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Inflation

Dow drops by over 1,000 points

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dow

The persistent inflation is causing investors so much anxiety. The Dow fell more than 1,050 points. There was a widespread decline. The persistent inflation that is causing investors so much anxiety. In late-afternoon trade on Tuesday, the Dow fell more than 1,050 points, or 3.3%. Even worse, the S&P 500 and Nasdaq fell 3.6% and … Read more

The worst of the inflation may now be behind us

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The worst

The figures could alter the Federal Reserve’s calculations, as it is certain to increase interest rates again at its next policy meeting on September 21. The third consecutive rise of that size is still expected to be three-quarters of a percentage point, or 75 basis points, according to traders. However, traders are anticipating that the … Read more

Siemens posts loss as energy spin-off struggles

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Siemens posts loss

German industrial conglomerate Siemens said Thursday it had made a significant net loss as it counted the cost of struggles at its former energy unit.

Between April and June, Siemens recorded a net loss of 1.5 billion euros ($1.5 billion), after a mirror 1.5-billion-euro profit in the same period last year.

The loss was due to a 2.7 billion euro devaluation of the group’s “stake in Siemens Energy and Russia-related impacts totalling 0.6 billion euros”, Siemens said in a statement.

Shares in Siemens Energy, which was spun off from its parent in 2020, have fallen around 25 percent since the start of the year.

Siemens Energy has had to contend with the struggles of its own wind-energy subsidiary, Siemens Gamesa, which has struggled to turn a profit despite surging demand for renewable energy.

Quarterly revenues at Siemens, which makes products ranging from trains to factory equipment, rose 11 percent year-on-year to 17.9 billion euros, with progress seen across the board.

Its “digital industries” division, which includes factory automation, led the way with sales up 18 percent to 4.9 billion euros.

The improvement came despite the turbulence caused by the Russian invasion of Ukraine, soaring inflation and persistent bottlenecks in supply chains that can be traced back to the coronavirus pandemic.

The Munich-based group had been able “to avoid larger disruptions due to supply chain risks”, it said.

Siemens, which runs its business year from October to September, said it continued to expect a profitable 12-month period, while reducing its guidance in line with the hit to its stake in Siemens Energy.

As such, the group expected earnings per share to be around 5.33 to 5.73 euros, down from an earlier estimate around nine euros.

Otherwise, Siemens still expected revenue growth in the current business year of six to eight percent.

 

 

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ArcelorMittal profits hit by Ukraine war, inflation

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ArcelorMittal profits
  • ArcelorMittal’s profits fall 2 percent to $3.9 billion in the second quarter.
  • Steel output falls 18 percent to 14.6 million tons.
  • Sales increase by 14.5 percent to 22 billion euros.

ArcelorMittal, the world’s number-two steel maker, said on Thursday that profits fell in the second quarter, weighed down by inflation and the war in Ukraine.

The group said in a statement its performance was “overshadowed by the outbreak of war in Ukraine, where we have steel and mining operations”.

“Globally, the conflict is impacting growth and adding further inflationary pressure, which is spilling over into weakening of demand (for steel),” the group said.

In the second quarter, net profit eased by two percent to $3.9 billion.

But over the first half, ArcelorMittal’s bottom line increased by 27 percent to $8.0 billion, primarily due to a strong performance in the first three months of the year.

ArcelorMittal said steel output fell by 18 percent to 14.6 million tonnes in the period from April to June.

Second-quarter sales, on the other hand, grew by 14.5 percent to just over 22 billion euros, driven by an increase of some 30 percent in steel prices.

ArcelorMittal employs some 26,000 people in Ukraine and suspended its operation there when the war broke out.

But it said in May it would resume operations in Ukraine, even if only one of the three furnaces there has since restarted.

Looking ahead, chief executive Adity Mittal said that “despite the more uncertain global macro outlook”, the business was “well positioned to effectively manage through the cycle”.

“The long-term outlook for steel demand also remains positive, underpinned by the scale of opportunity related to the energy transition and the continuing growth of developing economies,” Mittal said.

