Бізнес

KAJIADO, Kenya — The blood, milk and meat of cattle have long been staple foods for Maasai pastoralists in Kenya, perhaps the country’s most recognizable community. But climate change is forcing the Maasai to contemplate a very different dish: fish.

A recent yearslong drought in Kenya killed millions of livestock. While Maasai elders hope the troubles are temporary and they will be able to resume traditional lives as herders, some are adjusting to a kind of food they had never learned to enjoy.

Fish were long viewed as part of the snake family due to their shape, and thus inedible. Their smell had been unpleasant and odd to the Maasai, who call semi-arid areas home.

“We never used to live near lakes and oceans, so fish was very foreign for us,” said Maasai Council of Elders chair Kelena ole Nchoi. “We grew up seeing our elders eat cows and goats.”

Among the Maasai and other pastoralists in Kenya and wider East Africa — like the Samburu, Somali and Borana — cattle are also a status symbol, a source of wealth and part of key cultural events like marriages as part of dowries.

But the prolonged drought in much of East Africa left carcasses of emaciated cattle strewn across vast dry lands. In early 2023, the Kenya National Drought Management Authority said 2.6 million livestock had died, with an estimated value of 226 billion Kenya shillings ($1.75 billion).

Meanwhile, increasing urbanization and a growing population have reduced available grazing land, forcing pastoralists to adopt new ways to survive.

In Kajiado county near Kenya’s capital, Nairobi, the local government is supporting fish farming projects for pastoralists — and encouraging them to eat fish, too.

Like many other Maasai women, Charity Oltinki previously engaged in beadwork, and her husband was in charge of the family’s herd. But the drought killed almost 100 of their cows, and only 50 sheep of their 300-strong flock survived.

“The lands were left bare, with nothing for the cows to graze on,” Oltinki said. “So, I decided to set aside a piece of land to rear fish and monitor how they would perform.”

The county government supplied her with pond liners, tilapia fish fingerlings and some feed. Using her savings from membership in a cooperative society, Oltinki secured a loan and had a well dug to ease the challenge of water scarcity.

After six months, the first batch of hundreds of fish was harvested, with the largest selling for up to 300 Kenyan shillings each ($2.30).

Another member of the Maasai community in Kajiado, Philipa Leiyan, started farming fish in addition to keeping livestock.

“When the county government introduced us to this fish farming project, we gladly received it because we considered it as an alternative source of livelihood,” Leiyan said.

The Kajiado government’s initiative started in 2014 and currently works with 600 pastoralists to help diversify their incomes and provide a buffer against the effects of climate change. There was initial reluctance, but the number of participants has grown from about 250 before the drought began in 2022.

“The program has seen some importance,” said Benson Siangot, director of fisheries in Kajiado county, adding that it also addresses issues of food insecurity and malnutrition.

The Maasai share their love for cattle with the Samburu, an ethnic group that lives in arid and semi-arid areas of northern Kenya and speaks a dialect of the Maa language that the Maasai speak.

The recent drought has forced the Samburu to look beyond cattle, too — to camels.

In Lekiji village, Abdulahi Mohamud now looks after 20 camels. The 65-year-old father of 15 lost his 30 cattle during the drought and decided to try an animal more suited to long dry spells.

“Camels are easier to rear as they primarily feed on shrubs and can survive in harsher conditions,” he said. “When the pasture dries out, all the cattle die.”

According to Mohamud, a small camel can be bought for 80,000 to 100,000 Kenyan shillings ($600 to $770) while the price of a cow ranges from 20,000 to 40,000 ($154 to $300).

He saw the camel’s resilience as worth the investment.

In a vast grazing area near Mohamud, 26-year-old Musalia Piti looked after his father’s 60 camels. The family lost 50 cattle during the drought and decided to invest in camels that they can sell whenever they need cattle for traditional ceremonies. Cows among the Samburu are used for dowries.

“You have to do whatever it takes to find cattle for wedding ceremonies, even though our herds may be smaller nowadays,” said Lesian Ole Sempere, a 59-year-old Samburu elder. Offering a cow as a gift to a prospective bride’s parents encourages them to declare their daughter as “your official wife,” he said.
…

Johannesburg — After pledging $51 billion in financial support for Africa over the next three years and positioning China as a fellow developing country in contrast to the West’s colonialist past, President Xi Jinping told dozens of African leaders gathered in Beijing this week that “the China-Africa relationship is now at its best in history.”

This year’s Forum on Africa-China Cooperation, held every three years, was the first since the pandemic and China’s own economic slowdown. It comes amid growing geopolitical rivalry between Beijing and the West, and Xi was blunt in his assessment of the latter’s influence on the continent.

“Modernization is an inalienable right of all countries,” he said in his opening speech to more than 50 African leaders. “But the Western approach to it has inflicted immense sufferings on developing countries.”

Lucas Engel, an analyst with the Global China Initiative at Boston University, said China is reacting to increased competition in the region.

“Xi’s reminder of the ‘immense suffering’ inflicted on Africa by the West in his keynote speech this year is a sharper rebuke of Africa’s Western partners than we’ve seen in the past,” he told VOA. “It is likely that China is feeling the heat as Western partners ramp up cooperation with Africa.”

The theme of FOCAC 2024 was “joining hands to promote modernization,” and analysts told VOA beforehand they expected China to focus on green technology and the green energy transition, agricultural modernization and trade, and education and training.

