Author: CensorBiz

WASHINGTON — The U.S. government should block the import of low-cost Chinese autos and parts from Mexico, a U.S. manufacturing advocacy group said Friday, warning they could threaten the viability of American car companies. 

“The introduction of cheap Chinese autos — which are so inexpensive because they are backed with the power and funding of the Chinese government — to the American market could end up being an extinction-level event for the U.S. auto sector,” the Alliance for American Manufacturing said in a report. 

The group argues the United States should work to prevent automobiles and parts manufactured in Mexico by companies headquartered in China from benefiting from a North American free trade agreement. “The commercial backdoor left open to Chinese auto imports should be shut before it causes mass plant closures and job losses in the United States,” the report said. 

Vehicles and parts produced in Mexico can qualify for preferential treatment under the U.S.-Mexico-Canada trade agreement as well as qualifying for a $7,500 electric vehicle, or EV, tax credit, the report noted. 

The Chinese embassy in Washington said in response that China’s automobile exports “reflect the high-quality development and strong innovation of China’s manufacturing industry. … The leapfrog development of China’s auto industry has provided cost-effective products with high quality to the world.” 

The issue has received new interest after news reports that China’s BYD Company plans to set up an EV factory in Mexico. BYD, known for its cheaper models and a more varied lineup, recently overtook its biggest rival, Tesla, to become the world’s top EV maker by sales. 

Tesla announced plans almost a year ago to build a factory in the northern Mexican state of Nuevo Leon. In October, Mexico said a Chinese Tesla supplier and a Chinese technology company would invest nearly a billion dollars in the state. 

A bipartisan group of U.S. lawmakers has urged the Biden administration to hike tariffs on Chinese-made vehicles and investigate ways to prevent Chinese companies from exporting to the United States from Mexico. 

A group of lawmakers urged U.S. Trade Representative Katherine Tai to boost the 27.5% tariff on Chinese vehicles and said her office “must also be prepared to address the coming wave of [Chinese] vehicles that will be exported from our other trading partners, such as Mexico, as [Chinese] automakers look to strategically establish operations outside of [China].” 

Alliance for Automotive Innovation CEO John Bozzella has said that proposed U.S. environmental regulations could let China gain “a stronger foothold in America’s electric vehicle battery supply chain and eventually our automotive market.” 

The U.S. Treasury issued guidelines in December on the $7,500 EV tax credit aimed at weaning the U.S. EV supply chain away from China. 
…

HONG KONG — Dior has postponed a fashion show set to be held in Hong Kong next month, a city official confirmed Saturday, dealing a blow to the financial hub’s ambitions to boost its economy through major events.

Hong Kong is courting top international celebrities and brands in the hope of rebooting its reputation, which has been battered by years of social unrest and strict pandemic curbs. 

The Dior fashion show — meant to feature artistic director Kim Jones and the men’s autumn collection — was to be one of several “mega events” touted last month by Hong Kong’s culture, sports and tourism chief, Kevin Yeung, as part of the city’s drive to become an event capital. 

But Yeung’s office confirmed to AFP on Saturday that it had “just been notified” by organizers that the fashion show would not go ahead as scheduled on March 23. 

“Large-scale events are postponed from time to time, and we continue to welcome large-scale events to take place in Hong Kong,” a spokesperson for Yeung’s office said. 

Dior said the show had been “postponed indefinitely” without giving specifics, according to a company statement quoted by the South China Morning Post. 

According to the South China Morning Post, the event was expected to cost about $100 million ($12.8 million U.S.) and draw nearly 1,000 attendees.  

Louis Vuitton in November held its men’s pre-fall 2024 show in Hong Kong, led by creative director Pharrell Williams and drawing celebrity guests from China and South Korea. 

The much-hyped runway show was seen as a boon to Hong Kong’s international image and a sign of the luxury giant’s commitment to Asian markets. 
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Ukraine’s economy shrank 29% in 2022, the year Russia launched its full-scale invasion. In addition, Ukrainian businesses were destroyed, exports were halted and millions of people were displaced. But in 2023, Ukranian officials’ say, the economy actually grew 5%. Eastern Europe Bureau Chief Myroslava Gongadze reports from Kyiv.
…

Kenyan companies, facing economic challenges, are turning to artificial intelligence to reduce production and advertising expenses. That’s causing anxiety among artists and ad agencies, who fear reduced income and job losses if AI can replace the work they’ve always done. Mohammed Yusuf reports from Nairobi.
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PARIS — Farmers are protesting across the European Union, saying they are facing rising costs and taxes, red tape, excessive environmental rules and competition from cheap food imports.

