in the red, with technology companies, banks and retailers among the biggest weights on the market. Chipmaker Nvidia fell 1.6%, Bank of America slid 4.5% and Amazon dropped 3.3%.

    Bond yields mostly climbed. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.59% from 3.49% late Friday.

    Wall Street will get a weekly update on unemployment claims Thursday. November’s monthly report on producer prices is due Friday.

    In other trading Tuesday, U.S. benchmark crude oil gained 63 cents to $77.56 per barrel in electronic trading on the New York Mercantile Exchange. It lost $3.05 to $76.93 per barrel.

    Brent crude, the pricing basis for international trading, advanced 57 cents to $83.25 per barrel.

    The U.S. dollar rose to 136.88 Japanese yen from 136.71 yen late Monday. The euro climbed to $1.0497 from $1.0491.

    ———

    AP Business Writers Alex Veiga and Damian J. Troise contributed.

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  • ‘This is not a 2008’ — the banks are fine and capital levels are historically high, analyst says

    ‘This is not a 2008’ — the banks are fine and capital levels are historically high, analyst says

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    Squawk Box Europe

    Neal Wilson, co-chief executive officer at EJF Capital, says he doesn’t see “a nasty … prognosis.”

    04:17

    Fri, Dec 2 20225:51 AM EST

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  • Shutterfly CEO sees ‘choppy’ times through her economic lens

    Shutterfly CEO sees ‘choppy’ times through her economic lens

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    SAN FRANCISCO — While other technology companies lay off workers and try to cut other costs amid a post-pandemic comedown, Shutterfly CEO Hilary Schneider is gearing up for a busy holiday season. Orders are pouring in for the digital photo and printing company’s photo books, which capture moments from all the postponed vacations, weddings and other diversions people could finally enjoy this year.

    Schneider, who became Shutterfly’s CEO in 2020 shortly after Apollo Global Management took the company private in a $2.7 billion deal, also sympathizes with the belt-tightening at other technology companies. Her past experience includes being CEO of Red Herring, a technology magazine that collapsed during the dot-com bust 20 years ago, and working as a top executive at Yahoo during the Great Recession of 2008 and 2009. She recently shared her perspective with The Associated Press.

    Q: How do you view the current state of the economy?

    A: We’re certainly going through an economic reconciliation here. It’s hard to remember what that’s like because we have been in a bull market for so long. But those of us with some gray hair have seen this before. I think the reality is it’s a choppy environment. While we are not in a recession yet, there are certainly things that are impacting everyone already. You have the war in Ukraine, you have inflation, you have supply chain issues, and higher labor costs with nearly full employment.

    So that puts everyone in a cautious mode because of the lack of predictability about not only the next day or the next week, but what the next month is going to be. When my boys were young, I remember in soccer they would line them up and teach them to get into a crouch so you could react to the ball. I feel like that’s what all these businesses are doing right now,

    Q: We have seen thousands upon thousands of layoffs at major tech companies in recent weeks. Do you think this will be a prime opportunity for smaller tech firms to add talent?

    A: I was recently at a good friend’s 60th birthday party that had an interesting group there and everyone was talking about cutbacks. What I heard from the venture investors who were there is that they are in a more conservative mode just because they are trying to preserve cash for their existing portfolio (of funded companies). So you just look at number of new companies being funded, I think that number will go down. And that means there will be less of a call for new talent. Everybody is a little more risk averse in this current environment.

    Q: Do you expect the tougher economy to yield any new growth opportunities?

    A: The smarter companies — and I know we certainly are thinking about it this way — will remember the adage about not letting any downturn go by without taking advantage of it. Ultimately, I think some of the smarter companies are thinking, “OK, this is a harder economic environment but what are the jujitsu moves you can make right now?” So you are a company with more resources and more brand recognition than smaller competitors, you are going to be trying to make moves that allow you to come out of this downturn in a situation where you have actually gained market share.

    Q: Is it strange to see a company like Yahoo where you once worked go from a technology powerhouse to an afterthought?

    A: The interesting thing about something like Yahoo is there is still significant residual value in brands like that. I don’t know the specifics, but I think if you look at AOL, which was sort of the original internet, there is still a significant number of people with AOL email. There are habits that get formed and alliances that continue. There are companies that continue reinventing themselves, but unfortunately you also see technology companies that hit a peak and then didn’t catch that next wave.

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  • OECD forecast: High rates, inflation to slow world growth

    OECD forecast: High rates, inflation to slow world growth

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    Hobbled by high interest rates, punishing inflation and Russia’s war against Ukraine, the world economy is expected to eke out only modest growth this year and to expand even more tepidly in 2023.

    That was the sobering forecast issued Tuesday by the Paris-based Organization for Economic Cooperation and Development. In the OECD’s estimation, the world economy will grow just 3.1% this year, down sharply from a robust 5.9% in 2021.

    Next year, the OECD predicts, would be even worse: The international economy would expand only 2.2%.

    “It is true we are not predicting a global recession,” OECD Secretary-General Mathias Cormann said at a news conference. “But this is a very, very challenging outlook, and I don’t think that anyone will take great comfort from the projection of 2.2% global growth.”

