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The Federal Reserve may need to raise interest rates further to cool still-too-high inflation, Fed Chair Jerome Powell said on Friday, promising to move with care at upcoming meetings as he noted progress made on easing price pressures as well as risks from the surprising strength of the U.S. economy.

While not as hawkish a message as he delivered this time a year ago at the annual Jackson Hole Economic Policy Symposium, Powell’s remarks still delivered a punch, with investors now seeing one more rate hike by year-end more likely than not.

“We will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data,” Powell said in a keynote address. “It is the Fed’s job to bring inflation down to our 2% goal, and we will do so.”

The Fed has raised rates by 5.25 percentage points since March 2022, and inflation by the Fed’s preferred gauge has moved down to 3.3% from its peak of 7% last summer. Although the decline was a “welcome development,” Powell said, inflation “remains too high.”

“We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” he said.

But with “signs that the economy may not be cooling as expected,” including “especially robust” consumer spending and a “possibly rebounding” housing sector, Powell said that above-trend growth “could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

His remarks showed the Fed wrestling with conflicting signals from an economy where inflation has by some readings slowed a lot without much cost to the economy — a good outcome, but one that has raised the possibility that Fed policy is not restrictive enough to complete the job.

‘Finger on the trigger’

At day’s end, futures contracts tied to the Fed policy rate were pricing in just less than a 20% chance of a rate hike in September, but a better-than-50% chance of the policy rate ending the year in a 5.5%-5.75% range, a quarter-point higher than the current range. Fed policymakers will also meet in November and December.

The yield on the two-year Treasury note ended the day at 5.08%, its highest close since June 2007.

“My main takeaway is that when it comes to another rate hike, the chair still very much has his finger on the trigger, even if it’s a bit less itchy than it was last year,” said Inflation Insights’ Omair Sharif.

It is difficult, Powell said, to know with precision how high above the “neutral” rate of interest the current benchmark rate stands, and therefore hard to assess just how much restraint the Fed is imposing on growth and inflation.

Powell repeated what has become a standard Fed diagnosis of inflation progress — with a pandemic-era jump in goods inflation easing and a decline in housing inflation “in the pipeline,” but concern that continued consumer spending on a broad array of services and a tight labor market may make a return to 2% difficult.

Recent declines in measures of underlying inflation, stripped of food and energy prices, “were welcome, but two months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably,” Powell said.

Powell ended his speech on Friday with nearly the same line he finished with last year at Jackson Hole: “We will keep at it until the job is done.”
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China’s government is trying to reassure jittery homebuyers after a major real estate developer missed a payment on its multibillion-dollar debt, reviving fears about the industry’s shaky finances and their impact on the struggling Chinese economy.

There is no indication Country Garden’s problems might spread beyond China, which seals off its financial system from global capital flows, economists say. But they highlight the industry’s struggle under pressure from the ruling Communist Party to reduce soaring debt that is seen as an economic threat. That has bankrupted hundreds of small developers and depressed China’s economic growth.

The Country Garden episode has echoes of Evergrande Group, which is trying to restructure more than $340 billion owed to banks and bondholders. Fears of a possible Evergrande default in 2021 rattled global markets, but they eased after the Chinese central bank said its problems were contained and Beijing would keep credit markets functioning. A central bank official said in March that financing conditions have “improved significantly.”

Financial markets were rattled when Country Garden Holdings Co. missed two payments totaling $22.5 million due to buyers of dollar-denominated bonds on Aug. 6. It has a 30-day grace period before it would be declared in default.

Government reassurances

A government spokesperson tried to reassure the public and financial markets, saying conditions are improving and regulators are getting debt under control.

“The risks of housing enterprises are expected to be gradually resolved,” said Fu Linghui of the National Bureau of Statistics.

Policy changes “will help boost market confidence,” Fu said at a news conference. “Housing consumption and housing enterprises’ willingness to invest are expected to gradually improve.”

On Thursday, a half-dozen homebuyers sat outside a Country Garden development under construction in Beijing beside a sign that said they have been “fighting for their rights” for 97 days.

The homebuyers, who sat under tent in 31 C (89 F) heat, declined to talk to a reporter but a security guard said their complaint stemmed from a Country Garden project in Malaysia.

Country Garden, previously seen as one of China’s financially healthiest developers, suspended trading of its bonds Monday on Chinese exchanges. That followed a warning last week that it might post a loss of as much as 55 billion yuan ($7.5 billion) for the first half of 2023.

Abroad, the impact “seems likely to be limited,” said Jennifer McKeown of Capital Economics in a report.

Foreign investors pulled out of Chinese real estate after earlier defaults and “policymakers should step in to prevent a meltdown in China,” McKeown said.

Real estate propelled China’s economic boom, but developers borrowed heavily as they turned cities into forests of apartment and office towers. That helped to push total corporate, government and household debt to the equivalent of more than 300% of annual economic output, unusually high for a middle-income country.

After years of warnings that led to global rating agencies cutting the Chinese government’s credit rating in 2017, the ruling party cracked down on real estate debt in 2020. It imposed controls known as “three red lines” that prohibit heavily indebted developers from borrowing more to pay off bonds and bank loans as they matured.

A weak real estate industry complicates efforts by Chinese leader Xi Jinping’s government to reverse a deepening economic slump after a rebound following the end of anti-virus controls fizzled out sooner than expected.

Economic trends

The economy grew by a robust 2.2% over the previous quarter in the January-March period. But that fell to just 0.8% in the three months ending in June. That is equal to a 3.2% annual rate, which would be among China’s weakest in decades.

Revving up real estate spending was the ruling party’s solution for previous downturns. Xi’s government has eased restrictions on borrowing by developers and told banks to lend to homebuyers. But it appears to be trying to stick to its overall debt-reduction goal.

Real estate accounts for some 20% of China’s economy. When spending on steel and copper for construction, furniture and other related purchases is added in, estimates of its share of the economy rise as high as 35%.

Real estate’s troubles are causing a vicious cycle by prompting jittery households to put off housing, auto and other big purchases, which in turn depresses economic activity further. Auto sales shrank 2.6% in July from last year’s already depressed level under anti-virus curbs.

Potential impact

Country Garden’s debt struggle might “drive potential homebuyers away from privately owned developers,” Moody’s Investors Service said in a report. That would “weaken effects of any potential supportive measures by the government to stabilize property sales.”

The industry also might be squeezed as investors and banks shy away from lending to smaller developers, Moody’s said.

