Global Financial Crisis 2.0 - 2023 Edition

[Jamesc]

Xi destroyed the housing market.

Xi destroyed the tech firms.

Xi destroyed millions of jobs.

Edited October 25, 2022 by Jamesc

[noobcarbuyer]

https://www.reuters.com/markets/europe/south-koreas-economy-likely-ground-near-halt-q3-2022-10-25/

South Korea's economy likely ground to near halt in Q3

South Korea's economy likely slowed to a near halt in the third quarter as weakening exports and rising interest rates knocked the wind out of what had been a resilient run, a Reuters poll of economists found.

The export-led economy was expected to have expanded a seasonally-adjusted 0.1% last quarter, according to the median forecast of 21 economists, a sharp slowdown from the 0.7% quarterly growth in April-June.

Three economists forecast an outright contraction and two expected the economy to flatline.

On an annual basis, gross domestic product (GDP) likely expanded 2.8%, according to the median forecast from 22 economists polled Oct. 20-24, down from 2.9% in the second quarter.

The data will be published on Oct. 27.

"GDP growth is likely to have been slower in 3Q22 compared with 2Q22, mainly due to the slowdown in consumption. The weakness in exports and manufacturing production is likely to have continued amid the deterioration in the global economic outlook," noted Oh Suktae, economist at Societe Generale.

"GDP growth should remain sluggish, at least in the near term, with consumption growth normalising from the post-pandemic recovery and the export and investment environments likely to remain weak."

Exports in Asia's fourth-largest economy grew at the slowest pace in nearly two years in September and were expected to weaken further with growing fears of global recession and an economic slowdown in China, the country's largest trade partner.

That, along with the Bank of Korea's (BOK) aggressive interest rate hikes to curb decade-high inflationary pressures, will weigh on the economy. In October, the BOK raised its benchmark interest rate by 50 basis points to 3.00%.

The central bank has hiked rates by a cumulative 250 basis points already in this cycle.

"Looking ahead, weakening export prospects, elevated domestic inflation, rising debt servicing burdens and tightening policy all point to intensifying growth headwinds," said Bansi Madhavani, senior economist at ANZ.

According to a separate Reuters poll, growth is forecast to average 2.6% this year and ease to 1.9% next year.

[noobcarbuyer]

https://www.straitstimes.com/world/europe/euro-zone-downturn-deepens-germany-heads-for-recession-survey

Euro zone downturn deepens, Germany heads for recession: Survey

BRUSSELS – Economic activity in the euro zone plummeted further in October and Germany, the European Union’s top economy, looks headed for a recession, a closely watched survey showed on Monday.

The S&P Global Flash Eurozone purchasing managers’ index (PMI) fell to 47.1 for October, down from 48.1 a month earlier, as soaring inflation and high energy prices buffeted Europe.

A reading below 50 signals an economic contraction.

While the 19-nation euro zone looked likely to contract in the fourth quarter, the picture was worse in Germany, where the PMI dropped to 44.1, from 45.7 in September.

That was the lowest reading since the first business shutdowns in Germany when the Covid-19 pandemic hit.

The data adds “to the growing signs of an impending recession in the euro zone’s largest economy”, said S&P Global Market Intelligence economics associate director Phil Smith.

Both manufacturing and services in Germany were showing accelerated rates of shrinkage, though that had yet to feed through into jobs-shedding, the survey showed.

German businesses were “deeply pessimistic” about the year-ahead outlook.

In France, the second-biggest economy in the EU, the economy is stagnating, with a PMI of 50 compared with 51.2 in September.

Although France is suffering less than other countries in Europe from rising inflation, rising prices are still putting pressure on consumers, leading to a severe fall in factory orders.

Across the euro zone, the PMI indicated that factory output had dropped for the fifth consecutive month, at a rate unseen since the worst of the pandemic.

Supply congestion and shortages had eased a bit, against a backdrop of flagging demand. While input demand had slumped, rising energy bills and wage pressure kept costs high.

A euro zone-wide recession “is looking increasingly inevitable”, S&P Global Market Intelligence chief business economist Chris Williamson said.

“The region’s energy crisis remains a major concern and a drag on activity, especially in energy-intensive sectors.”