    The OECD, made up of 38 member countries, works to promote international trade and prosperity and issues periodic reports and analyses. Figures from the organization showed fully 18% of economic output in member countries being spent on energy after Russia’s invasion of Ukraine helped drive up prices for oil and natural gas. That has confronted the world with an energy crisis on the scale of the two historic energy price spikes in the 1970s that also slowed growth and fueled inflation.

    Inflation — largely fueled by high energy prices — “has become broad-based and persistent,” Cormann said, while “real household incomes across many countries have weakened despite support measures that many governments have been rolling out.”

    In its latest forecast, OECD predicts that the U.S. Federal Reserve’s aggressive drive to tame inflation with higher interest rates — it’s raised its benchmark rate six times this year, in substantial increments — will grind the U.S. economy to a near-halt. It expects the United States, the world’s largest economy, to grow just 1.8% this year (down drastically from 5.9% in 2021), 0.5% in 2023 and 1% in 2024.

    That grim outlook is widely shared. Most economists expect the United States to enter at least a mild recession next year, though the OECD did not specifically predict one.

    The report foresees U.S. inflation, though decelerating, to remain well above the Fed’s 2% annual target next year and into 2024.

    The OECD’s forecast for the 19 European countries that share the euro currency, which are enduring an energy crisis from Russia’s war, is hardly brighter. The organization expects the eurozone to collectively manage just 0.5% growth next year before accelerating slightly to 1.4% in 2024.

    And it expects inflation to continue squeezing the continent: The OECD predicts that consumer prices, which rose just 2.6% in 2021, will jump 8.3% for all of 2022 and 6.8% in 2023.

    Whatever growth the international economy produces next year, the OECD says, will come largely from the emerging market countries of Asia: Together, it estimates, they will account for three-quarters of world growth next year while the U.S. and European economies falter. India’s economy, for instance, is expected to grow 6.6% this year and 5.7% next year.

    China’s economy, which not long ago boasted double-digit annual growth, will expand just 3.3% this year and 4.6% in 2023. The world’s second-biggest economy has been hobbled by weakness in its real estate markets, high debts and draconian zero-COVID policies that have disrupted commerce.

    Fueled by vast government spending and record-low borrowing rates, the world economy soared out of the pandemic recession of early 2020. The recovery was so strong that it overwhelmed factories, ports and freight yards, causing shortages and higher prices. Moscow’s invasion of Ukraine in February disrupted trade in energy and food and further accelerated prices.

    After decades of low prices and ultra-low interest rates, the consequences of chronically high inflation and interest rates are unpredictable.

    “Financial strategies put in place during the long period of hyper-low interest rates may be exposed by rapidly rising rates and exert stress in unexpected ways,’’ the OECD said in Tuesday’s report.

    The higher interest rates being engineered by the Fed and other central banks will make it difficult for heavily indebted governments, businesses and consumers to pay their bills. In particular, a stronger U.S. dollar, arising in part from higher U.S. rates, will imperil foreign companies that borrowed in the U.S. currency and may lack the means to repay their now-costlier debt.

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  • Asian stocks surge after lower US inflation eases rate fears

    Asian stocks surge after lower US inflation eases rate fears

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    BEIJING — Asian stock markets surged Friday after U.S. inflation eased by more than expected, spurring hopes the Federal Reserve might scale down plans for more interest rate hikes.

    Hong Kong’s market benchmark jumped 5.7% and Seoul rose 3.3%. Shanghai, Tokyo and Sydney advanced. Oil prices edged higher.

    Wall Street’s benchmark S&P 500 index soared 5.5% on Thursday for its biggest one-day gain in 2 1/2 years after the government reported consumer prices rose 7.7% over a year ago in October. That was lower than the 8% expected by economists and the fourth month of decline.

    The announcement “drove a ‘more dovish’ calibration of interest rate expectations,” said Yeap Jun Rong of IG in a report.

    The Fed and central banks in Europe and Asia are raising rates to cool inflation that is at multi-decade highs. Investors worry that might tip the global economy into recession. They hope lower inflation might prompt the Fed to ease off plans for more increases.

    Forecasters warned Thursday it was too early to be certain prices are under control. Fed officials have said rates might have to stay elevated for some time.

    Hong Kong’s Hang Seng index soared to 16,994.66 and the Nikkei 225 in Tokyo gained 2.9% to 28,229.68.

    The Shanghai Composite Index added 1.4% to 3,078.42 after the ruling Communist Party promised to alter quarantine and other anti-virus tactics to reduce the cost of China’s severe “zero-COVID” strategy that has disrupted the economy.

    The Kospi in Seoul rose to 2,481.50 and Sydney’s S&P-ASX 200 was up 2.7% at 7,154.20.

    India’s Sensex opened up 1.6% to 61,579.12. New Zealand and Southeast Asian markets advanced.

    On Wall Street, the S&P 500 gained to 3,956.37, propelled by big gains for tech heavyweights. Amazon soared 12.2%, Apple rose 8.9% and Microsoft climbed 8.2%.

