Russia’s invasion of Ukraine a year ago saw a dramatic rise in the price of fertilizer for importers like Ghana, where farmers are struggling to cope. Ghana’s economic problems have made imports even more expensive, forcing farmers to switch to different crops and ultimately, reduce production. Kent Mensah reports from Akatsi, Ghana.
Camera: Nneka Chile
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The United States is nominating former Mastercard CEO Ajay Banga to lead the World Bank, President Joe Biden announced on Thursday, crediting him with critical experience on global challenges including climate change.
The news comes days after Trump appointee David Malpass announced plans to step down in June from his role leading the 189-nation poverty reduction agency. His five-year term was due to expire in April 2024.
Addressing the impacts of climate change at the multilateral bank is a priority for the U.S. And leading climate figures have urged the Biden administration to use Malpass’ early departure as an opening to overhaul the powerful financial institution, which has been increasingly criticized as hostile to less-wealthy nations and efforts to address climate change.
Malpass ran into criticism last year for seeming, in comments at a conference, to cast doubt on the science that says the burning of fossil fuels causes global warming. He later apologized and said he had misspoken, noting that the bank routinely relies on climate science.
Banga, currently vice chairman at private equity firm General Atlantic, has more than 30 years of business experience, having served in various roles at Mastercard and the boards of the American Red Cross, Kraft Foods and Dow Inc. He is the first Indian-born nominee to the World Bank president role.
“Ajay is uniquely equipped to lead the World Bank at this critical moment in history,” Biden said in a statement, adding that Banga “has critical experience mobilizing public-private resources to tackle the most urgent challenges of our time, including climate change.”
Treasury Secretary Janet Yellen said in a statement that Banga’s experience “will help him achieve the World Bank’s objectives of eliminating extreme poverty and expanding shared prosperity while pursuing the changes needed to effectively evolve the institution,” which include meeting “ambitious goals for climate adaptation and emissions reduction.”
Biden’s climate envoy, John Kerry, said on Twitter that Banga was “the right choice.”
“He can help put in place new policies that help deploy the large sums of money necessary to reduce global emissions and help developing and vulnerable countries adapt, build resilience, and mitigate the impact of greenhouse gases,” Kerry tweeted.
The United States has traditionally picked the World Bank chief. The head of its sister agency, the International Monetary Fund, has traditionally come from Europe. But critics have called for an end to that arrangement and for developing countries to gain a bigger voice in the two organizations.
The World Bank has promised to conduct “an open, merit-based and transparent selection process″ and said it would accept nominations through March 29.
Eric LeCompte, executive director of the anti-poverty coalition Jubilee USA Network, said the United States was “looking to nominate people that will be supported by the developing world” and that it was “incredibly relevant” that Banga was born in India. “They want to be able to appoint people who have experience and roots with other economies,” LeCompte said.
“I can’t think of a more intense time for a person to be coming into this job,” said Clemence Landers, policy fellow at the Center for Global Development, a Washington think tank.
The bank is under pressure to expand its mandate — an effort that likely would require the next president to convince donor countries to provide more money.
Critics say the bank should be doing more to help poor countries finance projects to combat and prepare for climate change without saddling them with heavy debt burdens. And Landers said it needs to do a better job at tackling problems that cross borders such as providing pandemic surveillance and backing broad vaccination programs.
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Pakistan Prime Minister Shehbaz Sharif has asked his ministers and advisers to fly economy class, forgo luxury cars and their salaries as part of an austerity drive that will save the government $766 million a year.
The belt tightening comes as Islamabad — which is facing a balance of payment crisis — thrashes out a deal with the International Monetary Fund (IMF) to secure funds worth $1 billion which have been pending since late last year over policy issues.
Pakistan’s foreign exchange reserves have fallen below a three-week import cover and the expenditure cuts announced on Wednesday are part of an effort to stave off an economic meltdown.
“These austerity measures will save us 200 billion rupees annually,” Sharif told a news conference in Islamabad.
“These measures are need of the hour, and these savings no matter if that’s one penny is very significant,” he said, terming it a sacrifice for the poor who wouldn’t afford food on the table or medicines in the face of consistently high inflation, which touched 27.5% in January.
Sharif said all federal ministries and government offices have been directed to reduce expenditure by 15% and that he had asked his ministers and advisers to forgo salaries, allowances, luxury cars, foreign trips and business class travel.
The ministers agreed to the measures voluntarily, he said, adding all Cabinet members will surrender their salaries and perks, and they will pay all of their utility bills from their pockets.
Armed forces have given a positive response to cut non-combat expenditures, Sharif said without elaborating.
Other steps include a complete ban on the purchase of luxury items or vehicles for all government-run entities and no administrative unit like a new district or town will be created for two years.
All luxury vehicles will be withdrawn from the ministers, advisers and bureaucrats, who would travel abroad only if inevitable and that too in economy class.
The South Asian nation hopes to secure funds from the IMF soon, Sharif said, adding the stringent measures were part of the requirements the lender had asked Pakistan to fulfill before finalizing a deal.
Talks between Pakistan and the IMF are due to conclude this week, officials say.