In a sign of weak demand, prices paid for new homes fell for a second month in July, according to the statistics bureau. Prices in 35 smaller cities declined 0.3% from June. Prices in 31 bigger cities edged down 0.2%.

Sales of land use rights are down, adding to the strain on local governments that are trying to manage debt burdens that swelled with the expense of fighting the COVID-19 pandemic.

Billions in losses

Country Garden was founded in 1992 by Yang Guoqiang, a former farmer and construction worker. Yang handed over his shares in 2005 to his 25-year-old daughter, Yang Huiyan. She was ranked the richest woman in Asia by Forbes magazine with a net worth of $11 billion.

Yang Huiyan’s fortune rose to $33.1 billion in 2020, making her the 11th-richest private individual in China, according to Hurun Report, which follows the country’s wealthy. Forbes estimated this week that plunged almost 90% to $4.3 billion as Country Garden’s share price tumbled.

Country Garden’s possible losses are a sliver of those of Evergrande, headquartered in Shenzhen, adjacent to Hong Kong, which reported in June that it lost $81 billion in 2021-22.

But both ran into the same problem: They have more assets than debt but can’t turn slow-selling real estate into cash fast enough to repay lenders.

Country Garden reported 1.7 trillion yuan ($233 billion) versus 1.4 trillion yuan ($193 billion) of liabilities at the end of 2022. The business news magazine Caixin cited an unidentified source who said the developer might have an additional 200 billion yuan ($27 billion) in debt.

The developer had only 147.6 billion yuan ($20 billion) of cash. Some 60 billion yuan ($8 billion) was buyer deposits and other money that couldn’t be freely used.

Country Garden, headquartered in Shunde, near Hong Kong, said Aug. 10 sales this year through July fell 35% from the same period of 2022 to 140.8 billion yuan ($19.3 billion). It said July sales fell 60%.

“The company has encountered the biggest difficulties since its establishment,” its president, Mo Bin, said in a statement.

Country Garden had outstanding bonds and asset-backed securities of 104 billion yuan ($14.25 billion), including 78 billion yuan ($10.7 billion) of bonds sold abroad, according to Caixin. It said bonds worth 7.3 billion yuan ($1 billion) will mature in September.

The company also owes 162.5 billion yuan ($22.3 billion) to banks and other financial institutions, according to Moody’s.

Evergrande, the global industry’s most heavily indebted company, was big enough that regulators stepped in to supervise its debt restructuring, which has yet to be completed. But they avoided bailing out the company or its creditors to avoid sending the wrong message about the need to reduce debt.

Local authorities took control of stalled Evergrande building projects to make sure buyers got apartments that already were paid for.

Country Garden said in a July 31 statement it would “seek guidance and support from the government and regulatory authorities.”

Authorities have yet to say whether the company is a big enough risk for regulators to get involved in its restructuring or take over building projects.
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Embattled developer China Evergrande Group has filed for bankruptcy protection in a U.S. court as part of one of the world’s biggest debt restructuring exercises, as anxiety grows over China’s worsening property crisis and a weakening economy.

Once China’s top-selling developer, Evergrande has become the poster child of the country’s unprecedented debt crisis in the property sector, which accounts for roughly a quarter of the economy, after facing a liquidity crunch in mid-2021.

The developer has sought protection under Chapter 15 of the U.S. bankruptcy code, which shields non-U.S. companies that are undergoing restructurings from creditors that hope to sue them or tie up assets in the United States.

The filing is procedural in nature, but the world’s most indebted property developer with more than $300 billion in liabilities has to do it as part of a restructuring process under U.S. law, two people familiar with the matter said.

The sources declined to be named due to the sensitivity of the matter.

Evergrande declined to comment.

Evergrande’s offshore debt restructuring involves a total of $31.7 billion, which include bonds, collaterals and repurchase obligations. It will meet with its creditors later this month on its restructuring proposal.

A string of Chinese property developers have defaulted on their offshore debt obligations since then, leaving unfinished homes, plunging sales and shattering investor confidence in a blow to the world’s second-largest economy.

The property sector crisis has also fanned contagion risk, which could have a destabilizing impact on an economy already weakened by tepid domestic consumption, faltering factory activity, rising unemployment and weak overseas demand.

A major Chinese asset manager missed repayment obligations on some investment products and warned of a liquidity crisis, while Country Garden, the country’s No. 1 private developer, has become the latest to flag a stifling cash crunch.

All of this comes at a time when property investment, home sales and new construction have contracted for more than a year.

Morgan Stanley this week followed some of the major global brokerages to cut China’s growth forecast for this year. It now sees China’s gross domestic product (GDP) growing 4.7% this year, down from an earlier forecast of 5%.

China is targeting 5% annual growth for this year, but an increasing number of economists are warning that it could miss the goal unless Beijing ramps up support measures to arrest the decline.

The China economic and property woes as well as the absence of concrete stimulus steps have sent a chill through global markets. Asian shares were headed for a weekly loss of 2.8%, the third straight week of declines. Chinese blue-chips on the CSI300 dropped 0.5% and Hong Kong’s Hang Seng Index slumped another 1.3%.

China is expected to cut lending benchmarks at a monthly fixing on Monday, with many analysts predicting a big reduction to the mortgage reference rate to revive credit demand and shore up the ailing property sector.

Debt restructuring

In response to the deepening property market crisis, the central bank reiterated it would adjust and optimize property policies, according to its second-quarter monetary policy implementation report published this week.

Since the sector’s debt upheaval unfolded in mid-2021, with Evergrande at the center of the turmoil, companies accounting for 40% of Chinese home sales have defaulted, most of them private property developers.

As developers scramble to ease investors’ concerns, Longfor Group, China’s second largest private developer, said on Friday it would speed up its “profit structure” in response to the changes of supply and demand in the real estate market.

Evergrande announced an offshore debt restructuring plan in March, expecting it to facilitate a gradual resumption of operations and generation of cash flow. It is now gathering creditor support to complete the process.

An affiliate of the developer, Tianji Holdings, also sought Chapter 15 protection on Thursday in Manhattan bankruptcy court.

In a filing in the Manhattan bankruptcy court, Evergrande said that it was seeking recognition of restructuring talks underway in Hong Kong, the Cayman Islands and the British Virgin Islands.

The company proposed scheduling a Chapter 15 recognition hearing for Sept. 20.

In June last year, another Chinese developer, Modern Land (China) Co. Ltd., which missed payments on its offshore bonds that were due in October 2021, had filed a petition for recognition under Chapter 15 of the bankruptcy code in New York.