    The Dow Jones Industrial Average gained 3.7%, or more than 1,200 points, to 33,715.37.

    The Nasdaq composite, dominated by tech stocks, shot up 7.4% to 11,114.15 for its best day since March 2020, when Wall Street was rebounding from a crash at the start of the coronavirus pandemic.

    Investors were reassured that U.S. inflation was declining from its June peak of 9.1%, though forecasters said the Fed’s campaign to cool price rises was far from over.

    Traders expect the Fed to raise its benchmark lending rate in December but by a smaller margin of half a percent following four increases of 0.75 percentage points, triple its usual margin. That benchmark stands at a range of 3.75% to 4%, up from close to zero in March.

    The Fed is trying to slow economic activity to reduce pressure for prices to rise.

    The latest figures are a sign the Fed is “on the right path,” but it will face “a lot of variables” over the next few quarters, said Edward Moya of Oanda in a report. He said the benchmark rate could be raised to 5% and “if inflation proves to be sticker, it could be as high as 5.50%.”

    Core inflation, which strips out volatile food and energy prices and is more closely watched by the Fed, was 6.3% over a year earlier, down from September’s 6.6% and below the consensus forecast of 6.5%. Core prices rose 0.3% month on month, half of September’s 0.6% gain.

    The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, fell to 3.82% from 4.15%. The two-year yield, which more closely follows expectations for Fed action, fell to 4.32% from 4.62% and was on pace for its sharpest fall since 2008.

    In energy markets, benchmark U.S. crude gained 20 cents to $86.67 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 64 cents to $86.47 on Thursday. Brent crude, the price basis for international oil trading, advanced 20 cents to $93.87 per barrel in London. It rose $1.02 to $93.67 the previous session.

    The dollar declined to 141.52 yen from Thursday’s 141.83 yen. The euro edged up to $1.0206 from $1.0180.

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  • Bank of England makes biggest interest rate hike in 30 years

    Bank of England makes biggest interest rate hike in 30 years

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    LONDON — The Bank of England made its biggest interest rate increase in three decades Thursday, joining the U.S. Federal Reserve and other central banks worldwide in rapid hikes as it tries to beat back stubbornly high inflation fueled by Russia’s invasion of Ukraine and the disastrous economic policies of former Prime Minister Liz Truss.

    The central bank boosted its key rate by three-quarters of a percentage point, to 3%, after consumer price inflation returned to a 40-year high in September. The aggressive move comes even as the bank predicted a two-year economic contraction through June 2024, which would be the longest recession since at least 1955, according to the Office for National Statistics.

    “If we don’t take action to bring inflation down, it gets worse,” Bank of England Gov. Andrew Bailey told reporters. “There’s no easy outcome in this sense.”

    Even so, the central bank should not increase its key rate too far, he said, but with uncertainties ahead, policymakers will “respond forcefully” if needed.

    The interest rate decision is the first since Truss’ government announced 45 billion pounds ($52 billion) of unfunded tax cuts that sparked turmoil on financial markets, pushed up mortgage costs and forced Truss from office after just six weeks. Her successor, Rishi Sunak, has warned of spending cuts and tax increases as he seeks to undo the damage and show that Britain is committed to paying its bills.

    “High energy, food and other bills are hitting people hard. Households have less to spend on other things. This has meant that the size of the UK economy has started to fall,” the bank said in its November monetary policy report.

    The rate increase is the Bank of England’s eighth in a row and the biggest since 1992. It comes after the U.S. Federal Reserve on Wednesday announced a fourth consecutive three-quarter point jump as central banks worldwide combat inflation that is eroding living standards and slowing economic growth.

    Central banks have struggled to contain inflation after initially believing that price increases were being fueled by international factors beyond their control. Their response intensified in recent months as it became clear that inflation was becoming embedded in the economy, feeding through into higher borrowing costs and demands for higher wages.

    The war in Ukraine boosted food and energy prices worldwide as shipments of natural gas, grain and cooking oil were disrupted. That added to inflation that began to accelerate last year when the global economy began to recover from the COVID-19 pandemic.

    Europe has been particularly hard hit by a jump in natural gas prices as Russia responded to Western sanctions and support for Ukraine by curtailing shipments of the fuel used to heat homes, generate electricity and power industry and European nations competed for alternative supplies on global markets.

    The U.K. also has struggled as wholesale gas prices increased fivefold in the 12 months through August. While prices have dropped more than 50% since the August peak, they are likely to rise again during the winter heating season, worsening inflation.

    The British government sought to shield consumers with a cap on energy prices. But after the turmoil caused by Truss’ economic policies, Treasury chief Jeremy Hunt limited the price cap to six months instead of two years, ending on March 31.

    Meanwhile, food prices have jumped 14.6% in the year through September, led by the soaring cost of staples such as meat, bread, milk and eggs, the Office for National Statistics said. That pushed consumer price inflation back to 10.1%, the highest since early 1982 and equal to the level last reached in July.

    Increases in the cost of tea bags, milk and sugar mean that even the “humble” cup of tea, which people across the country turn to when they need a break from the pressures of daily life, is getting more expensive, the British Retail Consortium said Wednesday.