The money announced was an increase on the $40 billion pledged at the last FOCAC, in 2021, but still fell short of previous pledges, such as the $60 billion earmarked for Africa in 2018 and 2015.

For some time, China has been seen to be moving away from the massive infrastructure projects of the early years of Xi’s trademark Belt and Road Initiative and toward what it has dubbed “small is beautiful projects.”

Some of the announcements made at FOCAC, however, surprised analysts by bucking that trend.

Xi announced China would be undertaking a $1 billion upgrade of the TAZARA railway, which will link mineral-rich, landlocked Zambia with Tanzania’s coast. He signed an agreement with the presidents of those two countries on Wednesday.

“There was already a sense that infrastructure would be one of those asks that would not be entertained by the Chinese side, so I think that has come as a bit of a surprise,” Paul Nantulya, a research associate with the Africa Center for Strategic Studies in Washington, told VOA.

“I think African countries were also quite concerned about infrastructure financing. … Now it seems like the Chinese side may have finally backed down,” said Nantulya, who was in Beijing for FOCAC. “That would indicate that China does not want to be locked out of the infrastructure game, given what the U.S. is doing with the Lobito Corridor.”

Nantulya was referring to the G7-backed strategic economic corridor that Washington says is designed to create jobs and enhance export potential for resource-rich Angola, the Democratic Republic of the Congo and Zambia. As the first big infrastructure project in Africa the U.S. has undertaken in a generation, Washington recently announced it could extend the railway to Tanzania and on to the Indian Ocean.

“China’s offer to refurbish the TAZARA railway connecting copper-rich Zambia with Tanzania on Africa’s eastern coast appears to be a direct answer to the Western-led Lobito Corridor,” said Engel of Boston University.

Did African leaders get what they wanted?

China was not the only country with an agenda at FOCAC, as African leaders also laid out their priorities for relations with their largest trading partner.

For South African President Cyril Ramaphosa, who leads the continent’s most developed economy, the primary aim was to reduce a long-standing trade imbalance and to get China to import more agricultural products. He also wants to see more value-added exports made in South Africa.

Ramaphosa embarked on a state visit to China ahead of FOCAC and made several announcements, including that South Africa would sign up for China’s Beidou satellite navigation system and inviting Chinese electric vehicle company BYD to use South Africa as a manufacturing hub.

Xi said China would in turn expand market access to African agricultural products and exempt 33 countries from import tariffs. He also announced that China would support 60,000 vocational training opportunities for Africans.

Nantulya said there seemed to be a lot of attention to detail regarding this year’s announcements.

“What that tells me is that the Chinese side has been responding to the African side,” he said. “You know, the African delegates are very mindful of the fact that one of the big criticisms of FOCAC is that it’s very high on pledges and very low on actual concrete tasks.”

Yunnan Chen, a researcher at London-based research group ODI, told VOA the pledged areas of cooperation spanned almost every sector.

“I think what’s interesting to note about them is this very striking emphasis on areas of technological cooperation — in industry, in agriculture, in science and technology,” she said.

“There’s a lot of emphasis on training and initiatives that would support knowledge transfer from China to African parties, and I think this is something that’s been very much an African demand for many years,” she added.

“Even though we have seen a decline in Chinese financing in Africa and we know that China is experiencing a lot of domestic financial troubles, there’s still a very clear and very emphatic political commitment,” she said.

Aside from Ramaphosa’s trade demands, other African leaders who held bilateral meetings with Xi had specific areas of concern.

Kenyan President William Ruto had infrastructure at the top of his list, asking that Beijing fund an extension of Kenya’s Chinese-built Standard Gauge Railway. It marked a sharp change from Ruto’s campaign rhetoric, in which he criticized his predecessor’s policy of taking Chinese loans.

Ruto made the request even though Kenya is heavily in debt to Western financial institutions such as the IMF and lenders such as China and has been experiencing violent anti-government protests.

Other key areas of cooperation announced at the conclusion of FOCAC included the military and security sectors, with Beijing vowing to allocate some $140 million in military assistance grants alongside training programs for thousands of military personnel from across the continent.

Green energy was also a focus, with Xi announcing China would launch 30 new clean energy projects on the continent.
…

Washington — U.S. employment increased less than expected in August, but a drop in the jobless rate to 4.2% suggested an orderly labor market slowdown continued and probably did not warrant a big interest rate cut from the Federal Reserve this month.  

Nonfarm payrolls increased by 142,000 jobs last month after a downwardly revised 89,000 rise in July, the Labor Department’s Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast payrolls increasing by 160,000 jobs after a previously reported 114,000 gain in July. Estimates ranged from 100,000 to 245,000 jobs.  

The smaller-than-expected increase in payrolls likely does not signal a deterioration in labor market conditions.  

August payrolls have a tendency to initially print weaker relative to the consensus estimate and recent trend before being revised higher later. Hiring typically picks up in the education sector, which is anticipated by the model that the government uses to strip out seasonal fluctuations from the data.  

The start of the new school year, however, varies across the country, which can throw off the so-called seasonal factors. The initial August payrolls counts have been revised higher in 10 of the last 13 years. Layoffs remain at historic low levels.  

The drop in the unemployment rate followed four straight monthly increases, which had lifted it near a three-year high of 4.3% in July. Early on Friday, financial markets saw a roughly 43% probability of a half-point rate cut at the Fed’s Sept. 17-18 policy meeting, according to CME Group’s FedWatch Tool. The odds of a 25 basis point rate reduction were around 57%.  