Before the talks the IMF had asked Pakistan to take a host of prior actions, which included withdrawal of subsidies, hiking energy tariffs, raising extra revenues and arranging external financing.
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The disappearance of a star Chinese dealmaker has left his bank struggling to reassure clients and staff, people with knowledge of the matter said on Monday, and has heightened concerns about “key man risk” for investors.
Shares of China Renaissance Holdings 1911.HK fell by as much as 5% on Monday, following a record low in the previous session after the investment bank said it could not contact its founder, chairman and CEO Bao Fan.
The stock ended the day up 0.1% in the Hong Kong market that rose 0.8%.
Though the reasons for Bao’s disappearance are unclear, his case follows a series of incidents in which high-profile executives in China have gone missing with little explanation during a sweeping anti-corruption campaign spearheaded by President Xi Jinping.
Some of them reappeared as abruptly as they disappeared.
China Renaissance said on Thursday in a stock exchange filing that it had no information that Bao’s “unavailability” was related to its business, and that its operations were continuing normally.
China Renaissance co-founder Kevin Xie and its investment banking head, Wang Lixing, who are running the company in Bao’s absence, have asked staff not to believe or spread rumours, according to two sources and copies of their messages to staff seen by Reuters.
“At such a critical moment, everyone should trust the company. Don’t fret and stumble. It’s OK to encounter some difficulties in the short term,” Wang said in his message posted on the company’s Wechat group on Friday.
According to two sources and some media reports, authorities took Bao away earlier this month to assist in an investigation into a former colleague, Cong Lin, the company’s former president.
All the sources, who have knowledge of the matter, declined to be identified due to its sensitivity.
A spokesperson for Beijing-based China Renaissance declined to comment on specific details and referred Reuters to its exchange filing made on Thursday.
Xie and Wang did not immediately respond to Reuters’ requests for comment on Monday.
Beijing’s public security bureau also did not respond to request for comment. Asked during a daily news conference on Friday whether the banker had been detained, Foreign Ministry spokesperson Wang Wenbin said he was not aware of the situation.
The Hong Kong-listed stock, which climbed as much as 3.5% early on Monday, gave up all those gains and fell to as low as HK$6.82. It hit an all-time low of HK$5 on Friday but later recovered some ground to close at HK$7.18, down 28%.
‘Key man risk’
Bao, also China Renaissance’s controlling shareholder, started the firm in 2005 as a two-person team, seeking to match capital-hungry startups with venture capitalist and private equity investors.
It firm later expanded into services including underwriting, sales and trading.
Known to be well connected in the corporate world, Bao was involved with tech mergers including the tie-up of ride-hailing firms Didi and Kuaidi, food delivery giants Meituan 3690.HK and Dianping, and travel platforms Ctrip 9961.HK and Qunar.
“What happened to China Renaissance highlighted the key man risk with some Chinese companies,” Li Nan, professor of Finance at Shanghai Jiaotong University, said.
“A group of Chinese financial institutions rose quickly over the past few years on one to two controllers’ efforts, while it makes these companies particularly vulnerable to any negative headlines that show the controllers are in trouble.”
Key man risk generally refers to the threat posed to a company from over-reliance on a limited number of personnel for decision making.
While it is not uncommon in China for authorities to take away business executives for various reasons, Bao’s disappearance comes against the backdrop of more than two years of sweeping regulatory crackdown on technology companies.
“This should once again remind foreign investors of the relative level of regulatory and governance risk associated with Chinese equities,” said Propitious Research analyst Wium Malan, who publishes on Smartkarma platform.
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Iran’s troubled currency broke below the psychologically key level of 500,000 rial per U.S. dollar on Monday, as market participants saw no end in sight to sanctions.
The Iranian rial plummeted to a new record low of 501,300 against the U.S. dollar, according to Bonbast.com which gathers live data from Iranian exchanges.
Facing an inflation rate of about 50%, Iranians seeking safe havens for their savings have been buying dollars, other hard currencies or gold, suggesting further headwinds for the rial.
The reimposition of U.S. sanctions in 2018 by former President Donald J. Trump have harmed Iran’s economy by limiting Tehran’s oil exports and access to foreign currency.
Since September, nuclear talks between Iran and world powers to curb Tehran’s nuclear program in exchange for the lifting of sanctions have stalled, worsening economic expectations for Iran’s future. Over the last six months, Iran’s currency has slumped nearly 60% in value, according to Bonbast.com.
Meanwhile, the central bank said it was opening a new foreign exchange center to ease access to foreign exchange and increase the volume of official transactions.
“The rate set in this exchange will become the market’s rate. It should be free from expectation factors that do not reflect our assessment of the country’s financial situation,” Mohammad Reza Farzin, the central bank governor, told state TV on Monday.
Farzin was appointed in December as governor with the key job of controlling the value of foreign currencies, according to IRNA.
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China’s job fairs are making a comeback after being forced online by COVID-19 for three years, but subdued wages and less abundant offerings in sectors exposed to weakening external demand point to an uneven and guarded economic recovery.