    “While some supply chain costs are beginning to fall, this is more than offset by the cost of energy, meaning a difficult time ahead for retailers and households alike,” said Helen Dickinson, the consortium’s chief executive.

    Truss’ failed economic plan made things worse, driving the pound to a record low against the dollar, threatening the stability of some pension funds and triggering predictions that the Bank of England would boost interest rates higher than expected. That increased mortgage costs as lenders repriced their products.

    The economic turmoil is putting homeownership further out of reach for many young people, according to research released this week by Hamptons, a U.K. real estate agency.

    Mortgage rates average around 6.5%, compared with 2% a year ago.

    That means the average first-time homebuyer would have to make a down payment equal to 41% of the purchase price to keep their monthly repayments at the same level as a similar buyer who made a 10% down payment last year, Hamptons said.

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  • US stock indexes are mixed as Facebook parent company slumps

    US stock indexes are mixed as Facebook parent company slumps

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    NEW YORK — Stock indexes are mixed on Wall Street in afternoon trading Thursday as more big companies report quarterly results.

    The S&P 500 fell 0.5% as of 2:11 p.m. Eastern. Roughly 70% of stocks within the benchmark index gained ground, but slides in several big technology stocks more than offset hose gains.

    The tech-heavy Nasdaq fell 1.5%. Facebook’s parent company, Meta Platforms, plummeted 23.7% after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. It joins other tech and communications stocks, such as Google’s parent company, Alphabet, and Microsoft, in reporting weak results and worrisome forecasts over advertising demand.

    The Dow Jones Industrial Average rose 263 points, or 0.8%, to 32,099. Construction equipment maker Caterpillar jumped 8.2% and contributed greatly to the index’s gains after it handily beat analysts’ third-quarter profit forecasts.

    Long-term Treasury yields fell. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.95% from 4.01% late Wednesday. The two-year yield fell to 4.34% from 4.42%.

    “What you’re seeing is a little bit of relief,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “Earnings are not great but they’re not awful either.”

    The benchmark S&P 500 is still holding on to weekly gains and remains solidly on track to end October in the green.

    Earnings have been the big focus for Wall Street this week, but markets got some encouraging economic news Thursday as the government reported the U.S. economy returned to growth last quarter, expanding 2.6%. That marks a turnaround after the economy contracted during the first half of the year.

    The economy has been under pressure from stubbornly hot inflation and the Federal Reserve’s efforts to raise interest rates in order to cool prices. The central bank is trying to slow economic growth through rate increases, but the strategy risks going too far and brining on a recession.

    The rising interest rates have made borrowing more difficult, particularly with mortgage rates. Average long-term U.S. mortgage rates topped 7% for the first time in more than two decades this week.

    The latest economic data is being closely watched for any signs of a slowdown or that inflation might be easing as Wall Street tries to determine if and when the Fed might pull back on its interest rate increases.

    The central bank is expected to raise interest rates another three-quarters of a percentage point at its upcoming meeting in November. But traders have grown more confident that it will dial down to a more modest increase of 0.50 percentage points in December, according to CME Group.

    Central banks around the world have also been raising interest rates in an effort to tame inflation. The European Central Bank piled on another outsized interest rate hike on Thursday. Markets in Europe were mixed.

    Wall Street has more earnings to review later Thursday. Internet retail giant Amazon and iPhone maker Apple report results after the market closes. Exxon Mobil will report its latest financial results on Friday.

    ———

    Joe McDonald and Matt Ott contributed to this report.

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  • US economy likely returned to growth last quarter

    US economy likely returned to growth last quarter

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    WASHINGTON — The problems have hardly gone away. Inflation, still near a 40-year high, is punishing households. Rising interest rates have derailed the housing market and threaten to inflict broader damage. And the outlook for the world economy grows bleaker the longer that Russia’s war against Ukraine drags on.

    But for now anyway, the U.S. economy has likely returned to growth after having shrunk in each of the first two quarters of 2022.

    At least that’s what economists expect to see Thursday when the Commerce Department issues its first of three estimates of gross domestic product — the broadest measure of economic output — for the July-September period.

    Economists surveyed by the data firm FactSet have predicted, on average, that GDP grew at a 2% annual rate in the third quarter. That would reverse annual declines of 1.6% from January through March and 0.6% from April through June.

    Consecutive quarters of declining economic output are one informal definition of a recession. But most economists say they believe the economy has so far skirted a recession, noting the still-resilient job market and steady spending by consumers. Most of them have expressed concern, though, that a recession is likely next year as the Federal Reserve continues to steadily ratchet up interest rates to fight inflation.

    Preston Caldwell, head of U.S. economics for the financial services firm Morningstar, notes that the economy’s contraction in the first half of the year was caused largely by factors that don’t reflect its underlying health and so “very likely did not constitute a genuine economic slowdown.” He pointed, for example, to a drop in business inventories, a cyclical event that tends to reverse itself and generally doesn’t reflect the state of the economy.