Demonstrations have been taking place for weeks in countries that include France, Germany, Belgium, the Netherlands, Poland, Spain, Italy and Greece.

While many issues are country-specific, others are Europewide. Here is a detailed look at the problems that have prompted the protest movement across the bloc and in individual nations.

Imports

Demonstrations in eastern Europe have focused on what farmers say is unfair competition from large amounts of imports from Ukraine, for which the EU has waived quotas and duties since Russia’s invasion.

Polish farmers have been blocking traffic at the border with Ukraine, which Kyiv says is affecting its defense capability and helping Russia’s aims.

Meanwhile, Czech farmers have driven their tractors into downtown Prague, disrupting traffic outside the farm ministry.

The farmers resent the imports because they say they put pressure on European prices while not meeting environmental standards imposed on EU farmers.

Renewed negotiations to conclude a trade deal between the EU and South American bloc Mercosur have also fanned discontent about unfair competition in sugar, grain and meat.

Rules and bureaucracy

Farmers take issue with excessive regulation, mainly at EU level. Center stage are new EU subsidy rules, such as a requirement to leave 4% of farmland fallow, which means not using it for a period of time.

They also denounce bureaucracy, which French farmers say their government compounds by overcomplicating implementation.

In Spain, farmers have complained of “suffocating bureaucracy” drawn up in Brussels that erodes the profitability of crops.

In Greece, farmers demand higher subsidies and faster compensation for crop damage and livestock lost in 2023 floods.

Rising diesel fuel costs

In Germany and France, the EU’s biggest agricultural producers, farmers have railed against plans to end subsidies or tax breaks on agricultural diesel. Greek farmers want a tax on diesel to be reduced.

In Romania, protests in mid-January were mainly against the high cost of diesel.

Income

In France, many producers say a government drive to bring down food inflation has left them unable to cover high costs for energy, fertilizer and transport.

What are governments doing?

The European Commission late last month proposed to limit agricultural imports from Ukraine by introducing an “emergency brake” for the most sensitive products — poultry, eggs and sugar — but producers say the volume would still be too high.

The commission has also exempted EU farmers for 2024 from the requirement to keep some of their land fallow while still receiving EU farm support payments, but they would need to instead grow crops without applying pesticides.

French Prime Minister Gabriel Attal announced measures that include controls to ensure imported foods do not have traces of pesticides banned in France or the EU and talks to get farmers higher prices and loosen bureaucracy and regulation.

Paris and Berlin have both relented to the pressure and rowed back on plans to end subsidies or tax breaks on agricultural diesel. In Romania, the government has acted to increase diesel subsidies, address insurance rates and expedite subsidy payments.

In Portugal, the caretaker government has announced an emergency aid package worth 500 million euros ($541 million), including 200 million euros ($217 million) to mitigate the impact of a long-running drought.

Why farmers are protesting, by country:

FRANCE

EU red tape
Diesel prices
Need more support to shore up incomes
Access to irrigation
Criticism over animal welfare and use of pesticides

POLAND

Cheap imports from Ukraine
EU regulation

CZECH REPUBLIC

Bureaucracy
Cheap imports
EU farm policy

SPAIN

"Suffocating bureaucracy" drawn up in Brussels that they say erodes the profitability of crops
Trade deals that they say open the door to cheap imports

PORTUGAL

Insufficient state aid, subsidy cuts
Red tape

ROMANIA

Cost of diesel
Insurance rates
EU environmental regulations
Cheap imports from Ukraine

BELGIUM

EU requirement to leave 4% of land fallow
Cheap imports
Subsidies favoring larger farms

GREECE

Demands for higher subsidies and faster compensation for crop damage and livestock lost in 2023 floods
Diesel tax and surging electricity bills
Falling state and EU subsidies 

…

ABUJA, Nigeria — Nigerians are facing one of the West African nation’s worst economic crises in years triggered by surging inflation, the result of monetary policies that have pushed the currency to an all-time low against the dollar. The situation has provoked anger and protests across the country.

The latest government statistics released Thursday showed the inflation rate in January rose to 29.9%, its highest since 1996, mainly driven by food and non-alcoholic beverages. Nigeria’s currency, the naira, further plummeted to 1,524 to $1 on Friday, reflecting a 230% loss of value in the last year.

“My family is now living one day at a time (and) trusting God,” said trader Idris Ahmed, whose sales at a clothing store in Nigeria’s capital of Abuja have declined from an average of $46 daily to $16.

The plummeting currency worsens an already bad situation, further eroding incomes and savings. It squeezes millions of Nigerians already struggling with hardship due to government reforms including the removal of gas subsidies that resulted in gas prices tripling.