Average hourly earnings increased 0.4% in August after falling 0.1% in July. Wages increased 3.8% year-on-year after advancing 3.6% in July. Still-solid wage growth continues to underpin the economy through consumer spending. 
…

WASHINGTON — The U.S. trade deficit widened to the highest level in more than two years in July as businesses likely front-loaded imports in anticipation of higher tariffs on goods, suggesting trade could remain a drag on economic growth in the third quarter.

While the surge in imports reported by the Commerce Department on Wednesday would subtract from gross domestic product, it was an indication of strong domestic demand and inconsistent with financial market fears of a recession.

“The July trade data suggest that net trade will weigh on third-quarter GDP growth, but that is hardly cause for concern when it reflects the continued strength of imports, painting a better picture of domestic demand than renewed recession fears would suggest,” said Thomas Ryan, North America economist at Capital Economics.

The trade gap increased 7.9% to $78.8 billion, the widest since May 2022, the Commerce Department’s Bureau of Economic Analysis said.

The government revised the trade data from January through June 2024 to incorporate more comprehensive and updated quarterly and monthly figures.

Imports increased 2.1% to $345.4 billion. Goods imports rose 2.3% to $278.2 billion, the highest since June 2022. They were boosted by an increase in capital goods, which increased $3.3 billion to a record high, mostly reflecting computer accessories.

Imports of industrial supplies and materials, which include petroleum, increased $2.8 billion. There were also rises in imports of nonmonetary gold-finished metal shapes.

President Joe Biden’s administration has announced plans to impose steeper tariffs on imports of Chinese electric vehicles, batteries, solar products and other goods.

The government said last week a final determination will be made public in the “coming days.” There are also fears of even higher tariffs on Chinese imports should former President Donald Trump return to the White House after the November 5 election.

The politically sensitive goods trade deficit with China increased $4.9 billion to $27.2 billion. Exports to China fell $1.0 billion while imports advanced $3.9 billion.

“Imports of goods from China increased, which shows how difficult it will be to direct U.S. manufacturers away from their dependence on lower-cost goods originating from China if that is what Congress and political candidates wish to do,” said Christopher Rupkey, chief economist at FWDBONDS.

Exports gained 0.5% to $266.6 billion. Goods exports climbed 0.4% to $175.1 billion. Exports of motor vehicles, parts and engines decreased $1.7 billion to the lowest since June 2022. Consumer goods exports fell $800 million.

Exports of capital goods surged $1.8 billion to a record $56.1 billion, boosted by semiconductors.

The goods trade deficit increased 6.9% to $97.6 billion after adjusting for inflation.
…

…

Geneva — Workers have seen their slice of the global income pie shrink significantly over the past two decades, swelling inequality and depriving the combined labor force of trillions, the U.N. said Wednesday. 

The United Nations’ International Labor Organization said that the global labor income share — or the proportion of total income in an economy earned by working — had fallen by 1.6 percentage points since 2004. 

“While the decrease appears modest in terms of percentage points, in 2024 it represents an annual shortfall in labor income of $2.4 trillion compared to what workers would have earned had the labor income share remained stable since 2004,” the ILO said in a report. 

The study highlighted the COVID-19 pandemic as a key driver of the decline, with almost half of the reduction in labor income share taking place during the pandemic years of 2020-2022.  

The global crisis exacerbated existing inequalities, particularly as capital income has continued to concentrate ever more among the wealthiest, it said. 

“Countries must take action to counter the risk of declining labor income share,” Celeste Drake, the ILO deputy director-general, said in a statement. 

“We need policies that promote an equitable distribution of economic benefits, including freedom of association, collective bargaining and effective labor administration, to achieve inclusive growth, and build a path to sustainable development for all.” 

Deepening inequality

The ILO stressed that technological advances, including automation, were a key driver of the declines in labor income share. 

“While these innovations have boosted productivity and output, the evidence suggests that workers are not sharing equitably from the resulting gains,” the U.N. labor agency said. 

It voiced particular concern that the artificial intelligence boom risked deepening inequality further.  

“If historical patterns were to persist… the recent breakthroughs in generative AI could exert further downward pressure on the labor income share,” the report said, stressing “the importance of ensuring that any benefits of AI are widely distributed”. 

The ILO found that workers currently rake in just 52.3 percent of global income, while capital income — earned by owners of assets like land, machines, buildings and patents — accounts for the rest. 

Since capital income tends to be concentrated among wealthier individuals, the labor income share is widely used as a measure of inequality. 

It also helps measure progress towards the U.N. sustainable development goal aimed at significantly reducing inequality between and within countries between 2015 and 2030. 

“The report indicates slow progress as the 2030 deadline approaches,” ILO said. 

The report also emphasized the stubbornly high incidence of young people who are not in employment, education or training (NEET). 

Since 2015, the global percentage has slipped slightly, from 21.3% to 20.4% this year. 

But there are major regional differences, with a third of youth in Arab states and nearly a quarter in Africa falling into the NEET category.  

The report also highlighted a large gender gap, with the global NEET incidence among young women standing at 28.2% — more than double the 13.1% seen among young men. 
…

Abuja, Nigeria — Barely 48 hours after Nigeria’s state-owned oil company made a startling revelation, hundreds of commuters joined a line stretching many kilometers for fuel at an NNPC outlet in the capital.