    By contrast, consumer spending, fueled by a healthy job market, and stronger U.S. exports likely restored the world’s biggest economy to growth last quarter.

    Thursday’s report from the government comes as Americans, worried about high prices and recession risks, are preparing to vote in midterm elections that will determine whether President Joe Biden’s Democratic Party retains control of Congress. Inflation has become a signature issue for Republican attacks on the Democrats’ stewardship of the economy.

    The risk of an economic downturn next year remains elevated as the Fed keeps raising rates aggressively to try to tame stubbornly high consumer prices. The central bank has raised its benchmark short-term rate five times this year, and it’s expected to announce further hikes next week and again in December. Chair Jerome Powell has warned bluntly that taming inflation will “bring some pain’’ — namely, higher unemployment and, possibly, a recession.

    Higher borrowing costs have already hammered the home market. The average rate on a 30-year fixed-rate mortgage, just 3.09% a year ago, is approaching 7%. Sales of existing homes have fallen for eight straight months. Construction of new homes is down nearly 8% from a year ago.

    Still, the economy retains pockets of strength. One is the vitally important job market. Employers have added an average of 420,000 jobs a month this year, putting 2022 on track to be the second-best year for job creation (behind 2021) in Labor Department records going back to 1940. The unemployment rate was 3.5% last month, matching a half-century low.

    But hiring has been decelerating. In September, the economy added 263,000 jobs — solid but the lowest total since April 2021.

    International events are causing further concerns. Russia’s invasion of Ukraine has disrupted trade and raised prices of energy and food, creating a crisis for poor countries. The International Monetary Fund, citing the war, this month downgraded its outlook for the world economy in 2023.

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  • Australia to reveal economic plan for deteriorating outlook

    Australia to reveal economic plan for deteriorating outlook

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    CANBERRA, Australia — Australia’s new government on Tuesday will propose an economic plan to steer the nation through rising inflation and interest rates while reigning in debt.

    Treasurer Jim Chalmers will deliver his center-left Labor Party’s first annual budget for the fiscal year that began in July.

    It will be the first budget by a Labor government in nine years and must contend with unprecedented levels of debt as a result of the COVID-19 pandemic.

    Chalmers said rising inflation was the primary influence on how he drafted his economic blueprint.

    “The budget will be solid, sensible and suited for the times. It will recognize that in a time of extreme global uncertainty, our best defense is a responsible budget at home,” Chalmers told reporters.

    “The budget has three objectives: responsible cost-of-living relief, strengthening the economy and beginning the hard yards of budget repair,” he added.

    The previous conservative government had forecast in its last budget in March a 78 billion Australian dollar ($49 billion) deficit in the current fiscal year.

    The new government’s forecast more than halves that deficit to AU$36.9 billion ($23.3 billion) thanks mainly to higher prices for commodities including iron ore and coal.

    However, slowing economic growth was expected to add to the longer-term difficulty of repaying debt.

    The March budget forecast that gross debt as a share of the economic growth would peak in mid-2025 at 44.9%, or AU$1.117 trilllion ($709 billion).

    The budget will help families by increasing child care subsidies and gradually increasing paid parental leave entitlements from 18 to 26 weeks, the government said.

    Prime Minister Anthony Albanese said the budget would provide cost-of-living relief for families without fueling inflation.

    “The priority will be on measures that boost the economy, that boost productivity. Cheaper child care does just that. So does paid parental leave,” Albanese said.

    The government will need to get its budget measures through the Parliament, where compromises may need to be made.

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  • Asian shares mixed as markets eye China meeting

    Asian shares mixed as markets eye China meeting

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    TOKYO — Asian shares were mixed Monday as investors kept their eyes on the weeklong Communist Party congress in China.

    Benchmarks dropped in Tokyo, Sydney and Hong Kong, but they recovered in afternoon trading in Seoul and Shanghai. Mumbai gained. Oil prices and U.S. futures rose.

    The meeting in China, which opened Sunday, is expected to reappoint Xi Jinping as leader for the next five years, reaffirming his grip on power and stronger state control over the economy. Analyst expect no change to the “zero-COVID policy.”

    “Fresh updates from China’s Party Congress are being scrutinized, with the emphasis on technological advancement and national security seemingly brought up as high priorities for China’s longer-term direction. Further de-coupling f rom U.S. technology seems to be the story,” said Yeap Jun Rong, market strategist at IG in Singapore.

    Japan’s benchmark Nikkei 225 slipped 1.2% in afternoon trading to 26,775.79. Australia’s S&P/ASX 200 dipped 1.4% to 6,664.40. South Korea’s Kospi rebounded to gain 0.3% to 2,219.71. Hong Kong’s Hang Seng lost 0.2% to 16,561.97, while the Shanghai Composite rose 0.5% to 3,086.38. In Mumbai, the Sensex gained 0.5%.

    Clifford Bennett, Chief Economist at ACY Securities, noted the U.S. dollar will likely continue to rise as interest rates are pushed higher to counter inflation.

    “The outlook is grim. The economic horizon is dark,” he said of the American economy. “”The U.S. dollar will continue to strengthen for the moment, particularly against other Western currencies.”