A snapshot of Nigeria’s economy

With a population of more than 210 million people, Nigeria is not just Africa’s most populous country but also the continent’s largest economy. Its gross domestic product is driven mainly by services such as information technology and banking, followed by manufacturing and processing businesses and then agriculture.

The challenge is that the economy is far from sufficient for Nigeria’s booming population, relying heavily on imports to meet the daily needs of its citizens from cars to cutlery. So it is easily affected by external shocks such as the parallel foreign exchange market that determines the price of goods and services.

Nigeria’s economy is heavily dependent on crude oil, its largest foreign exchange earner. When crude prices plunged in 2014, authorities used its scarce foreign reserves to try to stabilize the naira amid multiple exchange rates. The government also shut down the land borders to encourage local production and limited access to the dollar for importers of certain items.

The measures, however, further destabilized the naira by facilitating a booming parallel market for the dollar. Crude oil sales that boost foreign exchange earnings have also dropped because of chronic theft and pipeline vandalism.

Monetary reforms poorly implemented

Shortly after taking the reins of power in May last year, President Bola Tinubu took bold steps to fix the ailing economy and attract investors. He announced the end of costly decadeslong gas subsidies, which the government said were no longer sustainable. Meanwhile, the country’s multiple exchange rates were unified to allow market forces to determine the rate of the local naira against the dollar, which in effect devalued the currency.

Analysts say there were no adequate measures to contain the shocks that were bound to come as a result of reforms including the provision of a subsidized transportation system and an immediate increase in wages.

So the more than 200% increase in gas prices caused by the end of the gas subsidy started to have a knock-on effect on everything else, especially because locals rely heavily on gas-powered generators to light their households and run their businesses.

Why is the naira plummeting in value?

Under the previous leadership of the Central Bank of Nigeria, policymakers tightly controlled the rate of the naira against the dollar, thereby forcing individuals and businesses in need of dollars to head to the black market, where the currency was trading at a much lower rate.

There was also a huge backlog of accumulated foreign exchange demand on the official market — estimated to be $7 billion — due in part to limited dollar flows as foreign investments into Nigeria and the country’s sale of crude oil have declined.

Authorities said a unified exchange rate would mean easier access to the dollar, thereby encouraging foreign investors and stabilizing the naira. But that has yet to happen because inflows have been poor. Instead, the naira has further weakened as it continues to depreciate against the dollar.

What are authorities doing?

Central Bank of Nigeria Gov. Olayemi Cardoso has said the bank has cleared $2.5 billion of the foreign exchange backlog out of the $7 billion that had been outstanding. The bank, however, found that $2.4 billion of that backlog were false claims that it would not clear, Cardoso said, leaving a balance of about $2.2 billion, which he said will be cleared “soon.”

Tinubu, meanwhile, has directed the release of food items such as cereals from government reserves among other palliatives to help cushion the effect of the hardship. The government has also said it plans to set up a commodity board to help regulate the soaring prices of goods and services.

On Thursday, the Nigerian leader met with state governors to deliberate on the economic crisis, part of which he blamed on the large-scale hoarding of food in some warehouses.

“We must ensure that speculators, hoarders and rent seekers are not allowed to sabotage our efforts in ensuring the wide availability of food to all Nigerians,” Tinubu said.

By Friday morning, local media were reporting that stores were being sealed for hoarding and charging unfair prices.

How are Nigerians coping with tough times?

The situation is at its worst in conflict zones in northern Nigeria, where farming communities are no longer able to cultivate what they eat as they are forced to flee violence. Pockets of protests have broken out in past weeks, but security forces have been quick to impede them, even making arrests in some cases.

In the economic hub of Lagos and other major cities, there are fewer cars and more legs on the roads as commuters are forced to trek to work. The prices of everything from food to household items increase daily.

“Even to eat now is a problem,” said Ahmed in Abuja. “But what can we do?”
…

MUNICH — China’s foreign minister told a gathering of international security policy officials Saturday that trying to shut China out of trade in the name of avoiding dependency would be a historic mistake.

Wang Yi spoke at the Munich Security Conference. Host Germany wants to avoid over-reliance on trade with an increasingly assertive China and diversify its supply of key goods in an approach it calls “de-risking.” That’s in line with the approach of other industrial powers in the Group of Seven, which has stressed that it doesn’t seek to harm China or thwart its development.

Beijing has criticized the strategy.

“Today … more people have come to realize that the absence of cooperation is the biggest risk,” Wang said through an interpreter. “Those who attempt to shut China out in the name of de-risking will make a historical mistake.”

“The world economy is like a big ocean that cannot be cut into isolated lakes,” he said. “The trend toward economic globalization cannot be reversed. We need to work together to make globalization more universally beneficial and inclusive.”