Trading in China Evergrande shares has been suspended since March 2022. Shares of Evergrande Services plunged as much as 20% on Friday, while China Evergrande New Energy Vehicle Group lost as much as 17%.
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Chinese leader Xi Jinping has called for patience in a speech released as the ruling Communist Party tries to reverse a deepening economic slump and said Western countries are “increasingly in trouble” because of their materialism and “spiritual poverty.”

Xi’s speech was published by Qiushi, the party’s top theoretical journal, hours after data Tuesday showed consumer and factory activity weakened further in July despite official promises to support struggling entrepreneurs. The government skipped giving an update on a politically sensitive spike in unemployment among young people.

Xi, the country’s most powerful leader in decades, called for China to “build a socialist ideology with strong cohesion” and to focus on long-term goals of improving education, health care and food supplies for China’s 1.4 billion people instead of only pursuing short-term material wealth.

Since taking power in 2012, Xi has called for restoring the ruling party’s role as an economic and social leader and has tightened control over business and society since taking power in 2012. Some changes come at a rising cost as successful Chinese companies are pressured to divert money into political initiatives including processor chip development. The party tightened control over tech industries by launching data security and anti-monopoly crackdowns that wiped out billions of dollars of their stock market value.

“We must maintain historic patience and insist on making steady, step-by-step progress,” Xi said in the speech. Qiushi said it was delivered in February in the southwestern city of Chongqing. It is common for Qiushi journal to publish speeches months after they are delivered.

Economic growth slid to 0.8% in the three months ending in June compared with the previous month, down from 2.2% in January-March. That is equivalent to a 3.2% annual rate, which would be among China’s weakest in decades.

A survey in June found unemployment among urban workers aged 16 to 24 spiked to a record 21.3%. The statistics bureau said this week it would withhold updates while it refined its measurement.

The government also has expanded anti-spying rules and tightened controls on information, leaving foreign and private companies uncertain about what activities might be allowed.

Xi stressed “common prosperity,” a 1950s party slogan he has revived. He called for narrowing China’s yawning wealth gap between a tiny elite and the poor majority and to “regulate the healthy development of capital” but announced no new initiatives.

“Common prosperity for all people” is an “essential feature of Chinese-style modernization and distinguishes it from Western modernization,” Xi said.

Western-style modernization “pursues the maximization of capital interests instead of serving the interests of the vast majority of people,” Xi said.

“Today, Western countries are increasingly in trouble,” Xi said. “They cannot curb the greedy nature of capital and cannot solve chronic diseases such as materialism and spiritual poverty.”
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One year after passing the Inflation Reduction Act, President Joe Biden is in Wisconsin touting the success of his ‘Bidenomics.’ But despite legislative wins and improving economic indicators, the president is still scoring low in economic performance polls. VOA’s White House bureau chief Patsy Widakuswara reports.
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A broad array of Chinese data on Tuesday highlighted intensifying pressure on the economy from multiple fronts, prompting Beijing to cut key policy rates to shore up activity but analysts say more support is needed to revitalize growth.

Just before the release of a batch of July data, China’s central bank unexpectedly chopped one set of key interest rates and followed it with cuts on other rates hours later, underlining the rapid loss of the post-COVID economic rebound that has shaken global financial markets.

Tuesday’s data released by the National Bureau of Statistics (NBS), which comes on top of a raft of weak indicators from last week, showed retail sales, industrial output and investment all growing at a slower than expected pace – indicating the engines of business and consumption in the world’s second biggest economy were severely underpowered.

Additionally, China suspended publishing youth jobless data, which hit a record high of 21.3% in June. 

“All the main activity indicators undershot consensus expectations in July, with most either stagnant or barely expanding in month-on-month terms,” said Julian Evans-Pritchard, economist at Capital Economics.

“And with financial troubles at developers such as Country Garden likely to weigh on the housing market in the near-term, there is a real risk of the economy slipping into a recession unless policy support is ramped up soon.”

Nomura analysts were equally downbeat on China’s economic outlook.

“We believe the Chinese economy is faced with an imminent downward spiral with the worst yet to come, and the rate cut this morning will be of limited help,” they said.

Most economists see downside risk to Chinese growth, but they do not expect a recession.

Industrial output grew 3.7% from a year earlier, slowing from the 4.4% pace seen in June, the NBS data showed, and was below expectations for a 4.4% increase in a Reuters poll of analysts.

Retail sales, a gauge of consumption, rose 2.5%, down from a 3.1% increase in June and missed analysts’ forecasts of 4.5% growth despite the summer travel season.

It was the slowest growth since December 2022, showing how much of a challenge authorities face as they try to make consumption the key driver of future economic growth.

More stimulus

Asian stocks stalled at one-month lows, the yuan hit a 9-month nadir while the dollar held broadly firm after the weak Chinese data and latest policy easing measures.

Following the first rate cuts, China’s major state-owned banks were seen selling U.S. dollars and buying yuan in a bid to stem rapid declines in the currency, three people with direct knowledge of the matter said. Sovereign bond yields fell to three-year lows, and benchmark stock indexes were down.

Record-low credit growth and rising deflation risks in July necessitated more monetary easing measures to arrest the slowdown, market watchers said, while default risks at some housing developers and missed payments by a private wealth manager also soured market confidence.

Nie Wen, an economist at Hwabao Trust, expects special bonds to be introduced urgently and said the probability of a reserve requirement ratio (RRR) cut in the short run is relatively large.

Policymakers last month released a batch of stimulus measures, from boosting auto and home appliances consumption, relaxing some property restrictions to pledging support to the private sector, as a post-COVID rebound rapidly lost steam since the second quarter.

The catering sector, which reaped benefits from the COVID reopening, saw slower revenue growth in July from June.

Investment in the private sector shrank 0.5% in the first seven months, extending 0.2% decline in the first half of 2023.

Structural pains

The persistent drag in the property sector, mounting local government debt pressure, high youth jobless rate and cooling foreign demand continue to be major impediments to fostering a sustainable economic revival.

China is undergoing a painful transition to a less debt-fueled, less property-centric and more consumer-driven economy, said Robert Carnell, Asia-Pacific head of research at ING.

“We will continue to see weak macro data for the foreseeable future. It is a necessary part of the adjustment and is far preferable to resurrecting the debt-fueled property model that propelled growth previously. But we do need to lower our expectations for China’s growth.”

Other data on Tuesday showed fixed asset investment expanded 3.4% in the first seven months of 2023 from the same period a year earlier, versus expectations for a 3.8% rise. It grew 3.8% in the January-June period.