    In currency trading, the euro cost 97.37 cents, up from 97.21 cents.

    The U.S. dollar rose to 148.74 Japanese yen from 148.63 yen. That’s a nearly 32-year low for the yen against the dollar.

    Japan’s industrial production for August showed moderate signs of improvement, the government said. Industrial production rose 3.4% from the previous month, and 5.8% from the previous year, according to Ministry of Economy, Trade and Industry data released Monday.

    Worries about inflation, though cooling in some parts of the economy around the world, remain overall. On Wall Street, stocks ended last week with a broad slide, wiping out earlier gains.

    A report showing U.S. consumers’ expectations for inflation was another signal the Federal Reserve may keep aggressively raising interest rates, although that strategy raises the risks of a recession.

    The S&P 500 fell 2.4% on Friday. The Dow Jones Industrial Average fell 1.3% and the Nasdaq composite ended 3.1% lower. Both indexes also turned lower after marching higher in early trading.

    The Russell 2000 gave up 2.7%

    The Fed has already raised its benchmark interest rate five times this year, with the last three increases by three-quarters of a percentage point. Wall Street expects another raise of three-quarters of a percentage point at its next meeting in November.

    Investors have also been focusing on the latest earnings reports.

    In energy trading, benchmark U.S. crude added 66 cents to $86.27 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude oil prices fell 3.9% on Friday. Brent crude, the international standard, added 78 cents to $92.41 a barrel.

    ———

    Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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  • Little sign of relief expected in September inflation data

    Little sign of relief expected in September inflation data

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    WASHINGTON — Any Americans hoping for relief from months of punishing inflation might not see much in Thursday’s government report on price increases in September.

    Lower gas prices will probably reduce overall consumer inflation for a third straight month. But measures of “core” inflation, which are closely watched because they exclude volatile food and energy costs, are expected to return to a four-decade peak.

    Economists have estimated that the government’s consumer price index jumped 8.1% in September from 12 months earlier, according to a survey by the data provider FactSet. That is a distressingly large gain, though below the 9.1% year-over-year peak that was reached in June.

    Core prices are estimated to have risen 0.4% from August to September, slower than the previous month but still a much faster pace than was typical before the pandemic. Measured over the past 12 months, core prices are forecast to have surged 6.5%, up from 6.3% in August. That’s far above the 2% inflation that the Federal Reserve has long set as its target rate.

    Thursday’s report will provide the final inflation figures before the Nov. 8 midterm elections after a campaign season in which spiking prices across the economy have fed widespread public anxiety, with many Republicans casting blame on President Joe Biden and congressional Democrats.

    Inflation has escalated families’ grocery bills, rents and utility costs, among many other expenses, inflicting hardships on households and deepening gloom about the economy despite strong job growth and historically low unemployment.

    As the election nears, Americans are increasingly taking a dim view of their finances, according to a new poll by The Associated Press-NORC Center for Public Affairs Research. Roughly 46% of people now describe their personal financial situation as poor, up from 37% in March. That sizable drop contrasts with the mostly steady readings that had lasted through the pandemic.

    The September inflation report, whatever it shows, isn’t likely to change the Fed’s plans to keep hiking rates aggressively in an effort to wrest inflation under control. The Fed has boosted its key short-term rate by 3 percentage points since March, the fastest pace of hikes since the early 1980s. Those increases are intended to raise borrowing costs for mortgages, auto loans and business loans and cool inflation by slowing the economy.

    Minutes from the Fed’s most recent meeting in late September showed that many policymakers have yet to see any progress in their fight against inflation. The officials projected that they would raise their benchmark rate by an additional 1.25 percentage points over their next two meetings in November and December. Doing so would put the Fed’s key rate at its highest level in 14 years.

    Along with lower gas prices, economists expect to see that the prices of used cars tumbled in September after small declines the previous two months. Wholesale used car prices have dropped for most of this year, though the declines have yet to show up in consumer inflation data. (Used vehicle prices had soared in 2021 after factory shutdowns and supply chain shortages reduced production.)

    Large retailers, too, have started offering early discounts for the holiday shopping season, after having amassed excess stockpiles of clothes, furniture and other goods earlier this year. Those price cuts might have lowered inflation in September or will do so in the coming months.

    Walmart has said it will offer steep discounts on such items as toys, home goods, electronics and beauty. Target began offering holiday deals earlier this month.

    Yet prices for services — particularly rents and housing costs — are remaining persistently high and will likely take much longer to come down. Health care services, education and even veterinary services are still rising rapidly in price.

    “Services price increases tend to be more persistent than increases in the prices of goods,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, noted in remarks last week.

    Rising rental costs are a tricky issue for the Fed. Real-time data from websites such as ApartmentList suggest that rents on new leases are starting to decline.

    But the government’s measure tracks all rent payments — not just those for new leases — and most of them don’t change from month to month. Economists say it could be a year or longer before the declines in new leases feed through to government data.

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  • Little sign of relief expected in September inflation data

    Little sign of relief expected in September inflation data

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    WASHINGTON — Any Americans hoping for relief from months of punishing inflation might not see much in Thursday’s government report on price increases in September.