In a statement Sunday, Nigeria’s state oil firm, NNPC Limited, said that financial constraints are hampering its ability to import gasoline.

The statement acknowledged local media reports in July that the oil regulator owed oil traders more than $6 billion — double its debt compared with April.

Nigeria depends on imports to meet its daily demand for gasoline — more than 66 million liters — and NNPC is the sole importer of fuel.

Abuja resident John Prince said he’d been waiting in line for hours.

“When I came in the morning, they were not selling [gasoline]. They said they were waiting for orders from above. [Now] I’ve been here for the past two hours,” he said.

Prince said that while customers waited, the gasoline station increased prices by nearly 30%.

NNPC said the situation could worsen supply in coming days but also said it is working with the government and other partners to fix the problem.

Fuel shortages have been recurring in Nigeria since last year, despite Nigerian President Bola Tinubu scrapping the fuel subsidy.

Tinubu doubles as petroleum minister, but authorities later reinstated a partial subsidy to curb inflation, the high cost of living and growing public tensions triggered by economic reforms.

But the founder of the Center for Transparency Advocacy, Faith Nwadishi, said corruption and incompetence are to blame.

“It’s just a cocktail of corruption, impunity and no regard for the people of the country,” she said. “I think it’s just another ploy to make Nigerians pay for impunity. It’s quite disheartening. This morning, I had to queue so that I could get fuel to come out. You know — man hours lost, no productivity, and nobody is making any compensation for that. It’s unfortunate.”

Last month, NNPC announced a record $1.9 billion in profits for 2023 but said it was covering for shortfalls in the government’s petrol import bill.

Ogho Okiti, an economic analyst, said, “Every other oil-producing country is smiling now except Nigeria. So, it’s a transparency problem. There’s so much uncertainty. And that heightened uncertainty and volatility will continue to drive the price and, of course, drive the conditions that we see.

“As it is, we’re losing in all ramifications — we’re paying exorbitant prices for fuel, the government is not getting the resources, and the exchange rate is worsening,” Okiti said.

Meanwhile, authorities say the Dangote Oil Refinery in the Lagos area has begun gasoline production and could supply up to 25 million liters this month.

On Tuesday, the Nigerian Midstream and Downstream Petroleum Regulatory Authority entered an agreement with the NNPC to sell crude oil to Dangote refinery in the local currency, the naira.

If that happens, it could significantly address local supply issues and save the country several billions of dollars in foreign exchange.
…

Berlin, Germany — EU chief Ursula von der Leyen has made her first picks for her top team, with the key economy vice-president job going to Italy’s far-right nominee, German newspaper Die Welt reported Tuesday.

Von der Leyen, who secured a second term as commission chief in July, is expected to unveil her proposed lineup following a Friday deadline for states to name their nominees.

Die Welt, citing senior EU diplomats and European Commission insiders, said she is set to give Raffaele Fitto from the far-right Brothers of Italy party the executive vice-president portfolio in charge of the economy and post-pandemic recovery.

The job would oversee how the bloc’s pandemic recovery fund worth hundreds of billions of euros is deployed.

Fitto is Rome’s minister for European affairs.

Others to be named EU vice presidents include Valdis Dombrovskis, from Latvia and currently EU’s trade chief. His role will be EU expansion and Ukraine reconstruction, according to the report.

France’s Thierry Breton, the bloc’s internal market commissioner, will take on industry and strategic autonomy according to Die Welt.

Spain’s Environment Minister Teresa Ribera has been chosen for a “transition” portfolio which will include ecology and digital affairs. 

The nominee for the EU’s foreign policy chief, Estonia’s outgoing leader Kaja Kallas, will also be named an executive vice president.  

Each European member state put forward nominees for von der Leyen’s 26-person team.

Slovakia’s Maros Sefcovic, currently an executive vice president, is set to remain as a commissioner in charge of inter-institutional affairs.

Czech Industry and Trade Minister Jozef Sikela will be in charge of energy, while Poland’s ambassador to the EU, Piotr Serafin, will handle budgetary issues.

After the Commission president names her line-up, the candidates undergo confirmation hearings in the European Parliament in September and October. 
…

Nairobi — Kenyan officials have long pushed for milk to be pasteurized before it reaches the marketplace, but much of the milk sold is not pasteurized because small-scale vendors and producers can’t afford the expensive machines used in the process. Now, Canadian university graduates have developed a portable, affordable pasteurization machine that could help African farmers cheaply sterilize the dairy product and reduce milk-related disease.

In Kenya, smallholder farmers produce 56% of the milk, with five million dairy cattle generating five billion liters annually. According to Kenya’s Dairy Board, only 28% of that milk is processed by dairy companies, which pasteurize it to kill harmful bacteria.

The remaining 72% is sold directly to consumers by vendors who traditionally heat and reheat the milk over a fire, a method that fails to ensure complete safety.

To address the challenge faced by millions of farmers in Africa and around the world, a group of recent university graduates from Canada has developed a portable pasteurizer machine to help farmers sterilize milk cheaply and in a healthy way.

Miraal Kabir is the head of the startup Safi, which means “pure” in Swahili. She said her technology provides health and economic benefits to users and milk consumers.

