“Global economy hinges on US wage growth as policymakers fight inflation and recession…
“If earnings do not slow meaningfully, underlying inflation will remain high and the Fed – which effectively determines the level of global borrowing costs – will have little choice but to keep policy exceptionally tight…
“…even a softish landing could prove deceptive if central banks halt their rate-raising campaigns only to be forced to resume tightening in response to renewed inflationary pressures.”
“Central banks should sacrifice ambitions of a perfect economic landing…
“The big risk for 2023 is that rate-setters become so paranoid about losing face that they put their money where their mouth is and don’t just talk tough but impose multiple large rate rises. Rapid increases in borrowing costs would almost certainly push economies into recession. They could also spark bouts of financial turmoil that make the gilt market panic of last autumn look like a blip.”
https://www.ft.com/content/5b208707-3cb9-4410-9dee-1ebd8b5e6c3d
“The global stock of negative-yielding bonds has dwindled to zero after last month’s unexpected policy shift by the Bank of Japan undermined the last bastion of sub-zero yields…
“…last year’s abrupt end to the era of easy monetary policy sparked a historic bond sell-off that rapidly shrank the pile, as central banks in the eurozone and Switzerland brought down the curtain on years of negative interest rates.”
https://www.ft.com/content/35779b15-ca04-441a-bc3f-507b030ed45f
“World food prices hit record high in 2022.
“The Food and Agriculture Organization’s (FAO) food price index, which tracks international prices of the most globally traded food commodities, averaged 143.7 points in 2022, up 14.3% from 2021, and the highest since records started in 1990, the agency said on Friday.”
https://uk.finance.yahoo.com/news/world-food-prices-hit-record-090233469.html
“Samsung profits fall 69% as demand for semiconductors slumps.
“Samsung Electronics’ operating profit slid nearly 70 per cent in the fourth quarter to an eight-year low, according to its preliminary numbers, highlighting how a slowing global economy is crushing demand for semiconductors and electronics products.”
https://www.ft.com/content/7790591e-8105-4a57-92f3-6b672b5b88bf
“Apple has reportedly canceled the next iPhone SE.
“We may not be getting a new iPhone SE in 2024, according to analyst Ming-Chi Kuo, who bases his predictions on sources in the supply chain… Kuo thinks the reason the phone is getting axed could be that Apple’s lower-end phones were selling worse than the company hoped.”
https://www.theverge.com/2023/1/6/23542525/apple-iphone-se-4-2024-canceled-rumor-qualcomm
“U.S. service sector contracts in December, price increases slow, ISM survey says.
“U.S. services industry activity contracted for the first time in more than 2-1/2 years in December amid weakening demand, while the pace of increase in prices paid by businesses slowed considerably, offering more evidence that inflation was abating.”
“Why worries over subprime auto bonds might be only getting started.
“Investors already bracing for a recession and rising borrower defaults now face another kind of worry after a new lawsuit claimed Credit Acceptance Corp misled them in more than $7 billion worth of its subprime auto bonds… Since the summer, delinquencies and losses on subprime auto ABS have been shooting up (see chart) as pandemic stimulus faded.”
“ADHD Drug Shortages Spread to Generic Ritalin Amid Supply Issues…
“Now, another type of ADHD medications — methylphenidate drugs — is in short supply, according to the University of Utah’s Drug Information Service, which tracks shortages. These drugs, along with amphetamines, also treat narcolepsy.”
“Britain has never faced decline like this before.
“Britain’s economy is in a bad way. Almost every forecaster agrees that the country is in recession, with debate shifting to how long the downturn will last. Yet even as output falls, inflation remains uncomfortably high (10.7 per cent), leading to a deep squeeze of household incomes. Taken together, 2022 and 2023 look likely to be the worst two years for living standards since the 1930s.”
https://www.newstatesman.com/economy/2023/01/britain-decline-inflation-growth-uk-government
“UK Train Stoppages Continue as Threat Grows of Broader Strikes…
“Industrial action could intensify in the coming weeks and months. The head of Britain’s biggest transport union called on Friday for coordinated strikes, potentially involving tens of thousands of public sector workers including teachers, firefighters and nurses. Newly-trained doctors are considering joining the wave of unrest.”