Authorities announced hundreds of such events across the country this month, the latest sign that China is returning to its pre-COVID way of life and that youth unemployment, a major headache for Beijing, may ease from its near 20% peak.
In a country of 1.4 billion people, job fairs are one of the most efficient ways for employers and workers to connect. Although attendees said their long-awaited return is encouraging, some were not brimming with confidence.
“I only pray for a stable job, and do not have high salary expectations,” said Liu Liangliang, 24, who was looking for a job in a hotel or property management company at a fair in Beijing on Thursday, one of more than 40 held in the capital in February. “The COVID outbreak has hurt many people. There will be more job seekers battling for offers this year.”
Employment anxiety is widespread.
A survey of about 50,000 white-collar workers published on Thursday by Zhaopin, one of China’s biggest recruiting firms, showed 47.3% of respondents were worried they may lose their jobs this year, up from 39.8% a year ago.
About 60% cited the “uncertain economic environment” as the main factor affecting their confidence, up from 48.4% in 2022.
Job confidence of those working in consumer-facing sectors, which are recovering faster from a low base, was higher than in sectors such as manufacturing, affected by weakening external demand, or property, which has only just started to show tentative signs of stabilizing, the survey showed.
A human resources manager at Beijing Xiahang Jianianhua Hotel, who only gave his surname Zhang, said his company had three times more job openings compared with last year, as Chinese resumed travelling.
By contrast, Jin Chaofeng, whose company exports outdoor rattan furniture, said he has no plans to add to his payroll as orders from abroad are slowing.
“People in my industry are waiting and seeing, prudently,” he said, adding that he plans to cut production by 20%-30% in March from a year earlier.
Frederic Neumann, chief Asia economist at HSBC, expects the service and manufacturing sectors to run at vastly different speeds this year, but said overall employment in China should grow.
“Restaurants, hotels, and entertainment venues are now scrambling to hire staff. This is especially helpful for younger workers,” Neumann said. “The youth unemployment rate should start to fall in the coming months.”
China’s economy grew 3% last year, in one of its weakest performances in nearly half a century. Policymakers are expected to aim for growth of about 5%, which would still be below the blistering pre-pandemic pace.
That’s partly because the pain caused by stringent COVID rules persists.
At another job fair in the capital, Wei, a former cleaner looking for similar work, said she and her unemployed husband are struggling with credit card debt.
Wei, who has a child in primary school and did not want to give her full name, citing personal privacy, quit her previous job last year after her employer wanted to cut her wages to 3,200 yuan ($465.34) a month from 3,500 yuan despite demanding she work late hours to conduct COVID-related disinfection.
“We owe the banks hundreds of thousands yuan,” she said. “We are overwhelmingly anxious.”
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Long before the pandemic shut down Hong Kong’s vibrant retail sector, traders from China crossed the border to purchase everything from cosmetics to cars tax-free for profitable reselling upon returning home, where buyers worried about the quality of locally available products.
The brisk parallel import trade, which included some Hong Kong residents taking goods into China, survived protests by Hong Kong residents who felt it caused shortages of in-demand items such as baby formula and increased prices.
COVID-19 travel restrictions shut down parallel trading more effectively than any law could.
But within days of cross-border travel resuming between China and Hong Kong on Feb. 6, the parallel import trade picked up. Also revived were calls from Hong Kong residents who want the so-called “ants trade” regulated if not shut down.
Near Exit C of the Sheung Shui Station of the Mass Transit Railway (MTR), more than 10 people presumed to be parallel importers gathered to distribute goods around 11 a.m. on Feb. 12, the first Sunday after the border reopened. The station is in the Sheung Shui District of the New Territories, an area of Hong Kong that is closest to Shenzhen, a city in China’s Guangdong province. The Sheung Shui Station is one stop from the immigration control point at Lo Wu.
The number of people with either empty or jammed luggage grew as Sunday wore on. VOA Cantonese observed buying and selling of red wine, daily necessities and food.
Hong Kong Police Commissioner Raymond Siu Chak-yee said during a February 11 press briefing that the Immigration Department and the Food and Environmental Hygiene Department had stepped up crackdowns on popular parallel trading spots by issuing tickets. He said the operation will continue as part of an effort to nip the problem in the bud.
Leung Kam Sing, a spokesperson for the North District Parallel Imports Concern Group, told VOA Cantonese that the parallel import activities resumed sooner than he expected.
“If you look at where we are standing now, some people are already distributing the goods, and there are already bagged goods,” he said, adding that parallel importing thrives in Hong Kong because people in China worry about the quality of pharmaceuticals and cosmetics there.
According to a report by the local newspaper Ming Pao, more than 10 people gathered during the peak period of the parallel import activities near Sheung Shui MTR Station on Feb. 9 and dispersed when police arrived.
Leung said that the “ants trade” before and after the pandemic created a garbage problem in the Sheung Shui area and increased crowds.