The PMI data came ahead of a Thursday meeting of the European Central Bank’s (ECB) governing board that is expected to deliver a big interest rate hike in a bid to cool inflation.

Inflation in the euro zone stood at nearly 10 per cent in September, five times the ECB’s target of 2 per cent.

The German economy, whose energy-hungry industries relied heavily on Russian gas before the Ukraine war, is now forecast to shrink by 0.4 per cent in 2023. AFP

[noobcarbuyer]

https://www.telegraph.co.uk/business/2022/10/24/markets-business-live-blog-ftse-100-markets-live-updates/

Britain risks deeper recession under Rishi Sunak, says City economist 

Rishi Sunak’s economic approach will lead to a deeper recession than previously thought but will keep a lid on interest rates, according to a top City economist.

Thomas Pugh at RSM said the new prime minister’s pledge for fiscal responsibility suggests the country could be facing a fresh wave of austerity.

Combined with the cost-of-living crisis and rising rates, this could lead to a recession deeper than the 2pc previously forecast, he said.

However, lower fiscal spending is likely to keep down inflation in the medium term, meaning the Bank of England won’t need to raise interest rates as aggressively.

RSM downgraded its forecast for peak interest rates to 4.5pc from 4.75pc, adding that a bout of austerity would push that even lower.

Mr Pugh added: “For now, financial markets will be watching the new PM very closely and will be wanting to see evidence that he intends to stick to the message of fiscal discipline that he set out in the previous leadership campaign. 

“Any signs of straying off the path of fiscal discipline are likely to spook financial markets and result in another drop in the pound and surge in gilt yields.”

Ruth Gregory, senior UK economist at Capital Economics, added: “Overall, the news that Rishi Sunak will be the next PM means that the big downside risks to the economy posed by a prolonged period of political instability and a significant fiscal tightening have receded. 

“But with a fiscal tightening still on its way, the risk is that the recession will ultimately be deeper or longer than we currently expect.”

[noobcarbuyer]

https://www.bloomberg.com/news/articles/2022-10-25/inflation-cpi-drives-price-of-having-fun-to-40-year-high?

Cost of Having Fun in Singapore Surges to Highest in 40 Years

Households in Singapore are spending more on necessities and accommodation. It’s getting costlier to have fun and relax too.

Prices of recreational and cultural activities in Singapore in September soared the most in 40-years, according to the Department of Statistics on Tuesday. Keeping that pet puppy or turtle now costs 5.2% more than a year earlier while holiday expenses rose by 8.4%.

Concerns about the rising cost of living has prompted four rounds of monetary policy tightening this year, as the city contends with the fastest inflation in 14 years. Singapore unveiled a S$1.5 billion ($1.05 billion) inflation-relief package earlier this month. 

Food staples like flour and noodles also saw all-time highs. Chilled poultry prices jumped by a record 39% after a chicken export ban by neighboring Malaysia. The curb was lifted this month.

Dining out at hawker centers, which serves local street food such as chicken rice, is 7.9% pricier -- the biggest increase on record since the data was published in 2020.

 

[noobcarbuyer]

https://www.straitstimes.com/business/inflation-in-singapore-will-stay-high-next-year-even-as-pace-of-economic-growth-slows-mas

Inflation in Singapore will stay high next year even as pace of economic growth slows: MAS

SINGAPORE - Singapore is headed for a troubling year in which economic growth will slow while inflation will remain elevated, in part because wage increases are expected to continue.

Global prices may come off their recent peaks but inflation here will remain higher next year than the historical average, said the Monetary Authority of Singapore (MAS) on Thursday in its biannual Macroeconomic Review.

Meanwhile, the pace of economic growth will slow further in 2023 as pent-up demand at home from economic reopening and external demand for Singapore’s key electronics exports fade.

While the report shows that Singapore does not face an imminent threat of a recession, it warned that the outlook depends on the trajectory of advanced economies such as the United States and the European Union.

A deep and prolonged recession in these economies is still a possibility, with likely spillovers to externally oriented Asian economies such as Singapore.

For now, the MAS’ base-case scenario is that the US will avoid a full-year recession, in which case gross domestic product (GDP) growth in Singapore is likely to come in at 3 per cent to 4 per cent for 2022 as a whole, and moderate next year to a below-trend pace - estimated by analysts at around 3 per cent.