 

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US makes huge interest rate rise to tame soaring prices

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  • The Federal Reserve announced a 0.75 percentage point increase in its key rate, aiming for a range of 2.25 percent to 2.5 percent. Since March, the bank has raised borrowing costs in an attempt to cool the economy and reduce price inflation.
  • There are growing concerns that the moves will cause the US to enter a recession. Interest rates are being raised at an unusually rapid pace by the Federal Reserve.
  • Inflation in the United States rose to 9.1% last month, higher than the Fed’s 2% target.

The US Federal Reserve has announced another unusually large interest rate hike as it battles to keep the world’s largest economy’s prices under control.

The Federal Reserve announced a 0.75 percentage point increase in its key rate, aiming for a range of 2.25 percent to 2.5 percent.

Since March, the bank has raised borrowing costs in an attempt to cool the economy and reduce price inflation.

However, there are growing concerns that the moves will cause the US to enter a recession.

Recent data show a drop in consumer confidence, a slowing housing market, an increase in jobless claims, and the first contraction in business activity since 2020.

Many economists predict that the US economy will contract for the second quarter in a row.

That milestone is considered a recession in many countries, though it is measured differently in the United States.

Why are prices increasing so rapidly?
The Eurozone raises interest rates for the first time in 11 years.
At a press conference, Federal Reserve Chairman Jerome Powell acknowledged that the economy was slowing in some areas, but said the Fed was likely to keep raising interest rates in the coming months despite the risks, pointing to inflation that is at a 40-year high.

“Without price stability, nothing works in the economy,” he said. “We need to see a decrease in inflation… That is something we cannot avoid.”

How do higher interest rates combat inflation?
Higher interest rates contribute to the fight against inflation by increasing the cost of borrowing, encouraging individuals and businesses to borrow less and spend less. In theory, this should result in lower demand and slower price increases, but it also means less economic activity.

Mr Powell stated that a slowdown was “necessary.”

“We’re not attempting a recession, and we don’t believe we need to,” he added.

The International Monetary Fund (IMF) warned this week that the global economy may be on the verge of a recession as US growth slows and price increases squeeze households around the world.

Already, some companies in the technology and housing sectors, which have seen rapid growth in recent years due to low borrowing costs, have announced job cuts or plans to slow hiring, citing the market shift.

However, with inflation so high, central banks “don’t really have a choice” but to raise interest rates, according to International Monetary Fund economist Pierre-Olivier Gourinchas, director of research.

The European Central Bank announced an unexpectedly large rate hike earlier this month, its first in 11 years. Since December, the Bank of England has been raising interest rates, and dozens of other countries have followed suit.

“The majority of central banks are tightening monetary policy,” Mr Gourinchas said. “The big question going forward is how quickly this monetary tightening can bring inflation back to reasonable levels.”

How high is inflation in the United States?
In the United States, inflation rose to 9.1 percent last month, owing to higher prices for gasoline, food, and shelter. That is significantly higher than the Fed’s 2% target and the fastest rate since 1981.

Efforts to contain price increases at the time prompted the Fed to raise interest rates to more than 15%, plunging the economy into a year-long slump.

The fourth rate hike since March will raise the Fed’s borrowing rate to more than 2.25 percent, a level last seen in 2019, just above where rates were in the months before the pandemic hit in 2020.

Businesses and households, on the other hand, have grown accustomed to low interest rates, which have rarely risen above 2% since the 2008 financial crisis. In addition, the Fed is raising rates at an unusually rapid pace, with Wednesday’s increase marking the second 0.75 percentage point increase in a row.

“This is quickly proving to be one of the most aggressive hiking cycles in recent decades,” said Seema Shah, chief strategist at Principal Global Investors.

“It will take a sustained show of strength to combat four-decade-high inflation.”

 

She claims that her business, which worked on loans for prospective home buyers in one of America’s hottest housing markets, “fell off a cliff” in March, when the Federal Reserve began to raise interest rates.

She wasn’t concerned about finding a new job when her company informed her that it was eliminating her position. However, the 29-year-old claims that dozens of applications and aggressive networking in the weeks since have resulted in nothing.

She is now concerned that she will be out of work for months until the market recovers.