“It solves two problems. The main one being the problem of unsafe milk. It allows all of the milk being sold in the market to be safe, which isn’t the case right now. That’s leading to a lot of deaths, a lot of diseases, especially for children under five. And then on a secondary problem that it’s solving, right now in the dairy supply chain, the people who are winning the most are these large processors,” she said.

“They sell milk extremely cheap to these processors who then sell it at a huge premium. And so by allowing small scale farmers to pasteurize the milk themselves and earn the premium of pasteurized milk themselves, we’re actually empowering them financially as well.”

The device is placed on top of a pot. It has a whisk to stir the milk and ensure that it is heated uniformly. It also has a screen and LED lights, which guide the user through pasteurization. A temperature sensor tells the user when the milk is ready.

Moses Sitati is a dairy farmer in western Kenya. His cows produce 60 liters of milk per day, of which 10 liters spoil, meaning it is not suitable for human consumption.

The 40-year-old farmer has been using the pasteurizer for the past 12 months.

“I can sell milk, people can just buy milk and take it at the same time without going and boiling it fast. Now you know when you boil, wait until again by tomorrow so you boil, you are losing the milk, the first thing and also the nutrients. Now the pasteurizer helps to at least store the milk, it helps at least to preserve the milk for a long time,” he said.

In addition to farmers losing their income, raw and unpasteurized milk contains harmful bacteria like salmonella, E. coli, Brucella, tuberculosis, and Q fever.

Sitati is among the 20 farmers and vendors in Kenya and Rwanda who have purchased the pasteurizer.

The father of three happened to get the first product developed by the Safi team, which didn’t satisfy him, but he says he is happy with the final product for its safety and energy consumption.

“The first one could pasteurize milk from two to 10 liters, but this one pasteurized milk from two to 20 liters. The first one didn’t have a lid, so when pasteurizing the milk, it could spill out, so they improved this to put a lid so that there is no milk spilling out when you are pasteurizing. The first one used electricity, and this one uses solar energy. When you charge, you can use it for four hours,” he said.

Last month, the Safi company said it partnered with the Rwandan government, which helped them open for commercialization after taking part in pilot programs.

Kabir said the device tracks pasteurization data, letting farmers prove milk safety and helping regulators monitor it.

“We’ve also incorporated the data software side of things. Our device is actually able to capture all the key pasteurization data and provide it to the farmer themselves or the vendors so that they can prove that they have pasteurized their milk to their customers, but then we’re also able to aggregate all of this data and provide it to governments. Governments and regulators, they’re able to see where milk has been pasteurized, when it was pasteurized, where safe milk is being sold,” said Kabir.

The innovators say they hope to find a good manufacturer to start producing the device next year and make billions of liters of milk disease-free.
…

Washington — When Jerome Powell delivered a high-profile speech last month, the Federal Reserve chair came the closest he ever had to declaring that the inflation surge that gripped the nation for three painful years was now essentially defeated.

And not only that. The Fed’s high interest rates, Powell said, had managed to achieve that goal without causing a widely predicted recession and high unemployment.

Yet most Americans are not in the same celebratory mood about the plummeting of inflation in the face of the high borrowing rates the Fed engineered. Though consumer sentiment is slowly rising, a majority of Americans in some surveys still complain about elevated prices, given that the costs of such necessities as food, gas and housing remain far above where they were before the pandemic erupted in 2020.

The relatively sour mood of the public is creating challenges for Vice President Kamala Harris as she seeks to succeed President Joe Biden. Despite the fall of inflation and strong job growth, many voters say they’re dissatisfied with the Biden-Harris administration’s economic record — and especially frustrated by high prices.

That disparity points to a striking gap between how economists and policymakers assess the past several years of the economy and how many ordinary Americans do.

In his remarks last month, given at an annual economic symposium in Jackson Hole, Wyoming, Powell underscored how the Fed’s sharp rate hikes succeeded much more than most economists had predicted in taming inflation without hammering the economy — a notoriously difficult feat known as a “soft landing.”

“Some argued that getting inflation under control would require a recession and a lengthy period of high unemployment,” Powell said.

Ultimately, though, he noted, “the 4-1/2 percentage point decline in inflation from its peak two years ago has occurred in a context of low unemployment — a welcome and historically unusual result.”

With high inflation now essentially conquered, Powell and other central bank officials are preparing to cut their key interest rate in mid-September for the first time in more than four years. The Fed is becoming more focused on sustaining the job market with the help of lower interest rates than on continuing to fight inflation.

Many Americans ‘have taken a big hit’

Many consumers, by contrast, are still preoccupied most by today’s price levels.

“From the viewpoint of economists, central bankers, how we think about inflation, it really has been a remarkable success, how inflation went up, has come back, and is around the target,” said Kristin Forbes, an economist at MIT and a former official at the United Kingdom’s central bank, the Bank of England.

“But from the viewpoint of households, it has not been so successful,” she added. “Many have taken a big hit to their wages. Many of them feel like the basket of goods they buy is now much more expensive.”

Two years ago, economists feared that the Fed’s ongoing rate hikes — it ultimately raised its benchmark rate more than 5 percentage points to a 23-year high in the fastest pace in four decades — would hammer the economy and cause millions of job losses. After all, that’s what happened when the Fed under Chair Paul Volcker sent its benchmark rate to nearly 20% in the early 1980s, ultimately throttling a brutal inflationary spell.

In fact, at Jackson Hole two years ago, Powell himself warned that using high interest rates to defeat the inflation spike “would bring some pain to households and businesses.”