Investment in the property sector tumbled 8.5% year-on-year in January-July, after shrinking 7.9% in January-June, extending its fall for the 17th consecutive month.

The nationwide survey-based jobless rate climbed slightly to 5.3% from 5.2% in June. Among OECD members, the average unemployment rate was 4.8%, with youth joblessness around 10%.

China set its 2023 growth target at around 5%, but Nomura analysts warn the country could miss the goal again as it did last year.

“We also see bigger downside risk to our 4.9% y-o-y growth forecast for both Q3 and Q4, and it is increasingly possible that annual GDP growth this year will miss the 5.0% mark.”
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The Russian ruble on Monday reached its lowest value since the early weeks of the war in Ukraine as Moscow increases military spending and Western sanctions weigh on its energy exports.

It led Russia’s central bank to announce it will hold an emergency meeting Tuesday to review its key interest rate, opening the possibility of an increase in borrowing costs that would support the flagging ruble.

The Russian currency passed 101 rubles to the dollar, continuing a more than 25% decline in its value since the beginning of the year and hitting the lowest level in almost 17 months. The ruble recovered slightly after the central bank’s announcement.

The meeting was set after President Vladimir Putin’s economic adviser, Maksim Oreshkin, blamed the weak ruble on “loose monetary policy” in an op-ed Monday for state news agency Tass. He said a strong ruble is in the interest of the Russian economy and that a weak currency “complicates economic restructuring and negatively affects people’s real incomes.”

Oreshkin said Russia’s central bank has “all the tools necessary” to stabilize the situation and said he expected normalization shortly.

Bank deputy director Alexei Zabotkin told reporters Friday that it is adhering to a floating exchange rate because “it allows the economy to effectively adapt to changing external conditions.”

Analysts say the weakening of the ruble is being driven by increased defense spending — leading imports to rise — and falling exports, particularly in the oil and natural gas sector. Importing more and exporting less means a smaller trade surplus, which typically weighs on a country’s currency.

The Russian economy is now “working on different types of state orders related to the war, such as textile enterprises, pharmaceuticals and the food industry,” said Alexandra Prokopenko, nonresident scholar at the Carnegie Russia Eurasia Center and a former Russian central bank official.

Pivoting the entire economy to a war footing not only drives up imports but also raises the prospect of worsening inflation, she said.

To help lessen that prospect, the central bank said last week that it would stop buying foreign currency on the domestic market until the end of the year to try to prop up the ruble and reduce volatility.

Russia typically sells foreign currency to counter any shortfall in revenue from oil and natural gas exports and buys currency if it has a surplus.

The central bank also enacted a big increase of 1% to its key interest rate last month, saying inflation is expected to keep rising and the fall in the ruble is adding to the risk. The next meeting to discuss Russia’s key interest rate was planned for 15 September.

On Monday, some Russians in Moscow appeared concerned about the weakening currency.

“Prices will rise, which means that the standard of living will fall. It has already fallen, and it will fall even more — there are definitely more poor people,” said Vladimir Bessosedny, 63, a retired teacher.

Others hoped the fall of the ruble was temporary and that it would stabilize.

In January, the ruble traded at about 66 to the dollar but lost about a third of its value in subsequent months.

After Western countries imposed sanctions after the invasion of Ukraine in February 2022, the ruble plunged as low as 130 to the dollar, but the central bank enacted capital controls that stabilized its value. By last summer, it was in the 50-60 range to the dollar.

Zabotkin said Friday that international sanctions had cut off a significant amount of imports to Russia, contributing to the ruble’s fall, but he dismissed speculation that capital flight from Russia also was to blame, saying the idea was “not substantiated.”
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The post-pandemic travel boom and the high ticket prices that come with it show no signs of slowing well into next year, despite economic uncertainty and dwindling household savings.

While questions linger about how much longer consumers will continue to indulge, airlines, hotels and analysts say travel has remained a top priority instead of the “nice to have” purchase as in years past.

International travel reached around 90% of pre-pandemic levels this year, according to the International Air Transport Association. The rebound was led by visitors to Southern Europe from cooler climates despite soaring temperatures and included swaths of American tourists flying overseas.

TUI, one of the world’s biggest holiday firms, on Wednesday reported its first post-pandemic net profit on the back of robust bookings and travel demand in the three months to the end of June.

“In the wake of the pandemic, a number of folks have reset their priorities and have focused on splurging on travel,” said Dan McKone, a senior partner at strategy consultancy L.E.K. Consulting.

That desire may even strengthen next year, according to travel tech firm Amadeus, whose recent survey showed that 47% of respondents said international travel was a high-priority discretionary spending category for 2023 and 2024, compared with 42% who ranked it as such the previous year. Amadeus sampled travelers from Britain, France, the United States, Germany and Singapore.

Those trends lifted quarterly earnings of travel companies, with cruise operators like Royal Caribbean reporting record results in recent weeks. Travel operators Booking Holdings and Airbnb said revenue was up 27% and 18%, respectively, and air carrier Delta and hotel giant Marriott International forecast strong future demand.

German carrier Lufthansa said that bookings for the rest of the year currently exceed 90% of the pre-pandemic level and that the summer season is extending into October. United Airlines is expanding Pacific coverage this autumn with new flights to Manila, Hong Kong, Taipei and Tokyo.

Overall, global passenger demand is estimated to grow 22% year-on-year in 2023 and 6% in 2024, Moody’s investor service said on Tuesday. Ticket prices, which in some cases have increased by double-digit percentages since the pandemic, are unlikely to plummet.

“Everyone is pricing against demand, and this is the basic economic equation,” Jozsef Varadi, CEO of budget carrier Wizz Air, told Reuters. “We are in a high-input cost environment. So, that puts pressure on pricing.”

Travelers to Europe and Asia are not expected to see substantial price relief this autumn, said Hayley Berg, lead economist at online travel agency Hopper.

She expects air fares on long-haul international routes to remain high until supply outpaces pre-pandemic levels, demand normalizes and jet fuel prices decline further.

The weak spot is U.S. domestic travel, as the end of COVID-19 testing restrictions has unleashed pent-up demand by Americans to take vacations overseas.

“They said earlier in the year, ‘Look, I’m going to do that international trip that we’ve been meaning to do,’ and that’s created a lot of crowded places with Americans in Europe,” Booking Holdings CEO Glenn Fogel told Reuters.

International inbound travel to the United States in May rose 26% year over year to 5.37 million visitors but is still about 20% lower than pre-pandemic visitor volumes reported in May 2019, according to the U.S. National Travel and Tourism Office.