He added that some of the traders hold Hong Kong ID cards and called on the governments of China and Hong Kong to cooperate in combating parallel trading activities. “I have repeatedly reiterated that it is not only Chinese mainland tourists but also Hong Kong people who engage in parallel imports,” Leung said. “We all hope that the government will really face up to this problem, for example, continuing to use the blacklist of (parallel importers) who pass through customs. For example, if some Hong Kong people engage in parallel imports, will the Shenzhen customs take some [actions]? If there are things that are out of reach for Hong Kong customs, will there be some actions by Shenzhen customs?”
According to statistics from the Hong Kong Immigration Department, about 2.43 million people from China entered and exited through border control points from Feb. 6-12, or more than the 2.4 million who visited in the entire pre-pandemic month of December 2019, according to the Hong Kong Immigration Department.
Leung, who launched many anti-parallel import activities before the pandemic, said that under the expansive, vaguely worded National Security Law, the group will not begin a campaign. But if parallel trading intensifies, he believes upset local residents might respond spontaneously.
He looked to political groups active in the community for years to “feel the reaction of the residents. I think even if my organization does not carry out (anti-parallel import operations), (the political groups) should all speak out for the residents.”
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America’s consumers rebounded last month from a weak holiday shopping season by boosting their spending at stores and restaurants at the fastest pace in nearly two years, underscoring the economy’s resilience in the face of higher prices and multiple interest rate hikes by the Federal Reserve.
The government said Wednesday that retail sales jumped 3% in January, after having sunk the previous two months. It was the largest one-month increase since March 2021.
Driving the gain was a jump in car sales, along with healthy spending at restaurants, electronics stores and furniture outlets. Some of the supply shortages that had slowed auto production have eased, and more cars are gradually moving onto dealer lots. The enlarged inventories have enabled dealers to meet more of the nation’s pent-up demand for vehicles.
Whether America’s shoppers can continue to spend briskly will help determine how the economy fares this year. The eight interest rate hikes the Fed has carried out in the past year have raised the costs of mortgages and auto loans as well as credit card interest rates. Inflation has also eroded workers’ paychecks, thereby limiting their ability to spend freely.
Yet for all the challenges, consumers continue to show resilience. Several factors likely helped propel last month’s spending. About 70 million recipients of Social Security and other government pension programs last month received an 8.7% boost in their benefit checks, an annual cost-of-living adjustment to offset inflation. It was the largest such increase in 40 years.
The job market also surged in January, with nearly a half-million new jobs added. The unemployment rate reached 3.4%, its lowest level since 1969. With many businesses still eager to hire and keep workers, average wages and salaries have risen about 5% from a year ago — among the fastest such rates of increase in decades.
Those raises have generally been eaten up by inflation. Still, consumer price increases have been slowing. And for many households, a sharp drop in gas prices since summer has freed up more money to spend.
As price increases have slowed, average wage gains have surpassed inflation in some months, lending some consumers additional spending power.
On Tuesday, the government reported that inflation eased again in January compared with a year earlier, the seventh straight such decline, to 6.4% from 6.5% in December. But on a month-to-month basis, price increases accelerated in January compared with November and December, evidence that high inflation won’t be defeated quickly or smoothly.
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The average price for a new vehicle in the United States soared above $49,000 in December, a record high.
With Americans increasingly price conscious at a time of high inflation and elevated interest rates, customer choice is a prominent theme at the 2023 Chicago Auto Show, the largest and longest-running auto show in North America.
A launchpad for manufacturers to showcase their latest offerings, previous auto shows have highlighted battery powered electric vehicles — commonly known as EVs and BEVs — that herald a carbon-free future for ground transportation.
While many EVs are also on display this year, manufacturers want customers to know they still have other options.
“We believe it shouldn’t be just one formula,” said Toyota regional manager Curt McAllister, noting that the company’s current product lineup, a mix of electric and gas-powered automobiles, reflects customer feedback. “Our customers are telling us they want choices. They just don’t want us to try to pigeonhole them into one subset.”
Which is why Toyota is profiling a fifth-generation Prius, a best-selling hybrid that uses both a battery and a gasoline-powered engine.
“We now have 21 hybrids across Toyota and Lexus,” said McAllister. “So it’s a big part of our carbon neutrality message.”
McAllister said Toyota isn’t ignoring the rapidly growing but more expensive battery powered electric vehicle market. “We know that BEVs are part of the future, but we want to make sure that we have something that not only makes sense but makes sense for their pocketbook.”
Though overall car sales down, EV sales up
Higher interest rates for car loans in 2022 slowed new vehicle purchases, marking the first drop in sales in a decade, even as carmakers worked to overcome supply chain problems such as shortages of microchips.
Even so, the number of EVs sold increased by about 65% from a year earlier, according to research firm Motor Intelligence. EVs made up nearly 6% of all new vehicles sold in the U.S. last year.
Despite recent price cuts for some electric vehicles that make them more competitive with gasoline-powered cars, many Americans remain reluctant to purchase battery powered electric vehicles.
One primary obstacle is what’s known as “range anxiety” — the concern about how far a vehicle can travel before having to recharge in a nation where gas stations still outnumber charging stations.