Yet now, according to the Fed’s preferred measure, inflation is 2.5%, not far above its 2% target. And while a weaker pace of hiring has caused some concerns, the unemployment rate is at a still-low 4.3%, and the economy expanded at a solid 3% annual rate last quarter.

While no Fed official will outright declare victory, some take satisfaction in defying the predictions of doom and gloom.

“2023 was a historic year for inflation falling,” said Austan Goolsbee, president of the Chicago Fed. “And there wasn’t a recession, and that’s unprecedented. And so we will be studying the mechanics of how that happened for a long time.”

Measures of consumer sentiment, though, indicate that three years of hurtful inflation have dimmed many Americans’ outlook. In addition, high loan rates, along with elevated housing prices, have led many young workers to fear that homeownership is increasingly out of reach.

‘Inflation overhang’

Last month, the consulting firm McKinsey said that 53% of consumers in its most recent survey “still say that rising prices and inflation are among their concerns.” McKinsey’s analysts attributed the escalated figure to “an ‘inflation overhang.” That’s the belief among analysts that it can take months, if not years, for consumers to adjust emotionally to a much higher level of prices even if their pay is keeping pace.

Economists point to several reasons for the wide gap in perceptions between economists and policymakers on the one hand and everyday consumers and workers on the other.

The first is that the Fed tailors its interest rate policies to manage inflation — the rate of price changes — rather than price levels themselves. So when inflation spikes, the central bank’s goal is to return it to a sustainable level, currently defined as 2%, rather than to reverse the price increases. The Fed’s policymakers expect average wages to catch up and eventually to allow consumers to afford the higher prices.

“Central bankers think even if inflation gets away from 2% for a period, as long as it comes back, that’s fine,” Forbes said. “Victory, mission accomplished. But the amount of time inflation is away from 2% can have a major cost.”

Research by Stefanie Stantcheva, a Harvard economist, and two colleagues found that most people’s views of inflation are very different from those of economists. Economists in general are more likely to regard inflation as a consequence of strong growth. They often describe inflation as a result of an “overheating” economy: Low unemployment, strong job growth and rising wages lead businesses to sharply increase prices without necessarily losing sales.

By contrast, a survey by Stantcheva found, ordinary Americans “view inflation as an unambiguously bad thing and very rarely as a sign of a good economy or as a byproduct of positive developments.”

Her survey respondents also said they believed that inflation stems from excessive government spending or greedy businesses. They “do not believe that (central bank) policymakers face trade-offs, such as having to reduce economic activity or increase unemployment to control inflation.”

Perceived recession

As a result, few consumers probably worried about the potential for a downturn as a result of the Fed’s rate hikes. One opinion survey, in fact, found that many consumers believed, incorrectly, that the economy was in a recession because inflation was so high.

At the Jackson Hole conference, Andrew Bailey, governor of the Bank of England, argued that central banks cannot guarantee that high inflation will never appear — only that they will try to drive it back down when it does.

“I get this question quite often in Parliament,” Bailey said. “People say, ‘Well you failed to control inflation.’ I said no.”

The test of a central bank, he continued, “is not that we will never have inflation. The test of the regime is how well, once you get hit by these shocks, you bring it back to target.”

Still, Forbes suggested that there are lessons to be learned from the post-COVID inflation spike, including whether inflation was allowed to stay too high for too long, both in the U.S. and the U.K. The Fed has long been criticized for having taken too long to start raising its benchmark rate. Inflation first spiked in the spring of 2021. Yet the Fed, under the mistaken impression that high inflation would prove “transitory,” didn’t begin raising rates until nearly a year later.

“Maybe should we rethink … where we seem to be now: ‘As long as it comes back four to five years later, that’s fine,’ ” she said. “Maybe four to five years is too long.

“How much unemployment or slowdown in growth should we be willing to accept to shorten the length of time that inflation is too high?”
…

…

…

New York — A broadening rally in U.S. stocks is offering an encouraging signal to investors worried about concentration in technology shares, as markets await key jobs data and the Federal Reserve’s expected rate cuts in September.

As the market’s fortunes keep rising and falling with big tech stocks such as Nvidia NVDA.O and Apple AAPL.O, investors are also putting money in less-loved value stocks and small caps, which are expected to benefit from lower interest rates. The Fed is expected to kick off a rate-cutting cycle at its monetary policy meeting on Sept. 17-18.

Many investors view the broadening trend, which picked up steam last month before faltering during an early August sell-off, as a healthy development in a market rally led by a cluster of giant tech names. Chipmaker Nvidia, which has benefited from bets on artificial intelligence, alone has accounted for roughly a quarter of the S&P 500’s year-to-date gain of 18.4%.

“No matter how you slice and dice it you have seen a pretty meaningful broadening out and I think that has legs,” said Liz Ann Sonders, chief investment officer at Charles Schwab.

Value stocks are those of companies trading at a discount on metrics like book value or price-to-earnings and include sectors such as financials and industrials. Some investors believe rallies in these sectors and small caps could go further if the Fed cuts borrowing costs while the economy stays healthy.

The market’s rotation has recently accelerated, with 61% of stocks in the S&P 500 .SPXoutperforming the index in the past month, compared to 14% outperforming over the past year, Charles Schwab data showed.