MAS said consumer demand for electronic devices in Singapore’s top two final-demand markets, China and the US, has contracted, adversely impacting Singapore’s electronics exports in recent months.

Apart from slower demand, the domestic semiconductor industry is also grappling with soaring energy costs, it said. Meanwhile, the momentum of recovery in the travel-related and consumer-facing sectors is set to ease as pent-up demand from economic reopening dissipates.

Consultancy firm Gartner has downgraded its 2022 forecast for global chip sales to 7.4 per cent from its previous forecast of 13.6 per cent.

In 2023, the industry is expected to enter a downturn, with revenue now projected to decline by 2.5 per cent, compared with positive growth previously.

The world’s top semiconductor foundry — Taiwan Semiconductor Manufacturing Company — expects demand for cutting-edge chips used in high-performance computing to remain firm, though the recent US export restrictions on advanced chips and chip equipment to China could hamper orders and sales.

The World Trade Organisation also expects world merchandise trade volume growth to slow to just 1 per cent in 2023, from 3.5 per cent in 2022.

“Dampened global and regional trade flows will adversely affect activity in Singapore’s manufacturing, wholesale, water transport and storage sectors, even as global supply frictions continue to ease,” MAS said.

The latest electronics purchasing managers’ index for Singapore retreated further to 49.4 in September, its second consecutive month of contraction, as new orders and exports waned.

MAS said slowing external demand, arising from heightened global inflation and tighter financial conditions due to interest rate hikes by major central banks, has also dented growth prospects in the financial sector.

Meanwhile, growth in the insurance industry could also come under pressure.

“While growth in the economy should continue to be supported by expansions in the domestic-oriented and travel-related sectors, the pace of discretionary spending is likely to moderate as high inflation and the uncertain economic environment dampen consumer sentiment,” MAS said.

A slowing economy will take the vigour out of employment growth, but elevated inflation expectations should keep resident wage growth above pre-Covid-19 rates, which in turn will add to business costs.

“Resident wage growth is forecast to remain above its historical average next year, leading to an above-trend pace of increase in unit labour cost for services firms in particular, even as it slows compared with 2022.”

Also, local qualifying salary and progressive wage model expansions that came into effect last month, and the salary increases announced to retain workers in the civil service, healthcare and education sectors will likely provide a mild boost to resident wage growth for this year and next.

“Notwithstanding the weakening external outlook, hiring should remain firm in most sectors for the rest of 2022,” MAS said.

In the latest fourth-quarter hiring outlook surveys by the Singapore Commercial Credit Bureau and the ManpowerGroup, the net employment outlook remained firmly positive even as it moderated slightly from previous readings.

However, moderating global growth and tightening financial conditions will have some impact on labour demand, primarily in the external-oriented manufacturing sector and modern services, which include professional, financial and infocomm services.

The central bank maintained its recent inflation forecasts, saying core inflation, which excludes accommodation and private transport costs, is projected to average around 4 per cent this year, while the all-items headline inflation should come in at around 6 per cent.

For 2023 as a whole, taking into account all factors, including the goods and service tax (GST) hike due in January, core inflation is forecast to average 3.5 per cent to 4.5 per cent. Headline inflation next year is projected to average 5.5 per cent to 6.5 per cent.

Excluding the effects of the GST increase, core inflation may come in between 2.5 per cent and 3.5 per cent, while headline inflation may fall within 4.5 per cent to 5.5 per cent.

MAS’ assertion that inflation will remain above trend comes from the fact that core inflation in the decade before the pandemic started in 2020 averaged at 1.5 per cent.

The report follows the central bank’s decision on Oct 14 to reinforce the appreciation bias of the Singapore dollar, which helps damp import costs.

This was the fifth such move by MAS since October 2021. However, inflation remains stubbornly stuck at its highest level in 14 years.

[Jamesc]

I never increase prices of massage therapy sessions for good looking young ladies.

I am doing my bit for inflation.

[noobcarbuyer]

https://finance.yahoo.com/news/recession-price-pay-put-inflation-154706780.html

A recession is the ‘price we have to pay’ to put inflation ‘back in a box,’ JPMorgan president Daniel Pinto says

U.S. consumers may have to cope with a recession if they want inflation to finally go away.