“Our customer base, some of them are not ready for EVs,” explained Chad Lyons, who is representing General Motors Chevrolet brand at the Chicago Auto Show. “So, actually our plan for the next five years is to offer EVs for those that are ready … but at the same time offer gas-powered vehicles for those that are not ready.”
Lyons said demand for gas-powered sedans has plummeted. As a result, his company’s lineup is focused on sport utility vehicles — commonly known as SUVs — including the redesigned gasoline-powered Trax compact SUV launching later this year, and priced similarly to Chevrolet’s sedans.
“People want vehicles that are higher up [higher riding] — that’s why you see so many SUVs right now being so popular,” he said.
‘The jelly bean proportion’
That preference is also reflected in Chevrolet’s electric vehicle lineup. Later this year, the brand will roll out two new SUV EVs, the Equinox and Blazer, and the choices don’t end there.
“Pickup trucks are the heart of America, and so we are going to offer the Silverado EV as well,” said Lyons.
“Everyone loves muscle cars,” said Dodge design manager Deyan Ninov, adding that customers want vehicles that look less electric and more classic. “I think if you look at all the electric cars out there right now, they all sort of look the same, they all have the same feeling and character they kind of have the same proportions — the jelly bean proportion.”
Ninov’s team has been working on an electric version of Dodge’s iconic Challenger, hoping to bring the “muscle car experience” to the battery-powered vehicle segment.
While manufacturers continue to emphasize choice, President Joe Biden has outlined a plan to ensure 50% of all vehicles on the road by 2030 are all electric. As a number of states consider mandates for electric vehicle adoption, California is leading the way, requiring all new vehicles sold in the state to be electric or hydrogen powered by 2035.
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U.S. inflation likely slowed again last month in the latest sign that consumer price increases are becoming less of a burden on America’s households. But Tuesday’s report from the government may also suggest that further progress in taming inflation could be slow and “bumpy,” as Federal Reserve Chair Jerome Powell has described it.
Consumer prices are expected to have risen 6.2% in January from 12 months earlier, down from a 6.5% year-over-year surge in December. It would amount to the seventh straight slowdown.
On a monthly basis, though, inflation is expected to have jumped 0.5% from December to January, according to a survey of economists by the data provider FactSet. That would be much faster than the 0.1% uptick from November to December.
So-called core prices, which exclude volatile food and energy costs to provide a clearer view of underlying inflation, are also expected to have slowed on a 12-month basis. They are forecast to have increased 5.5% in January from a year earlier, down from a 5.7% year-over-year rise in December.
But for January alone, economists estimate that core prices jumped 0.4% for a second straight month — roughly equivalent to a 5% annual pace, far above the Fed’s target of 2%.
“The process of getting inflation down has begun,” Powell said in remarks last week. But “this process is likely to take quite a bit of time. It’s not going to be, we don’t think, smooth, it’s probably going to be bumpy.”
Average gasoline prices, which had declined in five of the past six months through December, likely rose about 3.5% in January, according to an estimate from Nationwide. Food prices are also expected to have risen, though more slowly than the huge spikes of last summer and fall.
On a brighter note, clothing and airfare costs are thought to have barely budged from December to January. And economists have estimated that hotel room prices fell sharply.
Overall, the government’s inflation report will likely show the continuation of a pattern that has emerged in recent months: The costs of goods — ranging from furniture and clothing to toys and sporting goods — are falling. But the prices of services — restaurant meals, entertainment events, dental care and the like — are rising faster than they did before the pandemic struck and threaten to keep inflation elevated.
Goods have become less expensive because supply chain snarls that had inflated prices after the pandemic erupted in 2020 have unraveled. And Americans are shifting much of their spending toward services, after having splurged on items like furniture and exercise equipment during the pandemic.
Yet average wages are rising at a brisk pace of about 5% from a year ago. Those pay gains, spread across the economy, are likely inflating prices in labor-intensive services. Powell has often pointed to robust wage increases as a factor that’s driving up services prices and keeping inflation high even as other categories, like rent, are likely to decelerate in price.
The Biden White House last week calculated a measure of wages in service industries excluding housing — the sector of the economy that Powell and the Fed are most closely tracking. The administration’s Council of Economic Advisers concluded that wages in those industries for workers, excluding managers, soared 8% last January from a year earlier but have since slowed to about a 5% annual pace.
That suggests that services inflation could soon slow, especially if the trend continued. Still, wage gains of that level are still too high for the Fed’s liking. The central bank’s officials would prefer to see wage growth of about 3.5%, which they see as consistent with their 2% inflation target.
A key question for the economy this year is whether unemployment would have to rise significantly to achieve that slowdown in wage growth. Powell and other Fed officials have said that curbing high inflation would require some “pain” for workers. Higher unemployment typically reduces pressure on businesses to pay bigger wages and salaries.
Yet for now, the job market remains historically very strong. Earlier this month, the government reported that employers added 517,000 jobs in January — nearly twice December’s gain. The unemployment rate dropped to 3.4%, the lowest level since 1969. Job openings remain high.
Powell said last week that the jobs data was “certainly stronger than anyone I know expected,” and suggested that if such healthy readings were to continue, more rate hikes than are now expected could be necessary.