His comments came amid calls over the last year from the United States and the European Union to reduce their dependence on China.

Wang also renewed China’s pushback against allegations of forced labor in the western Xinjiang region, where it is accused of running labor transfer programs in which Uyghurs and other Turkic minorities are forced to toil in factories as part of a longstanding campaign of assimilation and mass detention.

He complained of “fabricated information from different parties” and asserted that the aim is “to stop the development of China.”
…

ALGIERS, Algeria — In a square near the center of Algiers, currency traders carry wads of euros, pounds and dollars, hoping to exchange them to those worried about the plummeting value of the Algerian dinar.

This black market for foreign currencies is among the signs of the economic woes plaguing Algeria. The state, reluctant to allow the exchange rate to adjust fully, has proven incapable of limiting demand among the population as confidence in the dinar remains low.

The widening parallel exchange rate underscores how everyday Algerians have lost buying power as the government has juggled competing priorities, trying to combat inflation and maintain state spending, subsidies and price controls that keep people afloat.

In the oil-rich North African nation, business owners are rumored to be dumping their assets and scrounging up euros on the black market so their wealth isn’t stuck. Middle-class people also rely on euros and dollars to buy things in short supply like medicine, vehicle parts or certain foods.

Last week, the official exchange rate allowed one euro to be sold for 145 Algerian dinar, while on the same day, currency traders were selling one euro for nearly 241 dinars on the black market — 66% higher than the official exchange rate.

Rabah Belamane, a 72-year-old retired teacher from Algiers, told The Associated Press that the official rate is a fiction and that his pension doesn’t go as far as it used to in either dinar or euro.

“The real value of the dinar is on the informal market, not in the bank, which uses an artificial rate to lie to the public,” Belamane said.

Algeria has long been known for having among the region’s most closed economies. It limits the amount of foreign currency its citizens can access to a modest tourism allowance that amounts to less than needed to carry out one of Islam’s pilgrimages to Mecca or visit family in Europe’s large Algerian diaspora.

The government estimates roughly $7 billion worth of foreign currency trades hands on the country’s black market.

From Lebanon to Nigeria, experts warn that having two parallel exchange rates can distort a country’s economy, discourage investment and encourage corruption. Algeria has historically been reluctant to lower the official value of the dinar, worried that devaluation will spike prices and anger the population.

Traders are intimately aware that the gap between the official and black market exchange rate can narrow or widen by the day. They expect it to swing up as Ramadan approaches.

“In recent days, the supply of euros has been lacking, which explains how it has shot up,” trader Nourdine Sadaoui told the AP as he took a pause from yelling “Change!” at people passing by.

That shortage may make purchasing certain goods difficult for Algerians. But some in government believe it reflects the success of import restrictions and laws limiting how many euros can be brought into the country.

Hicham Safar, the head of a finance committee in the lower house of Algeria’s Parliament, said last week that he “welcomed” such concerns. The growing chasm between the official and black market rates meant fewer euros are getting into the country, he said.

“There’s no more overcharging on imports,” he said on television station Echourouk, citing efforts by customs officials to better regulate imports through the Bank of Algeria and minimize the use of foreign currency.

For decades, steady revenue from oil and gas allowed Algeria to import everything from toothpicks to industrial machinery. The country’s large import market concentrated economic power in the hands of a small group of businessmen known to overbill clients and stash profits abroad, including in European and Emirati banks.

Since President Abdelmajid Tebboune took power, the country has targeted the so-called “oligarchs,” including businesses active in imports. Throughout his tenure, the costs of basic goods in Algerian dinars have swung and imports have been further limited.

Algeria emerged as an unexpected beneficiary of the war in Ukraine, as energy prices rose and Europe sought non-Russian suppliers of oil and gas. But the country has experienced food crises and rising anger as the prices of necessities like chicken, cooking oil and legumes have risen.

Economist Karim Allam said the strength of the euro had worked to Algeria’s detriment, cutting into the purchasing power of those who make money in dinars. He is skeptical of the idea that a shortage of foreign currencies reflects the government’s success, but also doubts that business people are fleeing the country in droves or sending money abroad.

“I don’t think they’ll take the risk of smuggling currency out of the country, which is considered an economic crime punishable by 20 years’ imprisonment,” he said.

Regardless, the falling value of the dinar on the black market is one indicator of how Algerians continue to lose purchasing power despite governmental efforts to stabilize the economy while keeping government spending and subsidies high.

“Inflation has destroyed the buying power of Algerians, who are falling into poverty. The dinar has become worthless,” said Belamane, the retired teacher.
…

TOKYO — Japan unexpectedly slipped into a recession at the end of last year, losing its title as the world’s third-biggest economy to Germany and raising doubts about when the central bank would begin to exit its decade-long ultra-loose monetary policy.