“I feel like I spent two years rejecting job offers and now I’m out on the streets begging,” she says. “I’m concerned about how long the job market and housing market will remain depressed. Thousands of jobs will be lost if this trend continues.”

Analysts predict that the Fed will raise interest rates to between 3% and 4% by the end of the year. Financial markets rose following Mr Powell’s press conference on hopes that the rate of inflation will slow in the coming months.

Analysts believe the United States can avoid severe economic pain, citing a job market that continues to add hundreds of thousands of jobs each month. Consumer spending, which accounts for nearly 70% of the economy, has also held up, albeit at a slower pace.

“Getting it just right so that it cools the economy without tipping it into recession – that’s a difficult proposition even in the most normal of times, and we’re in a very complicated environment right now,” said Madhavi Bokil of Moody’s Investors Service.

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Britain’s train network sees new strike action over pay

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Britain's train network
  • More than 40,000 members of the RMT and TSSA unions went on strike for 24 hours.
  • Strike action last month brought Britain’s train network to a halt for three days.
  • Another union, ASLEF, representing train drivers, plans further strikes over pay and conditions.

Britain’s train network walked out again in a dispute over pay and conditions, the latest in a wave of industrial unrest as wages fail to keep pace with surging inflation.

More than 40,000 members of the RMT and TSSA unions went on strike for 24 hours, forcing almost half of Britain’s rail network to close, with train companies operating on a significantly restricted timetable and other sections of the nation having no rail service at all.

Network Rail advised travellers, including commuters, families on summer vacation, and sports fans on their way to the Commonwealth Games in Birmingham, which begin on Thursday, to travel only when absolutely necessary.

Because of changes in working patterns during the coronavirus pandemic, many office workers were able to work from home.

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Next UK prime minister faces winter of painful public sector strikes

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  • Millions of public sector workers angry that their pay is falling further behind inflation. Unions canvassing members, including teachers, nurses and civil servants about a walkout.
  • Summer of discontent now appears set to last the rest of the year after series of strikes.
  • Teacher unions are consulting with members about possible strike action. Civil service unions and the Royal College of Nursing are also on board.

The next prime minister of the United Kingdom will inherit the worst relations with unions and workers since the 1970s, with millions of public sector workers angry that their pay is falling further behind inflation.

Discontent among government employees is likely to be Boris Johnson’s most immediate legacy, regardless of whether Foreign Secretary Liz Truss or former Chancellor of the Exchequer Rishi Sunak wins the election in early September.

The pay settlements for 2.5 million British public sector workers announced last week sparked outrage. The government’s offer was almost always lower than the rate of inflation. Unions are now canvassing members, including teachers, nurses, and civil servants, about a walkout in protest this autumn.

This follows the devastating rail strikes that brought London to a halt in June. The summer of discontent, marked by waves of striking barristers and workers in formerly nationalised industries such as rail, mail, and telecommunications, now appears set to last the rest of the year.

Passengers at a nearly empty Newcastle station on Thursday morning, as train services remain disrupted as a result of the Rail, Maritime and Transport union’s nationwide strike. PA

 

There are even whispers among union officials of a “winter of discontent,” complete with Shakespearean overtones and memories of the rolling industrial action that brought down the Labour government and catapulted Margaret Thatcher’s Conservative Party to power in 1978 and 1979.

“I’ve never seen such rage,” said Kevin Rowan, head of organisation and services at the Trades Union Congress.

The most recent major public sector strike occurred in 2011 in response to pension reforms, when up to 2 million teachers, civil servants, National Health Service employees, and others went on strike for one day. “This is a bad time in terms of how people are feeling,” Mr Rowan said.

Wage growth across the economy is struggling to keep up with inflation, despite reaching a 40-year high of 9.4 percent. While some private-sector workers are receiving significant raises, particularly in hospitality and other trades where workers are in high demand, public-sector pay has lagged for more than a decade and is falling further behind.

 

STRIKES IN DETAIL
Which workers are set to strike this summer in the United Kingdom?