Other Fed officials, speaking last week, stressed their belief that more interest rate increases are on the way. The Fed foresees two more quarter-point rate hikes, at its March and May meetings. Those increases would raise its benchmark rate to a range of 5% to 5.25%, the highest level in 15 years.
The Fed lifted its key rate by a quarter-point when it last met on Feb. 1, after carrying out a half-point hike in December and four three-quarter-point increases before that.
The financial markets envision two more rate increases this year and don’t expect the Fed to reverse course and cut rates until sometime in 2024. For now, those expectations have ended a standoff between the Fed and Wall Street investors, who had previously been betting that the Fed would be forced to cut rates in 2023 as inflation fell faster than expected and the economy weakened.
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Ford said Tuesday that it will cut 3,800 jobs in Europe over the next three years in an effort to streamline its operations as it contends with economic challenges and increasing competition on electric cars.
The automaker said 2,300 jobs will be eliminated in Germany, 1,300 in the United Kingdom and 200 elsewhere on the continent. It said its strategy to offer an all-electric fleet in Europe by 2035 has not changed and that production of its first European-built electric car is due to start later this year.
The Dearborn, Michigan-based company said it is looking for “a leaner, more competitive cost structure for Ford in Europe.” The automaker will embark on consultations “with the intent to achieve the reductions through voluntary separation programs.”
The job cuts come amid a sea change in the global auto industry from gas-guzzling combustion engines to electric vehicles. Governments are pushing to reduce the emissions that contribute to climate change, and a resulting race to develop electric vehicles has generated intense competition among automakers.
It’s even stirred tensions among Western allies as the U.S. rolls out big subsidies for clean technology like EVs that European governments fear could hurt homegrown industry.
Ford aims to cut 2,800 of the European jobs in engineering by 2025 as a result of the transition to electric cars that are less complex, though it plans to keep about 3,400 engineering jobs on the continent. The remaining 1,000 jobs will be cut on the administrative side.
“Paving the way to a sustainably profitable future for Ford in Europe requires broad-based actions and changes in the way we develop, build and sell Ford vehicles,” Martin Sander, general manager of Ford’s Model e unit in Europe, said in a statement. “This will impact the organizational structure, talent and skills we will need in the future.”
“These are difficult decisions, not taken lightly,” he added. “We recognize the uncertainty it creates for our team, and I assure them we will be offering them our full support in the months ahead.”
Ford also announced in August cuts of about 3,000 white-collar jobs in North America as it reduces costs to help make the long transition from internal combustion to battery-powered vehicles.
In a step in that direction, it said Thursday that it plans to build a $3.5 billion factory in Michigan that would employ at least 2,500 people to make lower-cost batteries for new and existing EVs.
Company officials reported that its net income fell 90% in the last three months of 2022 from a year earlier. It said costs were too high and that it contended with a global shortage of computer chips and other parts used in its vehicles.
In Europe, Ford has some 34,000 employees at wholly owned facilities and consolidated joint ventures.
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Pakistan and the International Monetary Fund have held days of talks on reviving a stalled $6.5 billion bailout program but have failed to reach a deal to help prevent a looming default facing the South Asian nation.
The 10-day talks with the IMF delegation were “extensive” and “concluded successfully” before the visitors left the country early Friday, Finance Minister Ishaq Dar told a hurriedly convened news conference in the Pakistani capital, Islamabad.
Dar said his team will hold a virtual meeting with the IMF Monday after reviewing a draft memorandum on broadly agreed-to policies the IMF mission shared with his government.
An IMF statement described the talks with Pakistani officials as constructive and said “considerable progress” had been made.
However, it stressed “this mission will not result in a board discussion,” a meeting that would lead to the release of a $1.1 billion tranche critical to supporting the country’s crisis-hit $350 billion economy.
The tranche was initially expected to be disbursed in December as part of the $6.5 billion bailout package Pakistan signed with the IMF in 2019. The program is due to end in June.
The IMF must reach a staff-level agreement with Islamabad, which then requires approval by the agency’s Washington headquarters before the funds are released.
“Virtual discussions will continue in the coming days to finalize the implementation details of these policies,” the IMF said in its post-visit statement. It went on to stress the “timely and decisive” implementation of the policies was crucial for Pakistan to “successfully regain macroeconomic stability and advance its sustainable development.”
Economic experts see the IMF deal as key to preventing Pakistan from defaulting on external payment obligations and paving the way for other global lenders, including the World Bank and foreign governments, such as those of Saudi Arabia and China, to release funds.
Last year’s unprecedented summer flooding has fueled Pakistan’s economic troubles, stemming mainly from lingering political turmoil and security challenges in the wake of rising insurgent attacks.
Inflation has been raging at historic levels, the rupee has lost more than 35% against the U.S. dollar, and central bank foreign exchange reserves dipped to less than $3 billion this week — the lowest in a decade. The depleting dollar reserves have forced the government to place restrictions on imports, causing a severe industrial decline in Pakistan.
The IMF has been pushing the nuclear-armed country to broaden its low tax base, do away with tax exemptions for the export sector, and raise low gasoline, power, and natural gas prices.