Some analysts are warning of another contraction in the current quarter as weak demand in China, sluggish consumption and production halts at a unit of Toyota Motor Corp all point to a challenging path to an economic recovery.

“What’s particularly striking is the sluggishness in consumption and capital expenditure that are key pillars of domestic demand,” said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute.

“The economy will continue to lack momentum for the time being with no key drivers of growth.”

Japan’s gross domestic product (GDP) fell an annualized 0.4% in the October-December period after a 3.3% slump in the previous quarter, government data showed on Thursday, confounding market forecasts for a 1.4% increase.

Two consecutive quarters of contraction are typically considered the definition of a technical recession.

While many analysts still expect the Bank of Japan to phase out its massive monetary stimulus this year, the weak data may cast doubt on its forecast that rising wages will underpin consumption and keep inflation durably around its 2% target.

“Two consecutive declines in GDP and three consecutive declines in domestic demand are bad news, even if revisions may change the final numbers at the margin,” said Stephan Angrick, senior economist at Moody’s Analytics.

“This makes it harder for the central bank to justify a rate hike, let alone a series of hikes.”

Economy minister Yoshitaka Shindo stressed the need to achieve solid wage growth to underpin consumption, which he described as “lacking momentum” due to rising prices.

“Our understanding is that the BOJ looks comprehensively at various data, including consumption, and risks to the economy in guiding monetary policy,” he told a news conference after the data’s release, when asked about the impact on BOJ policy.

The yen JPY was steady following the release of the data and last stood at 150.22 per dollar, pinned near a three-month low hit earlier in the week.

The Nikkei N225 rose 0.8%, reversing some of its losses made from the previous session, possibly on expectations the BOJ may continue with its massive easing program for longer than expected.

On a quarterly basis, GDP slid 0.1% against median forecasts of a 0.3% gain, and compared with a 0.8% contraction in the previous quarter.

Consumption, capital expenditure weak

Private consumption, which makes up more than half of economic activity, fell 0.2%, weaker than a market forecast for a 0.1% gain, as rising living costs and warm weather discouraged households from dining out and buying winter clothes.

Capital expenditure, another key private-sector growth engine, fell 0.1%, compared with forecasts of a 0.3% gain, as supply constraints delayed construction projects.

External demand, or exports minus imports, contributed 0.2 percentage point to GDP as exports rose 2.6% from the previous quarter, the data showed.

The BOJ has been laying the groundwork to end negative rates by April and overhaul other parts of its ultra-loose monetary framework but is likely to go slow on any subsequent policy tightening amid lingering risks, sources have told Reuters.

While BOJ officials have not offered clues on when exactly they could end negative rates, many market players expect such an action to happen either in March or April. A Reuters poll taken in January showed April as the top choice among economists for the negative rate policy to be abandoned.

Some analysts say Japan’s tight labor market and robust corporate spending plans are keeping alive the chance of an early exit from ultra-loose policy.

“While the second consecutive contraction in GDP in Q4 would suggest that Japan’s economy is now in recession, business surveys and the labor market tell a different story. Either way, growth is set to remain sluggish this year as the household savings rate has turned negative,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics.

“The (BOJ) has been arguing that private consumption has ‘continued to increase moderately’ and we suspect that it will continue to strike an optimistic tone at its upcoming meeting in March,” Thieliant said, sticking to his projection the bank will end its negative interest rate policy in April.
…

Harare, Zimbabwe — Zimbabwe’s government said Monday it is introducing a gold-backed currency to replace the country’s nearly worthless dollar, which most businesses have shunned, preferring the U.S. dollar or South African rand.

Minister for Finance and Economic Development Mthuli Ncube told reporters in an online press conference that Zimbabwe was making the move to ensure sustained growth.

“Really this is a quest for currency stability,” Ncube said. “What has emerged over the years is the U.S. [dollar] being the most dominant.

“Going forward, we want to make sure that the growth we have achieved so far — which is very strong — is maintained and even increased,” he said. “We can only do that if we have further stability in the domestic currency. … And the way to do that is perhaps to link the exchange rate to some hard asset such as gold.”

He did not say when Zimbabwe will introduce the gold-backed currency.

Since Zimbabwe’s independence in 1980, the country has introduced new currencies several times after citizens and businesses shunned the previous money.

The present-day currency, known as the dollar, bondnotes or ZWL, was introduced in 2014. Within months it started losing value, something economists attributed to the government overprinting notes and businesses failing to have confidence in the currency.

It now trades at 20,000 for 1 U.S. dollar.