Average domestic airfare is currently $246 round-trip, down 8% from 2022, according to travel booking app Hopper.

Executives said U.S. hotel rooms may become more expensive due to lack of supply, but softening demand may moderate that effect.

“Growth is expected to remain higher internationally than in the U.S. and Canada, where we’re seeing a return to more normal seasonal patterns,” said Marriott CFO Kathleen Oberg.

Looking ahead, some airline groups like British Airways owner IAG said it is unclear whether demand can be sustained. Analysts have said dwindling consumer savings could cause a downturn in spending if inflation fails to let up.
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A forensic audit into Lebanon’s central bank by a New York-based company has revealed yearslong misconduct by the bank’s former governor and $111 million in “illegitimate commissions,” according to a report by the company.

It’s the latest chapter in the saga of Lebanon’s embattled former central bank governor Riad Salameh, 73, who ended his 30-year career as governor last month under a cloud of investigation and blame for his country’s economic meltdown.

A copy of the 331-page document by Alvarez & Marsal, seen by The Associated Press, was given to parliament on Friday. The audit was among key demands by the international community and the International Monetary Fund, which over the years increasingly lost confidence in crisis-hit Lebanon.

Lebanon’s government and Alvarez & Marsal signed a contract in September 2021, but the audit subsequently stalled. It covers the period between 2015 and 2020; Lebanon’s economic meltdown began in October 2019.

Alvarez & Marsal said the central bank’s “refusal to provide direct access to its systems and to allow work to be conducted” on its premises had “significantly delayed and slowed” the audit.

The report in one section focuses, among other things, on the practice of so-called financial engineering that started in 2015 and was used by the central bank to allow local lenders to attract dollar deposits from abroad and then encourage the banks to deposit the dollars at the central bank. In return, the lenders were given interest rates higher than international market rates.

“Financial engineering was costly,” the report said.

The central bank’s foreign currency shortage grew dramatically from a foreign currency surplus of $7.2 billion at the end of 2015, to a shortage of $50.7 billion at the end of 2020. The report says this was driven by a 119% increase in foreign currency denominated deposits, fueled by the central bank.

On Thursday, the United States, United Kingdom and Canada sanctioned Salameh and a handful of his close relatives and associates over corruption allegations.

Also, France, Germany and Luxembourg are investigating Salameh and several close associates over alleged financial crimes, including illicit enrichment and the laundering of $330 million. Paris and Berlin issued Interpol notices for Salameh in May. Lebanon, however, does not hand over its citizens to foreign countries.

The report also highlights illegitimate commissions during the 2015-2020 period, totaling $111 million, and said they appeared to be a scheme that’s being investigated by Lebanese and international prosecutors — an apparent reference to the former governor’s brother, Raja Salameh.

Reports have circulated that the Lebanese central bank had hired Forry Associates Ltd., a brokerage firm owned by Raja Salameh, to handle government bond sales from which the firm received $330 million in commissions.
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After months of concern that the Chinese economy was teetering on the brink of potentially damaging deflation, Beijing’s National Bureau of Statistics this week made it official, reporting that overall prices had declined in July by 0.3% compared to a year earlier.

As much of the world struggles with the difficult phenomenon of price inflation, the news about deflation in China comes after months of reports showing stagnating price levels there, rising unemployment and slowing domestic production.

Chinese officials characterized the decline in prices as transitory and said the year-over-year comparison is somewhat skewed by higher-than-usual levels of price appreciation in 2022. NBS chief statistician Dong Lijuan said, “With the impact of a high base from last year gradually fading, the CPI [consumer price index] is likely to rebound gradually.”

Economic struggles

The Chinese economy has been struggling for more than a year as officials have tried to navigate a way out of a downturn caused by multiple problems. The most prominent was a heavy-handed zero-COVID policy that saw entire cities shut down, sometimes for weeks at a time, in an effort to prevent the spread of the coronavirus.

However, the Chinese economy has also been enduring other difficulties. The property sector, which in recent years accounted for between 20% and 30% of GDP, has suffered a severe slowdown, with a number of major developers unable to service their debts, and many projects left incomplete. The banking sector is also burdened by bad loans, many of which were made to local government agencies that have experienced sharp declines in revenue.

Increasing unemployment among younger workers is also a problem, with the official jobless rate for people ages 16 to 24 at 21%, and some experts expressing concern that the real number is significantly higher.

One data point

Loren Brandt, the Noranda chair professor of economics at the University of Toronto, told VOA in an email exchange that it’s important to be careful about extrapolating from a single month’s data.

However, he added, “It is a signal of continued weakness in the economy that has deeper roots. The drop in external demand and exports only adds to these problems. We tell all kinds of stories of how deflation adversely affects the economy by itself, but at the core are a deeper set of issues. We learned this in the case of Japan.”

Japan, China’s neighbor to the east, has endured decades of price deflation that experts attribute to a wide variety of economic and societal factors, including a low birth rate and high rates of personal savings.

Global impact

William T. Dickens, a professor of economics and social policy at Northeastern University, told VOA he is concerned that deflation is likely to persist in China.

“The Chinese economy appears ripe for continuing deflation,” he wrote in an email exchange. “Both internal and external demand is weak, and inflation has been low even before this slip into deflation. The situation looks bad to me, and a lot will depend on what the Chinese government is able to accomplish to restore demand. I’m not optimistic.”

As the world’s second-largest economy, China’s troubles could have a global impact if deflation persists, Dickens said.

“My biggest worry is for developing countries that depend on China to purchase their raw materials,” he wrote. “A lot of these countries are already stressed by the debts they owe — to China in particular. As China falters, these countries will see a falloff in their demand exports. This will make it hard for them to keep paying their creditors.”

Widespread defaults, he added, could trigger “financial instability” that extends beyond China and heavily indebted countries.

Impacts of deflation

Consumers might initially see price deflation as a positive development, as it makes it cheaper to purchase goods and services. However, it also has serious potential negative effects.

Lower prices drive down business revenues, leading to lower profits, less investment, and potentially higher unemployment as companies pare back on production in the face of decreased demand.

Deflation can also make it relatively more expensive for consumers and businesses to service debt — especially debt incurred at interest rates prevalent before deflation sets in. In times of deflation, the relative purchasing power of every dollar spent on debt repayment is higher than it was before prices began falling.

‘Deflationary spiral’

Economists also warn of a possible “deflationary spiral,” in which expectations of future price declines influence consumer behavior.