    Lower gas prices will probably reduce overall consumer inflation for a third straight month. But measures of “core” inflation, which are closely watched because they exclude volatile food and energy costs, are expected to return to a four-decade peak.

    Economists have estimated that the government’s consumer price index jumped 8.1% in September from 12 months earlier, according to a survey by the data provider FactSet. That is a distressingly large gain, though below the 9.1% year-over-year peak that was reached in June.

    Core prices are estimated to have risen 0.4% from August to September, slower than the previous month but still a much faster pace than was typical before the pandemic. Measured over the past 12 months, core prices are forecast to have surged 6.5%, up from 6.3% in August. That’s far above the 2% inflation that the Federal Reserve has long set as its target rate.

    Thursday’s report will provide the final inflation figures before the Nov. 8 midterm elections after a campaign season in which spiking prices across the economy have fed widespread public anxiety, with many Republicans casting blame on President Joe Biden and congressional Democrats.

    Inflation has escalated families’ grocery bills, rents and utility costs, among many other expenses, inflicting hardships on households and deepening gloom about the economy despite strong job growth and historically low unemployment.

    As the election nears, Americans are increasingly taking a dim view of their finances, according to a new poll by The Associated Press-NORC Center for Public Affairs Research. Roughly 46% of people now describe their personal financial situation as poor, up from 37% in March. That sizable drop contrasts with the mostly steady readings that had lasted through the pandemic.

    The September inflation report, whatever it shows, isn’t likely to change the Fed’s plans to keep hiking rates aggressively in an effort to wrest inflation under control. The Fed has boosted its key short-term rate by 3 percentage points since March, the fastest pace of hikes since the early 1980s. Those increases are intended to raise borrowing costs for mortgages, auto loans and business loans and cool inflation by slowing the economy.

    Minutes from the Fed’s most recent meeting in late September showed that many policymakers have yet to see any progress in their fight against inflation. The officials projected that they would raise their benchmark rate by an additional 1.25 percentage points over their next two meetings in November and December. Doing so would put the Fed’s key rate at its highest level in 14 years.

    Along with lower gas prices, economists expect to see that the prices of used cars tumbled in September after small declines the previous two months. Wholesale used car prices have dropped for most of this year, though the declines have yet to show up in consumer inflation data. (Used vehicle prices had soared in 2021 after factory shutdowns and supply chain shortages reduced production.)

    Large retailers, too, have started offering early discounts for the holiday shopping season, after having amassed excess stockpiles of clothes, furniture and other goods earlier this year. Those price cuts might have lowered inflation in September or will do so in the coming months.

    Walmart has said it will offer steep discounts on such items as toys, home goods, electronics and beauty. Target began offering holiday deals earlier this month.

    Yet prices for services — particularly rents and housing costs — are remaining persistently high and will likely take much longer to come down. Health care services, education and even veterinary services are still rising rapidly in price.

    “Services price increases tend to be more persistent than increases in the prices of goods,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, noted in remarks last week.

    Rising rental costs are a tricky issue for the Fed. Real-time data from websites such as ApartmentList suggest that rents on new leases are starting to decline.

    But the government’s measure tracks all rent payments — not just those for new leases — and most of them don’t change from month to month. Economists say it could be a year or longer before the declines in new leases feed through to government data.

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  • IMF warns of higher recession risk and darker global outlook

    IMF warns of higher recession risk and darker global outlook

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    WASHINGTON — The International Monetary Fund is once again lowering its projections for global economic growth in 2023, projecting world economic growth lower by $4 trillion through 2026.

    Kristalina Georgieva, managing director of the IMF, told an audience at Georgetown University on Thursday that “things are more likely to get worse before it gets better,” saying the Russian invasion of Ukraine that began in February has dramatically changed the IMF’s outlook on the economy.

    The ongoing COVID-19 pandemic, rising inflation and worsening climate conditions are also impacting world economies, exacerbating other crises, like food insecurity and high debt levels held by lower-income countries.

    “The risks of recession are rising,” she said, adding that the IMF estimates that countries making up one-third of the world economy will see at least two consecutive quarters of economic contraction this or next year.

    Georgieva said the institution downgraded its global growth projections already three times. It now expects 3.2% for 2022 and now 2.9% for 2023.

    The bleak projections come as central banks around the world raise interest rates in hopes of taming rising inflation. The U.S. Federal Reserve has been the most aggressive in using interest rate hikes as an inflation-cooling tool, though central banks from Asia to England have begun to raise rates this week.

    Georgieva said “tightening monetary policy too much and too fast — and doing so in a synchronized manner across countries — could push many economies into prolonged recession.”

    Many countries are already seeing major impacts of the invasion of Ukraine on their economies, and the IMF’s grim projections are in line with other forecasts for declines in growth.

    The Organization for Economic Cooperation and Development last week said the global economy is set to lose $2.8 trillion in output in 2023 because of the war.

    The projections come after the OPEC+ alliance of oil-exporting countries decided Wednesday to sharply cut production to support sagging oil prices in a move that could deal the struggling global economy another blow and raise politically sensitive pump prices for U.S. drivers just ahead of key national elections in November.