At least that’s what JPMorgan’s president and COO, Daniel Pinto, said on Monday.

“I think putting inflation back in a box is very important,” Pinto told CNBC, arguing that the Federal Reserve should continue raising interest rates even as the economy slows. “If it causes a slightly deeper recession for a period of time, that is the price we have to pay.”

Fed officials have raised interest rates five times this year in an attempt to combat inflation, but so far, their efforts haven’t proved as fruitful as economists would have liked.

The most common measure of U.S. inflation, the consumer price index (CPI), rose 8.2% from a year ago in September. While that’s nearly a percentage point below June’s 40-year high of 9.1%, it’s still well above the Fed’s 2% target rate.

And core inflation, which excludes more volatile food and energy prices, hit its own fresh 40-year high just last month, lending weight to the argument that inflation is becoming “entrenched” in the economy.

Pinto’s comments are on the hawkish side, and he joins others including former Treasury Secretary Larry Summers and Queens’ College, Cambridge president Mohamed El-Erian.

But not every top economist and business leader believes that inflation is here to stay, or that the Fed should keep hiking rates. From billionaire investor Barry Sternlicht to Howard University economics Professor William Spriggs, there’s a growing chorus of critics who argue that inflation is already coming down and the Fed should pause its rate hikes before sparking a major recession.

On Monday, JPMorgan COO Pinto rebuked this new group of dovish Fed watchers, referencing his experience as a child in Argentina as evidence that fighting inflation needs to be a top priority for the Fed.

Argentina has historically dealt with some of the worst inflation in the world. In September, for example, consumer prices soared 83% year over year in the country. And between 1944 and 2015, Argentina’s average annual inflation was 204%.

Pinto recalled memories from his childhood in the South American nation, where he said the value of the Argentine peso changed so rapidly owing to inflation that workers could lose up to 20% of the value of their paychecks in a single day if they didn’t rush to change their money into U.S. dollars.

Pinto said that when he was growing up, supermarkets were forced to hire “armies of people” to relabel prices on products on an hourly basis as a result of inflation.

“At the end of the day, they had to remove all the labels and start over again the next day,” he said.

Pinto’s experience with the devastating effects of runaway inflation have led him to believe that central banks should be aggressive when fighting rising consumer prices, because if they don’t, inflation can become entrenched in the economy as it was in Argentina, and to a lesser extent in the U.S. in the 1970s and ’80s.

“That’s why when people say, ‘The Fed is too hawkish,′ I disagree,” Pinto said.

He went on to argue that the Fed should raise interest rates to a peak of 5%, nearly 2 percentage points above current levels. He said that if it does this, it will increase unemployment and finally bring inflation under control.

Pinto has more confidence in the U.S. economy’s ability to cope with the pain of a recession than he did in the past. He said that U.S. households and businesses still have strong balance sheets, there is less leverage in the banking system, and mortgage standards are far higher than they were in 2008.

“Things that triggered problems in the past are in a far better position now,” Pinto noted. “That said, you hope nothing new pops up.”

However, Pinto acknowledged that the potential “big Black Swan,” a term used to describe an unpredictable event with devastating economic consequences, is the spread of geopolitical tensions from Ukraine and Taiwan to the rest of the world.

Finally, he added that he expects the U.S. stock market to continue to fall as rate hikes weigh on corporate profits.

″I don’t think we’ve seen the bottom of the market yet,” he said. “When you think about corporate earnings heading into next year, expectations may still be too elevated; multiples in some equity markets including the S&P are probably a bit high.″

[Stary]

On 10/27/2022 at 1:20 PM, noobcarbuyer said:

https://www.straitstimes.com/business/inflation-in-singapore-will-stay-high-next-year-even-as-pace-of-economic-growth-slows-mas

Inflation in Singapore will stay high next year even as pace of economic growth slows: MAS

SINGAPORE - Singapore is headed for a troubling year in which economic growth will slow while inflation will remain elevated, in part because wage increases are expected to continue.

Global prices may come off their recent peaks but inflation here will remain higher next year than the historical average, said the Monetary Authority of Singapore (MAS) on Thursday in its biannual Macroeconomic Review.

Meanwhile, the pace of economic growth will slow further in 2023 as pent-up demand at home from economic reopening and external demand for Singapore’s key electronics exports fade.