When inflation began rising in the U.S. in 2021, economists warned that if consumers came to expect prices to keep rising, they might lead to an inflationary spiral, in which consumers concerned about rising prices accelerated their timetable for major purchases, driving up demand and inadvertently triggering even higher inflation.

A deflationary spiral in China would have the opposite effect. If Chinese consumers believe prices may keep falling, they could delay major purchases in the expectation of better deals in the future. The resulting slowdown in demand could exacerbate deflationary pressure.  
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U.S. consumer prices edged higher in July, the government reported Thursday, but underlying data signaled that inflation is not starting to resurge in the world’s biggest economy.

The Labor Department reported that the consumer price index rose 3.2% on an annualized basis in July, up from 3% in June. On a month-to-month basis, prices were up by two-tenths of a percent in July, the same figure as in June compared to May.

The U.S. central bank, the Federal Reserve, has raised its benchmark interest rate 11 times over the last 17 months, pushing it to a 22-year high to curb inflation, which a year ago topped 9%. Higher interest rates boost borrowing costs for businesses and consumers alike and can cut into spending.

The newest economic report could give Fed policymakers reason to put off another rate increase at its September meeting. The July figures lowered the three-month annualized rate of core inflation, which excludes volatile food and energy prices, to 3.1%, the lowest reading in two years.

Fed officials often focus on the core reading because they consider it a better barometer of future inflation than the overall rate.

Greg McBride, the chief financial analyst of Bankrate.com, said in a statement, “The monthly increase of 0.2% in the consumer price index is right on target and represents the kind of progress needed to get inflation down to a sustainable 2% annual rate.”

But he warned that “further increases in oil prices could throw up a detour on the journey to 2% inflation.”

“Everything we buy in a store or online has to be transported, and even some service categories add fuel surcharges or raise prices in response,” McBride said. “Easing inflation was aided by gasoline prices that had fallen nearly 20% in the 12 months ending July 31. But with a recent surge, gas prices are now closing in on $4 per gallon. Something to watch in the months ahead.”

The state of the U.S. economy is particularly important as the national November 2024 presidential election edges closer. While other issues are important to tens of millions of voters — abortion rights, immigration control, crime, Russia’s war in Ukraine, to name a few — the state of the American economy and the cost of living are often at the forefront of considerations in voters’ minds.

While the 3.5% U.S. unemployment rate remains at near a 50-year low, and hundreds of thousands of jobs have been added to the economy month after month, national polls show that voters do not think that President Joe Biden has managed the economy well.

Opposition Republican presidential contenders have often blamed Biden for too much government spending and the country’s ever-growing long-term debt total, which now is more than $32 trillion.
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Virgin Galactic rocketed to the edge of space with its first tourists Thursday, including a former British Olympian who bought his ticket 18 years ago and a mother-daughter duo from the Caribbean.

The space plane glided back to a runway landing at Spaceport America in the New Mexico desert, after a brief flight that gave passengers a few minutes of weightlessness.

Cheers erupted from families and friends watching from below when the craft’s rocket motor fired after it was released from the plane that had carried it aloft. The rocket ship reached about 88 kilometers high.

Richard Branson’s company expects to begin offering monthly trips to customers on its winged space plane, joining Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX in the space tourism business.

Virgin Galactic passenger Jon Goodwin, who was among the first to buy a ticket in 2005, said he had faith that he would someday make the trip. The 80-year-old athlete — he competed in canoeing in the 1972 Olympics — has Parkinson’s disease and wants to be an inspiration to others.

“I hope it shows them that these obstacles can be the start rather than the end to new adventures,” he said in a statement.

Ticket prices were $200,000 when Goodwin signed up. The cost is now $450,000.

He was joined by sweepstakes winner Keisha Schahaff, 46, a health coach from Antigua, and her daughter, Anastatia Mayers, 18, a student at Scotland’s University of Aberdeen. Also on board: two pilots and the company’s astronaut trainer.

It was Virgin Galactic’s seventh trip to space since 2018, but the first with a ticket-holder. Branson, the company’s founder, hopped on board for the first full-size crew ride in 2021. Italian military and government researchers soared in June on the first commercial flight. About 800 people are currently on Virgin Galactic’s waiting list, according to the company.

Virgin Galactic’s rocket ship launches from the belly of an airplane, not from the ground, and requires two pilots in the cockpit. Once the mothership reaches a height of about 15 kilometers, the space plane is released and fires its rocket motor to make the final push to just over 80 kilometers up. Passengers can unstrap from their seats, float around the cabin for a few minutes and take in the sweeping views of Earth, before the space plane glides back home and lands on a runway.

In contrast, the capsules used by SpaceX and Blue Origin are fully automated and parachute back down.

Like Virgin Galactic, Blue Origin aims for the fringes of space, quick ups-and-downs from West Texas. Blue Origin has launched 31 people so far, but flights are on hold following a rocket crash last fall. The capsule, carrying experiments but no passengers, landed intact.

SpaceX, is the only private company flying customers all the way to orbit, charging a much heftier price, too: tens of millions of dollars per seat. It’s already flown three private crews. NASA is its biggest customer, relying on SpaceX to ferry its astronauts to and from the International Space Station. since 2020.

People have been taking on adventure travel for decades, the risks underscored by the recent implosion of the Titan submersible that killed five passengers on their way down to view the Titanic wreckage. Virgin Galactic suffered its own casualty in 2014 when its rocket plane broke apart during a test flight, killing one pilot. Yet space tourists are still lining up, ever since the first one rocketed into orbit in 2001 with the Russians.

Branson, who lives in the British Virgin Islands, watched Thursday’s flight from a party in Antigua. He had held a virtual lottery to establish a pecking order for the company’s first 50 customers — dubbed the Founding Astronauts. Virgin Galactic said the group agreed Goodwin would go first, given his age and his Parkinson’s.
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China’s exports plunged by 14.5% in July compared with a year earlier, adding to pressure on the ruling Communist Party to reverse an economic slump.

Imports tumbled 12.4%, customs data showed Tuesday, in a blow to global exporters that look to China as one of the biggest markets for industrial materials, food and consumer goods.

Exports fell to $281.8 billion as the decline accelerated from June’s 12.4% fall. Imports sank to $201.2 billion, widening from the previous month’s 6.8% contraction.

The country’s global trade surplus narrowed by 20.4% from a record high a year ago to $80.6 billion.

Chinese leaders are trying to shore up business and consumer activity after a rebound following the end of virus controls in December fizzled out earlier than expected.

Economic growth sank to 0.8% in the three months ending in June compared with the previous quarter, down from the January-March period’s 2.2%. That is the equivalent of 3.2% annual growth, which would be among China’s weakest in three decades.