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  • UK’s Truss meets with fiscal watchdog amid economic crisis

    UK’s Truss meets with fiscal watchdog amid economic crisis

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    LONDON — British Prime Minister Liz Truss and her Treasury chief met with the independent Office of Budget Responsibility on Friday amid efforts to ease concerns about unfunded government tax cuts that have unleashed turmoil on financial markets.

    The meeting was significant because it was the government’s failure to publish the OBR’s analysis of its tax-cutting plans that spooked investors, sending the pound to a record low against the dollar earlier this week and forcing the Bank of England to intervene in the bond market to protect pension funds.

    The OBR promised an analysis by Oct. 7, far sooner than the date previously suggested — Nov. 23 — when the government releases more details on its economic plans. The oversight body promised that its forecast “will, as always, be based on our independent judgment about economic and fiscal prospects, and the impact of the government’s policies.”

    The chairman of the House of Commons’ Treasury committee said the meeting was an opportunity for the government to change course. Truss and Treasury chief Kwasi Kwarteng were likely to have “difficult” conversations with the OBR because investors want to see independent analysis showing that their plans won’t push government borrowing to unsustainable levels, said Mel Stride, a member of Truss’ Conservative Party.

    “The judgment so far of the markets, and indeed myself and many others, is that what was announced last Friday, unfortunately, doesn’t stack up fiscally and some changes are almost certainly going to need to be made,” Stride told the BBC.

    Truss defended her plan Thursday and shrugged off the market chaos, saying she was willing to make “controversial and difficult decisions” to get the U.K. economy growing. She said the problems facing the economy — namely high inflation driven by soaring energy prices — were global and spurred by Russia’s invasion of Ukraine.

    She got a piece of good news Friday, with revised figures showing the U.K. economy grew slightly in the three months through June, indicating the country isn’t technically in a recession, with two consecutive quarters of shrinking GDP being one definition.

    Her government’s economic stimulus program calls for 45 billion pounds ($48 billion) of tax cuts and no spending reductions, meaning a surge of borrowing would be used to pay for the cuts that many see as benefiting the wealthy. She also has capped energy bills for households and businesses that are driving a cost-of-living crisis, though prices are still going up Saturday as natural gas prices soar.

    Treasury minister Andrew Griffith had played down the significance of the meeting between the government and OBR, but nonetheless described it as a “very good idea.”

    “Just like the independent Bank of England, they have got a really important role to play,’’ Griffith said of the OBR during an interview with Sky News. “We all want the forecasts to be as quick as they can, but also as a former finance director, I also know you want them to have the right level of detail.”

    The decision to meet with the OBR also was welcomed by Conservative lawmakers and senior party figures, including former Chancellor George Osborne, who oversaw the creation of the independent spending watchdog in 2010.

    “Turns out the credibility of the institution we created 12 years ago to bring honesty to the public finances is more enduring than that of its critics,” Osborne said on Twitter.

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  • India raises interest rate to 5.90% to tame inflation

    India raises interest rate to 5.90% to tame inflation

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    FILE – Reserve Bank of India (RBI) Governor Shaktikanta Das gestures during a press conference after RBI’s bi-monthly monetary policy review meeting in Mumbai, India, on Feb. 6, 2020. India’s central bank on Friday, Sept. 30, 2022, raised its key interest rate by 50 basis points to 5.90% in its fourth hike this year and said the economies of developing countries were confronted with challenges of slowing growth, elevated food and energy prices, debt distress and currency depreciation. (AP Photo/Rajanish Kakade, File)

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  • India raises interest rate to 5.90% to tame inflation

    India raises interest rate to 5.90% to tame inflation

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    India’s central bank has raised its key interest rate to 5.90% and said developing economy were facing slowing growth, elevated food and energy prices, debt distress and currency depreciation

    NEW DELHI — India’s central bank on Friday raised its key interest rate by 50 basis points to 5.90% in its fourth hike this year and said developing economies were facing challenges of slowing growth, elevated food and energy prices, debt distress and currency depreciation.

    Reserve Bank of India Governor Shaktikanta Das projected inflation at 6.7% in the current fiscal year which runs to next March. June was the sixth consecutive month with inflation above the central bank’s tolerance level of 6%, he said in a statement after a meeting of the bank’s monitoring committee.

    He said the central bank will remain focused on the withdrawal of the accommodative monetary policy.

    The bank’s monetary committee slashed the real economic growth forecast to 7% for the current financial year from 7.2% forecast in August. The economic growth for the first quarter of the next financial year is expected around 6.7%.

    Das said the world has been confronted with one crisis after another, but India has withstood shocks from the coronavirus pandemic and the conflict in Ukraine.

    Das also said the Indian rupee has depreciated by 4% since April against 14% appreciation in the U.S. dollar. “The rupee has fared better than many other currencies” and the Reserve Bank Of India’s foreign exchange reserves umbrella remains strong, he said.

    The Indian rupee has plunged to an all-time low of 81.58 rupees to one U.S. dollar.

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