While the report shows that Singapore does not face an imminent threat of a recession, it warned that the outlook depends on the trajectory of advanced economies such as the United States and the European Union.

A deep and prolonged recession in these economies is still a possibility, with likely spillovers to externally oriented Asian economies such as Singapore.

For now, the MAS’ base-case scenario is that the US will avoid a full-year recession, in which case gross domestic product (GDP) growth in Singapore is likely to come in at 3 per cent to 4 per cent for 2022 as a whole, and moderate next year to a below-trend pace - estimated by analysts at around 3 per cent.

MAS said consumer demand for electronic devices in Singapore’s top two final-demand markets, China and the US, has contracted, adversely impacting Singapore’s electronics exports in recent months.

Apart from slower demand, the domestic semiconductor industry is also grappling with soaring energy costs, it said. Meanwhile, the momentum of recovery in the travel-related and consumer-facing sectors is set to ease as pent-up demand from economic reopening dissipates.

Consultancy firm Gartner has downgraded its 2022 forecast for global chip sales to 7.4 per cent from its previous forecast of 13.6 per cent.

In 2023, the industry is expected to enter a downturn, with revenue now projected to decline by 2.5 per cent, compared with positive growth previously.

The world’s top semiconductor foundry — Taiwan Semiconductor Manufacturing Company — expects demand for cutting-edge chips used in high-performance computing to remain firm, though the recent US export restrictions on advanced chips and chip equipment to China could hamper orders and sales.

The World Trade Organisation also expects world merchandise trade volume growth to slow to just 1 per cent in 2023, from 3.5 per cent in 2022.

“Dampened global and regional trade flows will adversely affect activity in Singapore’s manufacturing, wholesale, water transport and storage sectors, even as global supply frictions continue to ease,” MAS said.

The latest electronics purchasing managers’ index for Singapore retreated further to 49.4 in September, its second consecutive month of contraction, as new orders and exports waned.

MAS said slowing external demand, arising from heightened global inflation and tighter financial conditions due to interest rate hikes by major central banks, has also dented growth prospects in the financial sector.

Meanwhile, growth in the insurance industry could also come under pressure.

“While growth in the economy should continue to be supported by expansions in the domestic-oriented and travel-related sectors, the pace of discretionary spending is likely to moderate as high inflation and the uncertain economic environment dampen consumer sentiment,” MAS said.

A slowing economy will take the vigour out of employment growth, but elevated inflation expectations should keep resident wage growth above pre-Covid-19 rates, which in turn will add to business costs.

“Resident wage growth is forecast to remain above its historical average next year, leading to an above-trend pace of increase in unit labour cost for services firms in particular, even as it slows compared with 2022.”

Also, local qualifying salary and progressive wage model expansions that came into effect last month, and the salary increases announced to retain workers in the civil service, healthcare and education sectors will likely provide a mild boost to resident wage growth for this year and next.

“Notwithstanding the weakening external outlook, hiring should remain firm in most sectors for the rest of 2022,” MAS said.

In the latest fourth-quarter hiring outlook surveys by the Singapore Commercial Credit Bureau and the ManpowerGroup, the net employment outlook remained firmly positive even as it moderated slightly from previous readings.

However, moderating global growth and tightening financial conditions will have some impact on labour demand, primarily in the external-oriented manufacturing sector and modern services, which include professional, financial and infocomm services.

The central bank maintained its recent inflation forecasts, saying core inflation, which excludes accommodation and private transport costs, is projected to average around 4 per cent this year, while the all-items headline inflation should come in at around 6 per cent.

For 2023 as a whole, taking into account all factors, including the goods and service tax (GST) hike due in January, core inflation is forecast to average 3.5 per cent to 4.5 per cent. Headline inflation next year is projected to average 5.5 per cent to 6.5 per cent.

Excluding the effects of the GST increase, core inflation may come in between 2.5 per cent and 3.5 per cent, while headline inflation may fall within 4.5 per cent to 5.5 per cent.

MAS’ assertion that inflation will remain above trend comes from the fact that core inflation in the decade before the pandemic started in 2020 averaged at 1.5 per cent.

The report follows the central bank’s decision on Oct 14 to reinforce the appreciation bias of the Singapore dollar, which helps damp import costs.