This has resulted in the greatest squeeze on consumer spending power in at least two decades, resulting in a cost-of-living crisis that research groups predict will result in more people falling into poverty. Traditional middle-class jobs are not immune.

Teacher unions, including principals, are consulting with members about possible strike action. Civil service unions and the Royal College of Nursing, whose General Secretary Pat Cullen welcomed “the growing public support, including over strike action,” are also on board.

According to Mr. Rowan, the number of consultations unions have with their members is extremely unusual. He anticipates that further ballots on whether to strike will be held in the coming weeks.

The UK public sector employs 5.5 million people (including local government and ancillary workers), accounting for approximately 15% of all workers in the economy.

 

Ballots and strike threats are frequently used to force employers to negotiate. For the time being, Ms Truss and Mr Sunak are both standing firm. They insist on the fairness of public sector contracts, with Ms Truss making a tough stance on trade unions a cornerstone of her bid to woo Tory members after reaching the final stage of the leadership election last week.

 

 

However, it may be difficult to maintain this stance in the face of growing public support for strike action. According to an Opinium poll, sympathy for strikers grew after 50,000 rail workers walked out in early June demanding better pay and terms.

“There has been a mood shift,” TUC general secretary Frances O’Grady told members of parliament last week. “We saw that with the public outpouring of support for some of the recent strikes.”

That support could be attributed to the elevated status of key workers in the national consciousness during the pandemic. Week after week, people across the country came out to “clap for carers” in hospitals and emergency services that cared for Covid-19 victims.

Nonetheless, the pressure on public sector workers is increasing, making them more important than ever. A total of 6.6 million patients are currently waiting for NHS treatment. There are also over 100,000 unfilled positions. According to the independent NHS Pay Review Body, anxiety, stress, and depression are on the rise, causing more problems with sickness rates and employee retention.

 

A similar story can be told about staff retention in education. Within five years, one-third of new teachers leave the profession. One way to boost morale is through pay.

“Pay isn’t everything, but it sure helps,” Ms O’Grady said.

Economic nonsense that keeps wages low

The trend towards weaker public sector pay has accelerated in the past five years, most starkly this year. The latest public sector settlements were for pay increases of about 5 per cent, which is below the 7.2 per cent private-sector average, according to the Office for National Statistics, and 4.4 per cent below inflation.

 

“To give you three examples, the TUC has calculated that since 2010 nurses are worse off in real terms by more than £5,000 ($6,013); porters by £2,500; and paramedics by £6,700,” said Ms O’Grady.

 

Aggravating the matter is the fact that government departments have been told to find savings of up to £2 billion to cover some of the pay rises. The next prime minister will be under pressure to borrow that additional money.

 

Then there is the argument that public sector pay restraint is needed to prevent a wage price spiral, but economists disagree. The Institute for Fiscal Studies said: “Fears of a ‘wage-price spiral’ in the public sector are overblown, given the fact that most public sector goods do not have market prices that can rise in response to higher wages.”

 

Health workers and teachers do not like striking, given the vital public service aspect of their roles, so it is possible that some of the disputes can be defused. But with anger rising, unwelcome echoes of the 1970s are growing louder, raising the risk of another era of industrial action and stagflation.

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Russia drops interest rate by 1.5% as inflation falls

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Russia inflation

Friday, Russia central bank slashed its interest rate to 8%, a significant decrease from the previous month’s setting of 9.5%, citing a decline in inflation.

Earlier this year, in an effort to stabilise the rouble following Moscow’s invasion of Ukraine in February, the bank increased the rate to 20%. Since then, it has been progressively reversing the increase, and rates are currently lower than they were just before the invasion.

“Current consumer price growth rates remain low, contributing to a further slowdown in annual inflation,” the bank said in a statement. “Inflation expectations of households and businesses have significantly decreased, reaching the levels of spring 2021.”

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UK workers see their largest salary decrease in two decades

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UK workers
  • Real pay fell by 2.8 percent between March and May compared to the same period in 2016.
  • Consumer prices in the UK reached a 40-year high of 9.1% in May.
  • The pound has also beat this year, losing 11% of its value to the US dollar.