Prosper Chitambara, a senior economist with the Labor and Economic Development Research Institute of Zimbabwe, said the move will help control money supply.

“It also helps to stabilize the value of the currency because, ultimately, the value of the currency would be determined to a greater extent by the value of gold,” he said. “On paper, it sounds [like] a good idea to link your currency to an underlying asset such as gold.”

Ultimately, Chitambara said, Zimbabwe needs to exercise fiscal responsibility if it wants a stable domestic currency.

“We need to ensure fiscal sustainability through ensuring there is fiscal discipline, fiscal consolidation, restructuring public spending with a view of eliminating waste and nonproductive spending,” he said.

Also, he said, it is important to ensure monetary discipline through controlling supply and making institutional reforms to address waste and inefficiencies in public enterprises.

Zimbabwe “has been losing money through subsidizing loss-making parastatals and entities,” he said, referring to state-owned companies.

Steven Dhlamini, an economics professor at National University of Science and Technology, said the success of the change will also hinge on whether people have confidence in the gold-backed currency — “whether they believe the government will indeed be transparent and accountable as to the production of the gold viz-a-vis the printing of the currency.”

“So once the trust is established, then that is critical in ensuring the currency will be acceptable and will be stable,” he said.
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WASHINGTON — Annual inflation in the United States cooled last month yet remained elevated in the latest sign that the pandemic-fueled price surge is gradually and fitfully coming under control. 

Tuesday’s report from the Labor Department showed that the consumer price index rose 0.3% from December to January, up from a 0.2% increase the previous month. Compared with a year ago, prices are up 3.1%. 

That is less than the 3.4% figure in December and far below the 9.1% inflation peak in mid-2022. 

The latest reading is well above the Federal Reserve’s 2% target at a time when public frustration with inflation has become a pivotal issue in President Joe Biden’s bid for re-election. 

Excluding the volatile food and energy categories, so-called core prices climbed 0.4% last month, up from 0.3% in December and 3.9% over the past 12 months. Core inflation is watched especially closely because it typically provides a better read of where inflation is likely headed. The annual figure is the same as it was in December. 

Biden administration officials note that inflation has plummeted since pandemic-related supply disruptions and significant government aid sent it soaring three years ago. And a raft of forward-looking data suggests that inflation will continue to cool. 

Still, even as it nears the Fed’s target level, many Americans remain exasperated that average prices are still about 19% higher than they were when Biden took office. 

The mixed data released Tuesday could reinforce the caution of Fed officials, who have said they’re pleased with the progress in sharply reducing inflation but want to see further evidence before feeling confident that it’s sustainably headed back to their 2% target. Most economists think the central bank will want to wait until May or June to begin cutting its benchmark rate from its 22-year-high of roughly 5.4. 

The Fed raised its key rate 11 times from March 2022 to July of last year in a concerted drive to defeat high inflation. The result has been much higher borrowing rates for businesses and consumers, including for mortgages and auto loans. Rate cuts, whenever they happen, would eventually lead to lower borrowing costs for many categories of loans. 

In the final three months of last year, the economy grew at an unexpectedly rapid 3.3% annual rate. There are signs that growth remains healthy so far in 2024. Businesses engaged in a burst of hiring last month. Surveys of manufacturing companies found that new orders rose in January. And services companies reported an uptick in sales.
…

NEW YORK — How much choice is too much?

Apparently for Coca-Cola, it’s about 400 different types of drinks.

That’s why the beverage company recently decided to discontinue half of them, shedding brands like Tab, Zico coconut water, Diet Coke Fiesty Cherry and Odwalla juices but still leaving about 200 others to choose from.

It’s a move that other businesses are making as well, reducing the variety of offerings from mayonnaise to cereals to cars and instead focusing on what they think will sell best.

Stew Leonard’s, a supermarket chain that operates stores in Connecticut, New York and New Jersey, now has 24 cereal flavors or types, down from 49 in 2019. Edgewell Personal Care Co., the maker of Schick razors and Banana Boat suntan lotion, has trimmed certain varieties of its anti-bacteria wipes Wet Ones, among others. And Dollar General, based in Goodlettsville, Tennessee, used to stock six different kinds of mayonnaise on its shelves and is now looking to drop a couple of them.

“The consumer is not going to know the difference,” Todd J. Vasos, CEO of Dollar General, told analysts in December. “Actually, it’s going to make her life a little simpler when she goes to the shelf.”

Just a year ago, Kohl’s store in Clifton, New Jersey had tables stacked high with sweaters and shirts in a rainbow of colors as well as dress racks crammed with a wide assortment of styles. Now, it boasts a more edited approach — tables have slim piles of knit shirts that focus on fewer colors, and many dress racks have been reduced to just three or four styles.