This was the fifth such move by MAS since October 2021. However, inflation remains stubbornly stuck at its highest level in 14 years.

Looking at the makan threads,  I think most people here are inflation proof.  The mantra I learn around here is 10k/month is the new poor. 🤣

Edited October 28, 2022 by Starry

[Throttle2]

On 10/28/2022 at 5:06 PM, Starry said:

Looking at the makan threads,  I think most people here are inflation proof.  The mantra I learn around here is 10k/month is the new poor. 🤣

New meh?

well just remember I am the one who said it. 
several years ago, i also said $5kpm is poor, those people at that level refuse to believe, ego probably

today, those earning $10kpm , believe or not?

muayhahaha

[Jamesc]

What 2023 recession?

Its here now!

So many BM and Merc and  its 5 series and E class hor

that tailgate out of HDB carparks and have botak tyres.

Toberone also cannot afford!

5 series and E class with Toberone at least doing better!

[Jamesc]

10k is the new poor?

$10 in cash card also don't have.

[noobcarbuyer]

https://www.businesstimes.com.sg/global-enterprise/global-economy-approaching-a-recession-central-banks-unchained-poll

Global economy approaching a recession, central banks unchained: poll

 

THE global economy is approaching a recession as economists polled by Reuters once again cut growth forecasts for key economies while central banks keep raising interest rates to bring down persistently-high inflation.

One bright spot is that most major economies already in a recession or heading into one are starting with relatively low unemployment compared with previous downturns.

Indeed the latest poll expects the smallest gap between growth rates and joblessness in at least four decades.

But while that might deaden the intensity of recessions - most respondents say it will be short and shallow in key economies – that may also keep inflation elevated for longer than most currently expect.

A majority of the top global central banks are over two-thirds of the way to the expected terminal interest rate, but with inflation still much higher than their mandates, the risk is those rate expectations are too low.

After being late to call the inflation problem, global central banks have spent most of this year frontloading rate hikes to catch up. Most economists and central banks are of the view there will be little work left to do next year.

Michael Every, global strategist at Rabobank, said “risk of a global recession” is what everyone’s talking about and has become mainstream in forecasts. “I think that’s pretty much a no-brainer when you look at the trend in all the key economies.”

Looking at the low jobless rate is problematic, Every said, because it is a lagging indicator and “the longer it stays stronger the more central banks will feel that they can continue to hike rates.”

Of the 22 central banks polled this time, only six were expected to hit their inflation targets by the end of next year.

That was a downgrade from July surveys, where two-thirds of 18 were expected to hit their respective targets by then.

Analysts at Deutsche Bank wrote: “...history never repeats exactly, but since inflation forecasting has generally been so poor over the last 18 months, it’s worth us asking what normally happens when inflation breaches these thresholds. The answer is that it’s normally quite sticky.”

In the meantime, global equity and bond markets are in disarray while the US dollar is at a multi-decade peak in foreign exchange markets based on US rate expectations.

A strong 70 per cent majority of economists, 179 of 257, said chances of a sharp rise in unemployment over the coming year were low to very low, underscoring how widespread the view is among forecasters that it won’t be a devastating recession.

Global growth is forecast to slow to 2.3 per cent in 2023 from an expected 2.9 per cent this year, followed by a rebound to 3.0 per cent in 2024, according to Reuters polls of economists covering 47 key economies taken from Sept 26 to Oct 25.

Those were all downgrades from polls taken in July.

Over 70 per cent of economists, 173 of 242, said the cost of living crisis in the economies they cover would worsen over the next six months. The remaining 64 expected it to improve.

While the inflation cycle is global in nature, made worse by a sudden surge in energy prices after Russia invaded Ukraine on Feb 24, much will depend on how far the US Federal Reserve was likely to push rates higher.

The Fed is expected to go for a fourth consecutive 75 basis points interest rate hike on Nov 2, and economists say it shouldn’t pause until inflation falls to around half its current level.

China, the world’s second largest economy, was expected to grow 3.2 per cent in 2022, far below the official target of around 5.5 per cent and also well below pre-pandemic growth rates.

Excluding the meagre 2.2 per cent expansion after the initial Covid-19 hit in 2020, that would be the worst performance since 1976.