The reforms would likely increase inflation to new record levels if Pakistan eventually secures the staff-level agreement with the IMF, according to experts.
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US President Joe Biden celebrated his economic record this week during the annual State of the Union address. While US unemployment statistics are on the upswing, economists say there are clear economic challenges. Keith Kocinski reports.
Camera: Keith Kocinski and Rendy Wicaksana
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CAIRO — Egypt is embroiled in cost-of-living and currency crises, in part, exacerbated by Russia’s full-scale invasion of Ukraine nearly one year ago — the fallout of which has led to severe disruptions in global food and energy security. Vulnerable Cairenes struggle to cope with their ever-diminishing purchasing power. (Captions by Elle Kurancid)
Southwest Airlines executives and union officials are appearing before the U.S. Senate Commerce Committee Thursday to explain the cancellation of 16,700 flights last December in the middle of the holiday traveling season.
In a statement to the media ahead of his testimony, Southwest Airlines Chief Operating Officer Andrew Watterson took full responsibility for the failures that left more than 1 million passengers stranded in airports around the United States.
“We messed up. We own that,” he said, and pledged to take steps to ensure there will not be a repeat in the future.
Casey Murray, president of the Southwest Airlines Pilots Association (SWAPA), is also scheduled to testify at Thursday’s hearing. In a statement, he blamed the airline’s outdated scheduling technology and operational processes.
Murray said the airline ignored warnings about the system for years and said SWAPA predicted the holiday meltdown a month before it happened.
In a statement ahead of the hearing, Senator Maria Cantwell, chairwoman of the Senate Commerce Committee, said she was eager to hear the pilot’s testimony on how the debacle could have been avoided if the airline had acted sooner. She said the committee will be considering how to strengthen protections for consumers.
Some information for this report was provided by Reuters.
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The United States’ two-way trade with other nations spiked in 2022, new federal data show, including trade with China despite increasing friction between the world’s two largest economies.
Even while posting record-high exports to 73 countries in 2022, the U.S. still ran a trade deficit of $1.19 trillion, up $101 billion from 2021, the U.S. Commerce Department said this week. The deficit reflected the fact that the U.S. also recorded record-high imports from 90 countries.
U.S. imports from China reached $537 billion in 2022 compared with $505 billion the previous year. The U.S. sold a record-high $154 billion in exports to the Chinese market, up slightly from $151 billion the previous year. The net trade deficit with China for 2022 was $383 billion.
The data, released Tuesday, came out just hours before U.S. President Joe Biden delivered the State of the Union address in which he promised to boost domestic manufacturing, to use only U.S.-made materials for a spate of infrastructure projects, and to remain focused on “winning the competition” against China.
However, what “winning” looks like may be difficult to determine.
Politics versus reality
Relations between the U.S. and China worsened during the past week, after Biden ordered the U.S. military to shoot down what intelligence officials said was a Chinese espionage balloon that had floated across the U.S. Prior to the shoot-down, U.S. Secretary of State Antony Blinken canceled a scheduled trip to Beijing.
The balloon incident followed months of rising tensions and calls from many U.S. officials for a “decoupling” of the Chinese and U.S. economies and “reshoring” of key manufacturing to the U.S. But while the Biden administration may be able to use preferential purchasing treatment to shut Chinese construction materials and other goods out of U.S. infrastructure projects, experts said there is little evidence of broader separation between the U.S. and Chinese economies.
“Regardless of the political rhetoric, which is tending towards a kind of rigid and suspicious environment between China and the United States, the practical moves on the ground from a business and commerce perspective show that there is a deep and sustained connection between the Chinese and U.S. economies,” Claire Reade, a senior counsel with the law firm Arnold & Porter and former assistant U.S. trade representative for China affairs, told VOA.
Mark Kennedy, director of the Wilson Center’s Wahba Institute for Strategic Competition, agreed, saying, “There has not been a broad-based decoupling … and many economists are seeing that there really hasn’t been a significant onshoring or reshoring. There are still strong ties, and to break those ties with China would be both difficult and costly.”
Trade as ‘ballast’
Craig Allen, president of the U.S.-China Business Council, told VOA it’s a good sign that trade between the U.S. and China has been persistently strong despite the imposition of tariffs by both sides and the Biden administration’s recent move to block the sale of cutting-edge microprocessors to China.
“Trade has acted as an important ballast in the relationship between Washington and Beijing in the past, and I think it’s still the case,” he said via email. “Competition is surely defining the contours of the relationship at the moment, and we hope that the relationship doesn’t sour any further as a result.”
“I think, to that point, this new data can be a silver lining,” said Allen. “Even though the United States and China are competing with one another, this last year of data and the growth in U.S. exports to China really shows that we can simultaneously maintain a trading relationship that benefits Americans.”
A delicate balance
Reade said the Biden administration, in its effort to privilege American manufacturers over Chinese firms, will face a difficult challenge. Insulating American companies from non-U.S. rivals could make them less able to compete internationally or could lead to tit-for-tat protectionism against U.S. firms.