Meanwhile, the so-called Magnificent Seven group of tech giants — which includes Nvidia, Tesla TSLA.O and Microsoft MSFT.O — have underperformed the other 493 stocks in the S&P 500 by 14 percentage points since the release of a weaker-than-expected U.S. inflation report on July 11, according to an analysis by BofA Global Research.

Stocks have also held up after an Nvidia forecast failed to meet lofty investor expectations earlier this week, another sign that investors may be looking beyond tech. The equal weight S&P 500 index, a proxy for the average stock, hit a fresh record [last] week and is up around 10.5% year-to-date, narrowing its performance gap with the S&P 500.

“When market breadth is improving, the message is that an increasing number of stocks are rallying on expectations that economic conditions will support earnings growth and profitability,” analysts at Ned David Research wrote.

Value stocks that have performed well this year include General Electric GE.N and midstream energy company Targa Resources TRGP.N, which are up 70% and 68%, respectively. The small-cap focused Russell 2000 index, meanwhile, is up 8.5% from its lows of the month, though it has not breached its July peak.

The jobs report “tends to be one of the more market moving releases in general, and right now it’s going to get even more attention than normal.”

Investors are unlikely to turn their back on tech stocks, particularly if volatility gives them a chance to buy on the cheap, said Jason Alonzo, a portfolio manager with Harbor Capital.

Technology stocks are expected to post above-market earnings growth over every quarter through 2025, with third-quarter earnings coming in at 15.3% compared with a 7.5% gain for the S&P 500 as a whole, according to LSEG data.

“People will sometimes take a deep breath after a nice run and look at other opportunities, but technology is still the clearest driver of growth, particularly the AI theme which is innocent until proven guilty,” Alonzo said.
…

Algiers — Algeria has been approved for membership in the BRICS New Development Bank (NDB), the country’s finance ministry has  announced.

The decision was taken on Saturday and announced by NDB chief Dilma Roussef at a meeting in Cape Town, South Africa.

By joining “this important development institution, the financial arm of the BRICS group, Algeria is taking a major step in its process of integration into the global financial system,” the Algerian finance ministry said in a statement.

The bank of the BRICS group of nations — whose name derives from the initials of founding members Brazil, Russia, India, China and South Africa — is  aimed at offering an alternative to international financial institutions like the World Bank and IMF.

Algeria’s membership was secured thanks to “the strength of the country’s macroeconomic indicators” which have recorded “remarkable performances in recent years” and allowed the North African country to be classified as an “upper-tier emerging economy,” the finance ministry said.

Membership in the BRICS bank will offer Algeria — Africa’s leading exporter of natural gas — “new prospects to support and strengthen its economic growth in the medium and long term,” it added.

Created in 2015, the NDB’s main mission is to mobilize resources for projects in emerging markets and developing countries.

It has welcomed several country as new members, including Egypt, the United Arab Emirates, Iran and Saudi Arabia. 
…

NEW YORK — While many costs have come down for small businesses, rents remain high and in some cases are still rising, forcing many owners into some uncomfortable decisions.

“Every time the rent goes up, we have to raise prices, to keep up with the cost,” said Adelita Valentine, owner of HairFreek Barbers in Los Angeles. “But with the cost of living, it makes it difficult on our customers.”

Other owners are choosing to be late on payments or seeking out new locations where the rent is lower. A few are pushing back against their landlord.

Although inflation is easing, it remains a top concern for small businesses. According to Bank of America internal data, rent payments per small business client rose 11% year-over-year in July. That’s more than twice the increase for renting and owning a residence, a metric known as shelter, according to the government’s monthly Consumer Price Index. That figure rose 5.1% in July.

And although the situation has improved since the height of the pandemic, a survey by business networking platform Alignable of more than 6,000 small business owners found that 41% could not pay their July rent on time and in full. And 52% said they’ve encountered rent spikes in the past six months.

The rent for Valentine’s barbershop rose to $4,000 in January from $3,600 in December, the fifth increase in the past eight years. She had to raise the price for her cuts from $35 to $40.

Two months ago, she moved locations for a cheaper $3,200 rent, but her space is smaller now and she sees fewer families coming in.

“A lot of people can’t afford to take a whole family to get haircuts,” after the price increase, she said.

Peter Yu has owned iPAC Automotive, an auto repair and detailing shop in Ontario, Canada, for six years. He said the rent on the shop typically went up about 4% a year. But when his landlord sold the property to a new owner, Yu’s rent jumped from about $1,800 (2,500 Canadian dollars) to about $2,700 (3,700 Canadian dollars) after three months.

He contemplated moving but decided that the cost of a move would be more than just paying the extra rent.

Yu tried to raise prices a month ago, but customers would come in and say “Oh, its too expensive,” and leave, he said. So, he had to drop the price increase in order to get those customers back.

“When we do try to raise our prices, consumers don’t have the money to pay for it. They’re looking for financing options,” he said. Yu’s services run the gamut from paint correction that costs a few hundred dollars to troubleshooting problematic EV battery and electric drive units for out-of-warranty Teslas that can cost up to $15,000.

So instead, he’s going to try to improve his marketing, close more sales, and find a way to offer more financing.

Standing firm against a landlord sometimes works. Janna Rodriguez has run her home-based The Innovative Daycare Corp. in Freeport, New York, since 2018. When she first signed her lease, she paid $3,500, plus costs including landscaping and maintenance. In 2020, the pandemic began, and her landlord raised her rent to $3,800 and also made her start paying half of the homeowner’s insurance. Last year, the landlord raised her rent to $4,100, plus the additional expenses.