India’s economy was also forecast to grow well below its potential over the next two years with medians showing 6.9 per cent growth in the 2022-23 fiscal year and 6.1 per cent next year.

The euro zone economy was expected to grow 3.0% this year but flatline in 2023 before expanding 1.5 per cent in 2024. REUTERS

[Jamesc]

People have jobs and economists not happy.

Retrench all the economists lah to bring inflation down.

[noobcarbuyer]

https://www.theedgesingapore.com/news/global-economy/fed-and-boe-prepare-75-basis-point-salvos-inflation

Fed and BOE prepare 75 basis-point salvos on inflation

The Federal Reserve and the Bank of England may both unleash 75 basis-point interest-rate hikes in the coming days in a show of aggression toward inflation, even in the face of mounting recession risks.

The transatlantic double act illustrates the trade-off confronting central banks as evidence of an impending global economic contraction becomes harder to ignore, even as inflation lingers.

For the Fed, the fourth such out-sized move on Wednesday will bring it to a crossroads. The damage to growth inflicted by policy tightening is no longer being masked by the buoyancy of the post-pandemic economy, while its success in taming inflation has yet to materialize.

The BOE’s situation on Thursday is even less comfortable as it delivers what would be the biggest UK rate hike since 1989. Not only is the country probably already in a recession, but officials are also trying to reestablish the credibility of the UK’s framework after former Prime Minister Liz Truss’s unfunded fiscal plan led to a disastrous market crisis.

For each central bank, the week’s action is likely to be only a stepping stone toward even higher borrowing costs. Economists surveyed by Bloomberg reckon Fed rates will reach 5% by March, while the BOE may keep raising to settle above 4%.

Then again, recession worries could still temper policy makers’ enthusiasm for forceful hiking. That’s what happened with the Bank of Canada, which hiked rates by a less-than-expected 50 basis points.

In the US, many economists will look to the labour market for evidence of a deepening slowdown. Nonfarm payrolls due on Friday may show the economy added 190,000 jobs in October, the smallest addition since President Joe Biden’s administration began in January 2021.

Elsewhere this week, a likely slowdown in euro-zone growth, possible rate hikes from Norway to Australia, and a renewed surge in Turkish inflation will keep financial markets busy.

[Jamesc]

Expect the USD to rise again.

[noobcarbuyer]

https://fortune.com/2022/11/02/recession-outlook-maersk-earnings-shipping-dark-clouds-global-trade-decline/

‘Dark clouds’: One of the world’s biggest shipping companies has a stark recession warning for the global economy in its latest earnings report

The world has just a few giant shipping companies, and they touch every corner of international trade on a daily basis, so they’re attuned to the health of the global economy. When the world sneezes, in other words, shipping firms like Maersk get a cold.

Maersk occupies a huge position in global trade, managing 17% of international shipping and transporting goods for major consumer goods companies including Unilever and Walmart. And it’s feeling under the weather. 

Demand for trade is falling rapidly in the latest sign of a coming global recession, warns Maersk, one of the big four shipping firms that control nearly 60% of the market.

Global shipping had a bumper 2021, when demand for international goods rebounded from the early days of the pandemic, and global trade hit a record $28.5 trillion, a 25% jump from 2020 levels and 19% more than before the pandemic. 

But demand for global trade is now entering a period of decline that could last well into next year, according to Maersk, the world’s second-largest container shipping group. 

The Danish company exceeded expectations for the third quarter, according to its earnings report published on Wednesday, but also warned that global container demand is on track to fall by 2% to 4% in 2022, lowering its earlier forecast of growth plus or minus 1%, as larger headwinds begin to cloud the economic picture up to 2023.

“It is clear that freight rates have peaked and started to normalize during the quarter, driven by both decreasing demand and easing of supply-chain congestion,” Maersk CEO Søren Skou said in a statement accompanying the report.

“With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon. This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand.”

Flashing signals

Skou said that global trade is showing signs of “moving backward” amid a darkening global macroeconomic outlook during an interview with Bloomberg Wednesday, adding that a recession was “certainly” on the way in Europe with the U.S. “potentially” close behind.

International organizations, including the OECD and World Bank, have ramped up their warnings in recent weeks that a global recession is on the way, while several banks have declared one essentially set in stone in Europe owing to the continent’s ongoing energy crisis and exposure to the Ukraine War.