Workers in the UK are grappling with the largest pay cut in more than 20 years as rising food and energy costs significantly reduce take-home earnings.

Real pay, which accounts for inflation, fell by 2.8 percent between March and May compared to the same period in 2016, according to statistics issued by the Office for National Statistics on Tuesday.

Since the ONS started keeping statistics in 2001, that is the fastest fall.

UK Prime Minister Boris Johnson resigned earlier this month after a string of ethics issues proved to be too expensive for the administration to ignore. His replacement, who is now being chosen, has a sizable number of economic and financial difficulties.

Global inflation has been fueled for months by rising energy and commodity costs, which have been made worse by Russia’s invasion of Ukraine. Among the richest countries in the world, the one with the fifth-largest GDP has been among the hardest hit.

Consumer prices in the UK reached a 40-year high of 9.1% in May, the highest among the G7 leading countries. Despite a series of interest rate hikes, it is predicted that consumer prices could surpass 11% later this year.

Additionally, households are under pressure. The largest cost-of-living crisis to hit the British people in decades has been brought on by eye-watering electricity and grocery costs. The second-largest decrease in disposable income since records began in 1964, according to the Bank of England, is expected to occur this year.

According to figures from research firm Kantar released on Tuesday, grocery bill inflation reached nearly 10% in the four weeks ending on July 10. This implies that Britons should budget an additional £454 ($545) for food and other necessities this year.

According to energy analysis company Cornwall Insight, energy costs would likely exceed £3,000 ($3,603) per year for millions of homes starting in October, up from an increase of 54% in April. The government then adjusts a price cap that places a cap on the amount suppliers can bill customers per unit of energy at that point.

The government of Boris Johnson has pledged to provide payments totaling £400 ($480) per household to assist the millions of people who are having trouble paying their energy bills. Additionally, the government gave in to pressure last month and proposed a £5 billion ($6 billion) levy on oil and gas company windfall gains.

The country’s growth has been stunted by high prices and detrimental Brexit policies. The UK economy was predicted to stagnate by the Organization for Economic Co-operation and Development last month, with 0% GDP growth anticipated for 2023. Next year, that would be the G7’s lowest performance.

The pound has also beat this year, losing 11% of its value to the US dollar, which will probably increase the cost of importing products.

But there is one encouraging thing. According to preliminary ONS data, hiring accelerated last month, with the number of employees increasing by 3% from a year earlier.

 

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Nobel prize-winning economist Joseph Stiglitz calls for windfall profits tax in Australia

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A windfall gains tax, according to Joseph Stiglitz, is a “no-brainer” that has been abandoned because of the influence of large corporations. The Nobel-winning economist personally lobbied Australia’s treasurer to enact the tax and warned against excessive interest rate increases. Treasurer Jim Chalmers warns of “confronting” inflation and wage projections. Australia today has an unemployment … Read more

Even when retailers cut prices to clear inventory, people pay more

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retailers

Clothing costs increased 5.2 percent over the last year and 0.8 percent in June compared to May. The overall inflation rate increased by a higher-than-anticipated 9.1 percent from a year earlier. Sales of women’s formal dresses increased by 42% from January to May, according to NPD. In the warehouses and stores of many retailers, excess … Read more

Google becomes the latest tech giant to slow hiring

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Google

Google plans to restrict its hiring pace for the balance of the year. Announcement was made in an internal message by CEO Sundar Pichai. Google told said that the letter was real, but it would not elaborate. In the latest indication that major businesses are rethinking staffing amid a market slump that has hit Silicon … Read more

IMF warns of ‘darkening’ global economic outlook

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IMF

The head of the IMF, Kristalina Georgieva, warns that the economic picture has darkened. Inflation in the US has risen to 9.1%, the highest level in more than 40 years. The G20 finance ministers and governors of the world’s central banks are meeting in Bali. The head of the International Monetary Fund has stated that … Read more

A truly massive interest rate hike is now on the table

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interest rate

Consumer prices increased 9.1% year over year in June, a record 40-year high. Fed Governor Christopher Waller: “I believe the markets would suffer a heart attack”. This puts pressure on central bankers to immediately stabilise the situation. After a rocky start, central banks have demonstrated that they are committed to keeping inflation under control. Now … Read more