Rodriguez raised her prices for the first time, by $10 per child per week, to help offset the rising rent.

This year she successfully pushed back when the landlord wanted to raise the rent yet again.

“I said to them, if you do that, then I’m going to find another property to move my business to, because at this point now you’re trying to bankrupt a business, right?” 

It’s worked – so far. But Rodriguez is worried about the future.

For others, negotiating a late payment is an option. Nicole Pomije owner of Minneapolis-based The Cookie Cups, which makes cookie kits for kids, has a 372-square-meter office space along with a warehouse where she develops her line of baking kits. Her rent rose 10% this year to $4,000 monthly. Then there are unanticipated bills, such as $1,500 for snow plowing.

“There’s so much stuff that pops up that you just you never expect,” she said. “And it’s always when you never expect it.”

Pomije hasn’t raised prices, but instead tried to mitigate the higher rent costs by buying materials in bulk – like ordering 5,000 boxes instead of 1,000 boxes for a 40% discount — and finding cost savings elsewhere.

Still, there have been several months over the past couple of years where she couldn’t pay rent on time. So, far the landlord has been amenable.

“If we have a conversation like hey, we don’t know if we’re going to make it for the first this month. It might be closer to the tenth,” she said.

Asked if she thinks costs might ease in the future, Pomije said she is focused on the present.

“It’s weird, but I’m trying not to think about the future too much and I’m trying to just do what we have to do, and get ready for a holiday season and just, like, get everything paid on time now,” she said. “And then we’ll kind of reevaluate everything in January.”
…

FRANKFURT/TALLINN — Inflation in the euro zone fell to its lowest level in three years in August, setting the stage for a further cut in the European Central Bank’s interest rates next month despite an Olympics-driven surge in the price of services.

The ECB has started winding down a two-year campaign against high inflation that followed the brisk reopening of the economy after the COVID-19 pandemic and Russia’s invasion of Ukraine.

Inflation in the 20 countries sharing the euro currency fell to 2.2% this month, the slowest pace since July 2021 and closing in on the ECB’s 2% target, according to a flash reading by the European Union statistics office, Eurostat.

While the fall was mostly driven by lower energy prices and may even reverse later this year, it was still likely to seal the deal on a second ECB rate cut on Sept 12 after a first move in June.

“The significant drop in headline inflation in August makes the September cut a foregone conclusion,” said Tomas Dvorak, a senior economist at Oxford Economics.

Even ECB board member and prominent policy ‘hawk’ Isabel Schnabel appeared to open the door to more easing on Friday, saying further gradual rate cuts might not derail the disinflation process as some policymakers had feared.

Still, the report showed price growth in the services sector – which is closely watched by policymakers because it better reflects domestic demand rather than external conditions – accelerated to 4.2% from an already high 4.0%.

This was the probable result of a boost from the Olympic Games in Paris, but also greater spending power by workers after some recent pay increases.

“This likely reflects a relatively tight job market, as the decrease in the unemployment rate in July shows,” said Gian Luigi Mandruzzato, senior economist at EFG Asset Management.

For now, markets see about six rate cuts before the end of next year, roughly one more cut than is baked into the ECB’s own economic projections, indicating that markets are more optimistic about the price outlook than the ECB.

This is partly because market economists see a bigger dip than the ECB’s own staff in inflation this autumn.

Policymakers say they will not be confident in the inflation outlook until wage growth slows, with Germany’s central bank especially vocal about this risk.

Still, with inflation now within a whisker of the ECB’s target, the euro zone’s central bankers were likely to broaden their debate from the single-minded focus on inflation to take into account signs of economic weakness.

Wage growth has slowed sharply and unemployment is already rising in around a quarter of the euro zone’s 20 countries. Survey data among firms and households suggest there is further labour market deterioration in store.

Lending has dwindled to a trickle since the ECB jacked up rates last year, causing investment to dry up and hampering sectors that rely on it, such as construction and manufacturing.

This has left euro zone economic growth barely humming along for over a year, with weakness in industrial powerhouse Germany only partly offset by strength in services-oriented countries such as Spain.

“We think the ECB is already behind the curve, fixated too much on current and narrow measures of inflation while not paying enough attention to weak growth, with potential long-term damaging impacts,” Oxford Economics’ Dvorak said.
…

Washington — The U.S. economy expanded more than initially estimated in the second quarter this year, the Department of Commerce said Thursday, on stronger consumer spending than originally anticipated.

The world’s biggest economy grew at an annual rate of 3.0% in the April-to-June period, up from 2.8% according to an earlier estimate.

Analysts had expected no revision to the figure.

“The update primarily reflected an upward revision to consumer spending,” the Commerce Department said.

Unexpectedly robust consumption — even in the face of high interest rates — has helped to bolster the U.S. economy in recent times. But with households depleting pandemic-era savings, the anticipation was for consumption to pull back.

In the latest revision, the higher spending was partly offset by downward revisions in areas such as business investment, exports and government spending.

Imports, however, were revised higher.

The 3.0% figure for the second quarter this year was an uptick from 1.4% growth in the first quarter.

The Federal Reserve rapidly increased interest rates to tackle surging inflation in 2022. It is widely expected to make its first post-pandemic rate cut in September. This could provide a boost to the economy.
…