At the same time, she said, there is strong evidence that many large Chinese firms, including those that manufacture the kinds of goods used in major infrastructure projects, receive favorable treatment from the Chinese government that insulates them from market pressures, unfairly advantaging them over competitors.
“To the extent the competition is not fair competition, it is also legitimate to not allow destructive price undercutting that decimates legitimate industries,” she said.
US economic strength
Looking beyond the U.S.-China relationship, experts said that much of the explanation for the rising trade deficit has to do with the relative strength of the U.S. economy compared with those of many of its trading partners. A strong dollar makes foreign goods and services more affordable for Americans, while making U.S.-made goods and services more expensive overseas.
“The big takeaway is that when you’re running a high-pressure economy, which the U.S. is, you’re going to import a lot of stuff,” Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told VOA. “And that’s exactly what has happened. You’ve got the unemployment rate down to 3.4% and two job vacancies for every worker unemployed … that really speaks to just high-pressure demand.”
Although China was the largest source of imports to the U.S. in 2022, Canada and Mexico were the United States’ largest two-way trading partners. The countries share lengthy land borders with the U.S. and participate in a three-way free trade agreement. Total U.S.-Canada trade was $794 billion in 2022, and U.S.-Mexico trade was $779 billion.
After Canada, Mexico and China, Japan was the next largest of the United States’ trading partners, with $229 billion in goods trading hands last year.
The U.S. did $903 billion in two-way trade with the nations of the European Union in 2022, with the largest share, $220 billion, between the U.S. and Germany.
Other large two-way trading partners in 2022 were South Korea at $187 billion; the United Kingdom at $141 billion; Vietnam at $139 billion; Taiwan at $136 billion; and India at $133 billion.
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U.S. President Joe Biden followed up his State of the Union address with a trip Wednesday to the Midwestern state of Wisconsin to herald what he sees as the country’s economic advance on his watch.
Opposition Republicans, meanwhile, were calling for an end to what they call runaway government spending that Biden has sanctioned during his two years in the White House.
The president visited a training center for the Laborers’ International Union of North America in the village of DeForest to discuss manufacturing jobs. Wisconsin is a perennial political battleground in presidential elections and almost certainly will again be a focal point in 2024, both for Biden as he nears a formal reelection bid in the coming months and his eventual Republican opponent, whether it is former President Donald Trump or someone else.
Under Biden, the U.S., with the world’s biggest economy, has added hundreds of thousands of new jobs every month as it recovers from the worst effects of the coronavirus pandemic that started in 2020.
The country’s 3.4% unemployment rate is the lowest in 53 years. But Republicans and Democrats alike say the country’s consumer price inflation rate, while easing in recent months, is still too high at an annualized 6.5% in December.
Debt limit
Additionally, congressional Republicans and Biden are sparring over increasing the government’s $31.4 trillion debt limit, the amount it can borrow to pay its financial obligations. Republicans want sharp — but to date, unspecified — cuts in government spending in exchange for increasing the debt limit by June.
That’s when the government is expected to run out of enough money in tax revenues to pay all its bills. Biden wants an unconditional debt limit increase but is willing to separately discuss future government spending.
Biden and new House Speaker Kevin McCarthy have started talking about how to increase the debt ceiling but appear far from reaching an agreement in what are likely to be protracted discussions.
After his Wisconsin visit, Biden was to head Thursday to another political battleground, the Southern state of Florida, where Trump lives during the winter months. In Tampa, Biden will accuse Republican lawmakers of wanting to shrink pension and health care benefits for older Americans, a potent issue in Florida where millions of retirees have settled.
Biden struck an optimistic, determined tone Tuesday in his second State of the Union address, lauding his legislative and policy achievements, reiterating his stances on contesting China and supporting Ukraine, and proclaiming that “though bruised, our democracy remains unbowed and unbroken.”
“Because the soul of this nation is strong, because the backbone of this nation is strong, because the people of this nation are strong, the state of the union is strong,” Biden said.
“I’m not new to this place. I stand here tonight — and I’ve served as long as about any one of you have ever served — I have never been more optimistic about the future of America,” he said. “We just have to remember who we are. We are the United States of America, and there is nothing, nothing beyond our capacity if we do it together.”
Benefits of spending
In the speech, he sought to explain how hundreds of billions of dollars in spending for infrastructure, climate change controls and computer chip manufacturing that he supported in the last two years will benefit Americans in the coming years.
A handful of Republican lawmakers heckled Biden during the speech, with Representative Marjorie Taylor Greene of Georgia calling him a “liar” when he suggested that at least some Republicans wanted to curtail funding for the pension and health care insurance plans for older Americans.
Biden seemed to enjoy the moment, and he prodded the hundreds of lawmakers in the House of Representatives chamber to stand in a show of support for not trimming funding for the Social Security and Medicare programs.
McCarthy tweeted after the speech: “Republicans offer a vision for a future built on freedom, not fearmongering.”
His deputy, House Majority Leader Steve Scalise of Louisiana, said on Twitter that Biden was “living in an alternate universe. Families can’t afford gas or food — and they feel unsafe in their communities.”
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