Under its new CEO Tom Kingsbury, Kohl’s has been cutting back on the colors and variations of sweaters, jeans and other items, while sending their buyers into the New York market more frequently to bring in fresh trendy merchandise.

“We would go out, and we would buy a lot of goods and it would come in 12, 14 months later, and it didn’t perform very well,” Kingsbury told analysts in a call in November. “We’re going to be using the marketplace, so that we can react to the business quickly, getting into trends.”

Some customers like the changes so far.

“It’s pretty organized,” said Kimberly Ribeiro, 30, who was at the Kohl’s store on a recent Friday. “If it’s not so cluttered, then you don’t get overwhelmed.”

Even in the auto world, shoppers are finding fewer choices. Both General Motors and Ford have been touting how they are limiting the number of option combinations customers can get on their vehicles to reduce manufacturing and purchasing complexity.

That’s a reversal from a few years ago when there was an explosion of choices, encouraged in part by online shopping that paid no mind to space constraints. But that didn’t always lead to sales, so companies started pruning selections a year or two before the pandemic.

During the pandemic, the pruning only accelerated, with companies focusing on necessities as they wrestled with supply chain clogs. But even after the pandemic, when goods began moving freely again, many businesses decided less was better and justified the limited selection by asserting shoppers don’t want so much choice. It’s also more profitable for companies because they’re not carrying over as many leftovers that need to be discounted.

Overall, new items accounted for about 2% of products in stores in 2023 across categories such as beauty, footwear, technology and toys, down from 5% of items in 2019, says market-research firm Circana.

Eric O’Toole, president of Edgewell’s North America division, noted the pandemic presented “a really valuable stimulus” for reassessing assortment.

“We avoid jumping on fads, as the supply chain and retailer costs required to support  

getting to shelf typically don’t generate a return in the end,” O’Toole said. “A tighter,  

more curated portfolio supports healthy profit management.”

Many think they’re doing shoppers a favor, with studies showing that fewer choices, not lots of variety, encourage shoppers to buy more.

In 2000, psychologists Sheena Lyengar and Mark Lepper published a study that showed limited selection is better for the shopper. In their experiment, Lyengar and Lepper found consumers were 10 times more likely to purchase jam on display when the number of jams available was cut down from 24 to 6 even though they were more likely to stop at the display offering more selection. Subsequent studies have confirmed this phenomenon. 

“Retailers are recognizing that they have to be respectful of shoppers’ time,” said Paco Underhill whose company, Envirosell, studies consumer behavior.

Still, retailers can’t just slash products willy-nilly, said David Berliner, who leads the business restructuring and turnaround practice at BDO.

“You want to make these cuts so they’re not even aware of it, and you want the store to still look full,” Berliner said. “If you do it too much, you might scare some away.”
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WASHINGTON — U.S. Treasury Secretary Janet Yellen will travel to the battleground states of Pennsylvania and Michigan this week as part of an election-year push aimed at showcasing what she calls “the strongest economic comeback of our lifetimes.”

Yellen will visit Pittsburgh on Feb. 13 and Detroit on Feb. 14 for events with elected officials and community leaders focused on the Biden administration’s efforts to lower health care costs, support small businesses and boost economic opportunity, the Treasury said.

The trips build on Yellen’s visits to Illinois and Wisconsin in January and other states such as Nevada and North Carolina last year. But the administration’s marketing efforts have failed to convince the American public, according to recent polls.

A recent Reuters/Ipsos poll showed President Joe Biden is running six percentage points behind Republican front-runner former President Donald Trump, with voters focused on immigration challenges, Biden’s age and are still unhappy about the economy despite big improvements since he took office in 2021.

Yellen has counseled patience in the past, arguing that the shock caused by the COVID pandemic left lingering concerns, while expressing confidence about improving consumer sentiment.

“Over the past three years, the Biden administration has driven the strongest economic comeback of our lifetimes,” Yellen said in a speech to be given at the Greater Pittsburgh Chamber of Commerce on Tuesday. She will also meet with Democratic Senator Bob Casey, a strong supporter of Biden.

She will hail strong economic growth in the U.S., a quicker and more rapid cooling of inflation than in other advanced economies, and the continued strength of the labor market.

With unemployment below 4% and household median wealth up 37% between 2019 and 2022 — the largest three-year increase on record — Americans now had more purchasing power, she said.

In Detroit, whose economic recovery has lagged behind other cities somewhat, Yellen will speak at a joint event with Governor Gretchen Whitmer, meet with Senator Debbie Stabenow and local business leaders, and give a speech focused on small businesses.