US stocks plummet after a higher inflation reading

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us stocks

The annual rate of US consumer price inflation reached 9.1 percent last month. Yields increase when prices decline. Since last week, the two-year yield has exceeded that of the benchmark 10-year note. Inverted yield curve has preceded each recession over the past 50 years. US stocks: A carefully monitored indicator of recession risk on Treasury … Read more

UK economy grows but fears remain over rising prices

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UK

The Office for National Statistics said that the economy expanded by 0.5 percent in May. Every sector of the economy saw growth, including manufacturing, transport, and construction. There is still a real risk that the UK could enter recession, according to chief economist Paul Dales. According to official data, the UK economy expanded in May … Read more

Bostic: Recent inflation statistics were not as positive as expected

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Recent inflation

Recent inflation data is “not as encouraging as I would have liked,” Atlanta Fed President Raphael Bostic says. He expects another 0.75 percentage point increase in the federal funds rate. Inflation data to be released on Wednesday is expected to show consumer prices rising. Recent inflation data “has not been as encouraging as I would … Read more

England’s bus network faces 30% cuts as Covid subsidies end

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England

Local leaders have warned that England’s bus networks might soon decrease by up to a third as commercial operators abandon unprofitable routes and government Covid subsidies end. Ministers gave bus and light rail companies a bailout of £2 billion during the pandemic to keep them operating while ridership fell as more people stayed at home. … Read more

Sales slow at Pakistan’s livestock market on Eid ul Adha

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Eid Ul Adha

Farmers camping out at cattle market between Islamabad and Rawalpindi for two weeks. Consumers refrained from buying cows and goats for Eid ul Adha due to economic downturn. Bulls sell for between Rs100,000 and Rs700,000; goats and sheep go for up to Rs40,000. One of the largest livestock markets in Pakistan saw slower-than-normal business on … Read more

From Meta to Peloton, companies slow hiring as economy sputters

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Meta

Alibaba may lay off 15,000 employees as a result of a broad regulatory crackdown in China. Autoliv Inc, announced a reduction in headcount to reduce costs. Swedish company Klarna is cutting 10% of its 7,000-person workforce. Numerous businesses throughout the world have been forced to think about laying off employees or putting a block on … Read more

Minutes suggest ‘more restrictive’ Fed policy if inflation doesn’t fall.

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Fed policy

Federal Reserve officials highlighted the need to fight inflation even if it meant slowing economy. Members predicted that another 50- or 75-basis point move would likely occur at the July meeting. One tenth of a percentage point is referred to as a basis point. According to meeting minutes disclosed on Wednesday, Federal Reserve officials highlighted … Read more

Bank of England vows to bring down inflation

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Bank of England

The UK’s inflation rate reached 9.1 percent in May, the highest level in 40 years. The Bank of England issued a warning in June that inflation may reach 11%. Higher interest rates encourage consumers to save more money. The Bank of England has made more interest rate increases seem likely as it works to get … Read more

Sri Lanka’s central bank boosts interest rates to a 21-year high

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Central Bank

The Central Bank of Sri Lanka raises key rates by a full percentage point. Inflation touched a record 54.6% year-on-year in June while food inflation accelerated to 80.1%. The island of 22 million people is wilting under a severe foreign exchange shortage. The Central Bank of Sri Lanka (CBSL) raised its critical rates by a … Read more

Zimbabwe to introduce gold coins as local currency tumbles

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Zimbabwe

Zimbabwe’s central bank to sell gold coins as a form of reserve money. The coins will be sold starting on July 25 in local currency and other foreign currencies. Annual inflation reached 192 percent in June, according to the latest official figures. Zimbabwe’s central bank said that it would begin selling gold coins this month … Read more

Cost of living: Firms warned consumers want more than low prices

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Cost of living

Six out of ten customers expect cheap costs to have a bigger impact on where they shop. The Institute of Customer Service surveyed 10,000 people as part of its review of customer service. A third of those surveyed were still open to paying more for quality service. According to a survey, six out of ten … Read more

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