Despite global economic uncertainty, Maersk was still able to beat Wall Street forecasts by posting $10.9 billion in earnings last quarter, up from projections of $9.8 billion. But the coming months and year will likely be a “more volatile business environment” for global trade, according to Skou, as a global recession hits demand for international shipping and logistics operators like Maersk prepare for lowered profits in the near future.

“On the one hand, we have never delivered such a great result financially, but every indicator we are looking at is flashing dark red. Clearly, we expect a slowdown; we expect lower earnings going forward,” Skou told the Financial Times on Wednesday, adding that the company is prepared to idle ships if necessary in the event of a slowdown.

After hitting record high volumes last year, global trade has begun to plateau over the past few months. International merchandise trade already slowed significantly during the second quarter of this year, according to the World Trade Organization’s Goods Trade Barometer, a benchmark index that underscores the trajectory of global trade. The WTO projected global trade to remain “weak” for the remainder of 2022 in its latest forecast from August.

Some shipping companies—including Italy’s MSC and the France-based CMA CGM—have placed several orders for new ships during the industry’s recent boom period, but in his interview with the FT, Skou said that Maersk had ordered relatively few new ships. 

Even if it didn’t buy many new ships, Maersk did go on a shopping spree with its big earnings of the past year, making a bigger bet on land-based logistics services, including the acquisition of two new e-commerce companies in 2021—one based in the U.S. and one in Europe—to help boost land-based shipments from factories and warehouses.

[noobcarbuyer]

https://www.bbc.com/news/business-63471725

Bank of England expects UK to fall into longest ever recession

The Bank of England has warned the UK is facing its longest recession since records began, as it raised interest rates by the most in 33 years.

It warned the UK would face a "very challenging" two-year slump with unemployment nearly doubling by 2025.

Bank boss Andrew Bailey warned of a "tough road ahead" for UK households, but said it had to act forcefully now or things "will be worse later on".

It lifted interest rates to 3% from 2.25%, the biggest jump since 1989.

By raising rates, the Bank is trying to bring down soaring prices as the cost of living rises at its fastest rate in 40 years.

Food and energy prices have jumped, in part because of the Ukraine war, which has left many households facing hardship and started to drag on the economy.

A recession is defined as when a country's economy shrinks for two three-month periods - or quarters - in a row.

Typically, companies make less money, pay falls and unemployment rises. This means the government receives less money in tax to use on public services such as health and education.

The Bank had previously expected the UK to fall into recession at the end of this year and said it would last for all next year.

But it now believes the economy already entered a "challenging" downturn this summer, which will continue next year and into the first half of 2024 - a possible general election year.

While it will not be the UK's deepest downturn, it will be the longest since records began in the 1920s, the Bank said.

The unemployment rate is currently at its lowest for 50 years, but it is expected to rise to nearly 6.5%.

The interest rate announcement is the first since former Prime Minister Liz Truss and former Chancellor Kwasi Kwarteng unveiled their controversial mini-Budget in September.

Their plans for £45bn worth of unfunded tax cuts - much of which have been reversed - sent the value of the pound tumbling and sparked market turmoil, forcing the Bank of England to step in to restore calm.

Mr Bailey told the BBC he believed that the mini-budget had "damaged" the UK's standing internationally.

He said that at a recent International Monetary Fund gathering in Washington "it was very apparent to me that the UK's position and the UK's standing had been damaged".

That same week, Mr Kwarteng was sacked as Chancellor.

Chancellor Jeremy Hunt said: "The most important thing the British government can do right now is to restore stability, sort out our public finances, and get debt falling so that interest rate rises are kept as low as possible."

But shadow chancellor Rachel Reeves said families could not withstand such high rate rises "when we've got rising food prices, rising energy bills and now higher mortgage rates as well".

The latest rate hike - the Bank's eighth since December - takes borrowing costs to their highest since 2008, when the UK banking system faced collapse.

The Bank believes by raising interest rates it will make it more expensive to borrow and encourage people not to spend money, easing the pressure on prices in the process.

But while its latest rate rise will be welcomed by savers, it will have a knock-on effect on those with mortgages, credit card debt and bank loans.