Detroit has seen economic advances, but other Midwestern counterparts have higher numbers of workers earning a living wage, according to University of Michigan economists.
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Dubai, United Arab Emirates — The International Monetary Fund said on Sunday Middle East economies were lagging below growth projections due to oil production cuts and the Israel-Gaza conflict, even as the global economic outlook remained resilient.

Despite uncertainties, “the global economy has been surprisingly resilient,” IMF managing director Kristalina Georgieva told the Arab Fiscal Forum in Dubai, while warning of a potential wider impact on regional economies of continued conflict in Gaza.

In a regional economic report last month, the IMF revised its GDP growth forecast for the Middle East and North Africa down to 2.9% this year, lagging below October projections, due in part to short term oil production cuts and the conflict in Gaza.

The IMF last month edged its forecast for global economic growth higher, upgrading the outlook for both the United States and China and citing faster-than-expected easing of inflation.

Georgieva said economies neighboring Israel and the Palestinian territories saw the conflict weighing on tourism revenues, while Red Sea attacks weighed on freight costs globally.

Those factors compounded “the challenges of economies that are still recovering from previous shocks,” she told the forum on the sidelines of the World Governments Summit in Dubai.

The Iran-aligned Houthis in Yemen have been targeting commercial vessels with drones and missiles in the Red Sea since mid-November, and say their attacks are in solidarity with Palestinians as Israel strikes Hamas militants in Gaza. But the U.S. and its allies characterize them as indiscriminate and a menace to global trade. 

Several global shippers have been diverting traffic to the Cape of Good Hope, a longer route than through Egypt’s Suez Canal.

Egypt’s Finance Minister Mohamed Maait told Reuters on the sidelines of the summit that part of the impact of the diversion on Suez Canal revenues could be absorbed due to good growth in “the period before the events.”

AI Tsunami

The IMF will publish on Monday a paper that shows phasing out energy subsidies could save $336 billion in the Middle East, equivalent to the economies of Iraq and Libya combined, Georgieva said.

Georgieva said that eliminating regressive energy subsidies also “discourages pollution, and helps improve social spending.”

In the Middle East and North Africa (MENA) region, fossil fuel subsidies made up 19% of GDP in 2022, the IMF has said.

It has recommended the gradual unwinding of energy subsidies for the region’s economies, including oil exporters, and suggested targeted support as an alternative.

Advanced technology, including Artificial Intelligence, is a key theme of focus at the World Governments Summit, with several top executives from major global tech firms due to speak, including Sam Altman, CEO of OpenAI.

Georgieva said globally, 40% of jobs are exposed to AI, and countries that lack the infrastructure and a skilled workforce to invest could fall behind.

Regional economies such as the UAE and Saudi Arabia have significantly increased investment in AI as part of strategies to diversify income sources.
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HAVANA — Cuba has charged 30 people with stealing 133 tons of chicken and selling them on the street in a rare major heist at a time of food shortages in the communist-run nation. 

Thieves took the meat, in 1,660 white boxes, from a state facility in the capital, Havana, and used the sale proceeds to buy refrigerators, laptops, televisions and air conditioners, according to a Cuban state TV broadcast late Friday. 

The chicken had been earmarked for Cuba`s “rationbook” system introduced after the late Fidel Castro’s 1959 revolution to provide subsidized staples for all. 

Rigoberto Mustelier, director of government food distributor COPMAR, said the quantity stolen was the equivalent of a month`s ration of chicken for a medium-sized province at current distribution rates. 

The amount of chicken available via the rationbook has fallen sharply in recent years as an economic crisis has brought scarcities of food, fuel and medicines. 

Many subsidized products reach the populace days, weeks or even months later than scheduled, leaving people who make an average wage of 4,209 pesos a month ($14 at the informal exchange rate) to seek other ways to make ends meet. 

Authorities did not say when the chicken theft took place but noted it likely occurred between midnight and 2 a.m., when they detected fluctuations in the temperature of the cold storage facility. Video surveillance captured trucks transporting the chicken off site. 

The 30 charged included shift bosses and information technology workers at the plant, as well as security guards and outsiders not directly affiliated with the company, the TV report said. 

The suspects, if found guilty, could face up to 20 years in prison. 

Crime has increased alongside economic hardship since the end of the COVID-19 pandemic, although reports of large-scale thefts are still a rarity on the Caribbean island. 
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Having enough feed for livestock is critical to the food security of many African countries. Some farmers are considering adopting a Chinese-engineered grass called Juncao, advertised as high-yielding and fast-maturing. Some scientists advise caution. Francis Ontomwa has more from Kajiado, Kenya. Video: Amos Wangwa.
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About 10,000 people born between 1946 and 1964 leave the workforce each day
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