Demand for Chinese exports cooled after the U.S. Federal Reserve and central banks in Europe and Asia started raising interest rates last year to cool inflation that was at multidecade highs.

The export contraction was the biggest since the start of the COVID-19 pandemic in 2020, according to Capital Economics. It said the decline was due mostly to lower prices, while volumes of goods were above pre-pandemic levels.

“We expect exports to decline further over the coming months before bottoming out toward the end of the year,” said Capital Economics in a report. “The near-term outlook for consumer spending in developed economies remains challenging.”

The ruling party has promised measures to support entrepreneurs and to encourage home purchases and consumer spending but hasn’t announced large-scale stimulus spending or tax cuts. Forecasters expect those steps to revive demand for imports but say that will be gradual.

“Domestic demand continues to deteriorate,” said David Chao of Invesco in a report. “Policymakers have pledged further policy support, which could buoy household spending and lead to an improvement in import growth for the coming few months.”

Exports to the United States fell 23% from a year earlier to $42.3 billion, while imports of American goods retreated 11.1% to $12 billion. China’s politically sensitive trade surplus with the United States narrowed by 27% to a still-robust $30.3 billion.

China’s imports from Russia, mostly oil and gas, narrowed by just under 0.1% from a year ago to $9.2 billion. Chinese purchases of Russian energy have swelled, helping to offset revenue lost to Western sanctions imposed to punish the Kremlin for its invasion of Ukraine.

China, which is friendly with Moscow but says it is neutral in the war, can buy Russian oil and gas without triggering Western sanctions. The United States and French officials cite evidence that China is delivering goods with possible military uses to Russia but haven’t said whether that might trigger penalties against Chinese companies.

Exports to the 27-nation European Union slumped 39.5% from a year earlier to $42.4 billion, while imports of European goods were off 44.1% at $23.3 billion. China’s trade surplus with the EU contracted by 32.7% to $19.1 billion.

For the first seven months of the year, Chinese exports were off 5% from the same period in 2022 at just over $1.9 trillion. Imports were down 7.6% at $1.4 trillion.
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Japan is due to start releasing wastewater used to cool the crippled reactors at the Fukushima nuclear plant as soon as the end of August. China has criticized the planned release and imposed restrictions on Japanese seafood — prompting accusations of hypocrisy, as Henry Ridgwell reports from Tokyo.
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Over the past year, inflation in the United States has tumbled from 9% all the way to 3%, softening most of the price pressures that have gripped the nation for more than two years.  

Now comes the hard part.  

Squeezing out the last bit of excess inflation and reducing it to the Federal Reserve’s 2% target rate is expected to be a much harder and slower grind.  

A measure called “core” inflation, which excludes volatile food and energy prices, is even higher than overall inflation. It, too, seems likely to slow only gradually. The Fed pays particular attention to core prices as a signal of where inflation might be headed. In June, core prices were up 4.1% from a year earlier, according to the Fed’s preferred gauge.  

“We see some challenges in getting that all the way back to 2% quickly,” said Michael Hanson, senior global economist at J.P. Morgan.  

The stickiness of inflation could endanger the possibility that the Fed will achieve a rare “soft landing” — a scenario in which it manages to slow inflation down to its target level through higher interest rates without derailing the economy. If inflation were to remain elevated for too long, the Fed might feel compelled to further raise its key rate from its current 5.4%, a 22-year high. Most economists say they think the central bank is done hiking, but only if inflation continues to cool.  

At the same time, the Fed has acknowledged that inflation pressures have eased significantly over the past year. Encouragingly, that slowdown has occurred even while the economy has continued to expand and employers have steadily hired at a healthy pace.  

On Thursday, when the government will issue inflation data for July, economists expect it to show a slight pickup in year-over-year inflation to 3.3%. It would be the first such increase after 12 months of declines.

In part, any rebound in annual inflation for July will reflect higher gas prices. Unless they ease, gas prices could keep overall inflation above 3% through the end of the year. The national average pump price has jumped about 30 cents, to $3.83, in the past month, partly because the cost of oil has risen.  

One obstacle in bringing inflation down to the Fed’s 2% target is that the price slowdown so far has reflected mainly relatively painless changes not likely to be repeated. Until last month, for example, gas prices had already plunged from a peak national average of $5. And supply-chain snarls that had swollen the prices of cars, furniture, appliances and other physical goods have mostly unwound. The cost of long-lasing manufactured goods actually declined slightly in June from a year ago.  

Another factor is that prices had soared in the first half of 2022 before slowing in the second half. So any increase in July would have the effect of boosting the year-over-year inflation rate.  

What’s now sending prices up is mostly the cost of services — everything from dental care and auto insurance to restaurant meals and summer concerts. Those costs mostly reflect healthy wage gains for workers, which are often passed on to customers in the form of higher prices.  

“Energy prices are off, commodity prices off, core goods fell,” said Kristin Forbes, an economist at MIT and a former member of the Bank of England’s interest-rate setting committee. “That’s the quick, easy stuff. What’s left is this underlying wage-service inflation. And that’s the part that’s harder to slow down and will take take longer.”  

Many employees, especially in the economy’s service sector, could push for further raises in the coming months. With labor shortages still a problem for service industries, workers have leverage to demand higher pay. For most Americans, pay gains have trailed inflation over the past two years.  

Higher pay is one key issue driving strikes among Hollywood writers and actors. It was also a focus of the Teamsters union in its negotiations with UPS, which led to large pay gains. The United Auto Workers is also pushing for robust raises in its talks with U.S. automakers.  

Hanson, of J.P. Morgan, notes that measures of health insurance costs will start to rise this fall because of quirks in how the government measures them. And auto insurance and repair costs have been surging. A key reason is that vehicle prices soared after parts shortages developed when the pandemic erupted; costlier cars are more expensive to fix and insure. Auto insurance prices have soared nearly 17% in the past year.  

As a result, economists generally expect core prices, under the Fed’s preferred measure, to still rise at a 3.5% annual pace by year’s end — far above its 2% target. The Fed’s latest forecasts show that its policymakers expect core inflation to still be 2.6% at the end of 2024.  

Still, there are some hopeful signs that hiring and wages are slowing, which would cool inflation over time. On Friday, the government reported that employers added 187,000 jobs in July, a solid total but still reflective of a slowdown: Job growth over the past three months has averaged only about half the pace of the same period in 2022. And wage growth slipped to 4.6% in the April-June quarter, the government said, the slowest pace in a year and a half.

“That trajectory tells us where things will go in the next 12 months,” said Skanda Amarnath, executive director of Employ America, an advocacy group.  

At his most recent news conference, Fed Chair Jerome Powell sounded some cautious but hopeful notes about the prospect of a soft landing.  

“I wouldn’t use the term optimism about this yet,” he said. “I would say though that there’s a pathway….We’ve seen so far the beginnings of disinflation without any real costs in the labor market. And that’s a really good thing.”  

Yet a defining characteristic of the post-pandemic economy has been resilience, with consumers in particular showing a surprisingly persistent willingness to spend. Some economists worry that it will take a sharp rise in unemployment to reverse that trend and finally conquer inflation.  

The Fed has already been coming under some criticism for sharply raising rates and potentially putting the job market at risk. Sen. Elizabeth Warren, a Massachusetts Democrat, wrote Powell before the Fed met last month and urged him to forgo another rate increase. The central bank, though, went ahead with its 11th rate hike since March 2022.  

“The Fed’s aggressive rate hikes disproportionately threaten Black workers and their families and risk fully reversing the extraordinary labor market gains we have seen,” Warren, a frequent Fed critic, wrote.  

With political pressure on the Fed rising, Powell and other officials may soon see the precipitous drop in inflation in the first half of this year as having been the easy part.  

“The Fed has got lucky so far in what it’s gotten,” said Steven Blitz, chief U.S. economist at GlobalData TS Lombard. “Most of the decline in inflation was going to happen anyway. They really own the part that’s to come.”
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The contours of the debate at the heart of the Federal Reserve’s policy decision next month came into clearer view on Monday as officials outlined the case for and against another interest rate hike.

“The debate is really about: Do we need to do another rate increase? Or not? … I think we’re pretty close to what a peak rate would be,” New York Fed President John Williams said in an interview with the New York Times in which he voiced some confidence that underlying inflation was on a downward path.

“I do think that we are moving to an environment already where the underlying inflation rate has come down quite a bit,” Williams said in the interview, conducted August 2 and released on Monday. Williams, the vice chair and a permanent voting member of the policy-setting Federal Open Market Committee, said that inflation measures developed by the New York Fed suggest the pace of price increases could slow to as little as 2.5% annually by the end of the year, within striking distance of the Fed’s 2% target.

In separate remarks to a “Fed Listens” community event in Atlanta, Fed Governor Michelle Bowman said the combination of still-elevated inflation and continued economic growth meant further rate increases are likely. 

“I supported raising the federal funds rate at our July meeting, and I expect that additional increases will likely be needed to lower inflation to the [Federal Open Market Committee’s] goal,” she said, referring to the central bank’s benchmark overnight interest rate, which is currently set in the 5.25%-5.50% range.

“I will be looking for evidence that inflation is on a consistent and meaningful downward path as I consider whether further increases in the federal funds rate will be needed, and how long the federal funds rate will need to remain at a sufficiently restrictive level,” Bowman said.

The Fed’s preferred headline measure of inflation, the personal consumption expenditures price index, was at 3% on an annual basis as of June, while the same measure stripped of volatile food and energy prices was at 4.1% and has shown slower progress in recent months back to the Fed’s target.

The Fed raised rates by a quarter of a percentage point at the end of its July 25-26 meeting, and the most recent projections by policymakers show most expect one more rate increase by the end of the year.

But recent data have shown inflation slowing faster than expected, with many analysts anticipating a “disinflationary” trend may be developing that will work in the Fed’s favor.

Investors in contracts tied to the Fed’s policy rate are currently betting against any further increases, and expect the central bank’s next move to be a rate cut in the first months of next year.

Williams said that if inflation does continue falling, rate reductions would be appropriate next year so that the inflation-adjusted “real” rate of interest doesn’t increase through inaction.

“Assuming inflation continues to come down … then if we don’t cut interest rates at some point next year, then real interest rates will go up, and up, and up. And that won’t be consistent with our goals,” Williams said. “From my perspective, to keep maintaining a restrictive stance may very well involve cutting the federal funds rate next year.” 
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The tidal wave of artificial intelligence (AI) barrelling toward many professions has generated deep anxiety among workers fearful that their jobs will be swept away — and the mental health impact is rising.

The launch in November 2022 of ChatGPT, the generative AI platform capable of handling complex tasks on command, marked a tech landmark as AI started to transform the workplace.

“Anything new and unknown is anxiety-producing,” Clare Gustavsson, a New York therapist whose patients have shared concerns about AI, told AFP.

“The technology is growing so fast, it is hard to gain sure footing.”

Legal assistants, programmers, accountants and financial advisors are among those professions feeling threatened by generative AI that can quickly create human-like prose, computer code, articles or expert insight.

Goldman Sachs analysts see generative AI impacting, if not eliminating, some 300 million jobs, according to a study published in March.

“I anticipate that my job will become obsolete within the next 10 years,” Eric, a bank teller, told AFP, declining to give his second name.

“I plan to change careers. The bank I work for is expanding AI research.”

Trying to ’embrace the unknown’

New York therapist Meris Powell told AFP of an entertainment professional worried about AI being used in film and television production — a threat to actors and screenwriters that is a flashpoint in strikes currently gripping Hollywood.

“It’s mainly people who are in creative fields who are at the forefront of that concern,” Gustavsson said.

AI is bringing with it a level of apprehension matched by climate change and the Covid-19 pandemic, she contended.

But she said that she tries to get patients to “embrace the unknown” and find ways to use new technology to their advantage.

For one graphic animator in New York, the career-threatening shock came from seeing images generated by AI-infused software such as Midjourney and Stable Diffusion that rivaled the quality of those created by humans.

“People started to realize that some of the skills they had developed and specialized in could possibly be replaced by AI,” she told AFP, adding she had honed her coding skills, but now feels even that has scant promise in an AI world.

“I’ll probably lean into more of a management-level role,” she said. “It’s just hard because there are a lot less of those positions.

“Before I would just pursue things that interested me and skills that I enjoy. Now I feel more inclined to think about what’s actually going to be useful and marketable in the future.”

Peter Vukovic, who has been chief technology officer at several startups, expects just one percent or less of the population to benefit from AI.

“For the rest, it’s a gray area,” Vukovic, who lives in Bosnia, said. “There is a lot of reason for 99 percent of people to be concerned.”

AI is focused on efficiency and making money, but it could be channeled to serve other purposes, Vukovic said.

“What’s the best way for us to use this?” he asked. “Is it really just to automate a bunch of jobs?”
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