“[UK] Households are using cat litter to heat their homes, according to pet shop bosses, after the Ukraine war sparked a shortage of wood pellets.
“Jollyes, one of the UK’s largest pet food stores, said its cat litter suppliers were “working overtime to fulfill demand” for wood pellets, after a sharp jump in sales earlier this winter.”
“German Factory Orders Plummet as Manufacturers Under Siege…
“Demand declined 5.3% from the previous month, more than the 0.5% that analysts had predicted in a Bloomberg survey. The slump was driven by foreign orders, especially from the euro zone, and the drop was exacerbated by large-scale orders, the German statistics office said Friday.”
“Back to basics: wood-fired oven shields French baker from soaring energy costs.
“While many of his colleagues are teetering on the brink of financial collapse, Burgaud says the cost of firewood has only risen by 3 to 5% over the past year. “This is not even remotely close to the electricity prices and, in case of power outage, a wood-fired oven will always work,” he told Reuters.”
“Record-High Temperatures across Europe Ease Energy Crisis Imposed by Russia’s War.
“Extreme heat has provided some relief from Europe’s punishing energy crunch… But Europe’s troubles are not over. Russian gas imports will be far lower than last year, meaning the European Union will need to continue looking for alternative sources…”
“Europe’s Coming Bond Avalanche Will Test the ECB…
“The 10 largest euro nations are expected to sell some €1.3 trillion ($1.38 trillion) of sovereign bonds this year. A little over half of that will be new money, after allowing for maturing debt. It’s a scarily large jump… Someone, somewhere is going to have to step up and buy all of these new securities. Unfortunately, the timing is poor as central banks globally have become net sellers…”
“The End of China’s Magical Credit Machine.
“China’s financial system simply won’t be able to generate the same levels of credit growth that it has in previous years. This means that Beijing will have far less control over the direction of its economy than it has in the past. Growth in total societal financing (TSF), a measure of funds provided by the financial system to the real economy, is at all-time lows, and other credit metrics are decelerating.”
https://rhg.com/research/magical-credit-machine/
“China: Footage of protesters destroying police car in Henan shared online.
“Angry locals in Luyi County, Henan, destroyed a police car after an officer tried to enforce a fireworks ban during New Year celebration.. Footage of the incident was shared online in the latest example of protesters defying censorship in China.”
“North China Gas Shortages Leave Villagers Shivering.
“Rural residents in North China’s Hebei province have experienced gas shortages this winter that have left them without enough of the fuel to adequately heat their homes and cook amid sub-zero temperatures, as local distributors failed to secure enough cheap gas from upstream suppliers, Caixin has learned.”
“An Iranian member of parliament from Sistan-Baluchestan province has criticized bread and gasoline shortages, reporting long queues at gas stations and bakeries.
“ISNA news agency in Tehran quoted Abdol Naser Derakhshan Thursday as saying that the shortage of bread and gasoline in various cities of the relatively poor province has worsened during the past few days.”
https://www.iranintl.com/en/202301053455
“Pakistan economic crisis: No flour in Lahore; prices of sugar, ghee up by 25% to 62%.
“Amid dwindling forex reserves and an unstable government at the helm of affairs, there is a massive shortage of flour in Pakistan’s Lahore. The prices of flour have gone up in the city and the commodity was not available across most shops in the second most populous city in Pakistan.”
“Lebanon facing total collapse: people face starvation in the face of power vacuum…
“Week after week, legislators cast blank votes while the people beg for bread and jobs. It is a paralysis for the country that comes at the same time as foreign policy attempts are being made to revive ties with the Gulf states following Hezbollah’s dominance over the past decade.”
“As young Gazans die at sea, anger rises over Hamas leaders’ travel…
“A rising number of Gazans, seeking better lives abroad, are drowning at sea. The devastating procession has prompted a rare outpouring of anger against the territory’s militant Hamas rulers, a number of whom are making their own — very different — exodus. In recent months, high-profile Hamas officials have quietly decamped to upscale hotels in Beirut, Doha and Istanbul…”
“Nigeria’s Nationwide Fuel Scarcity May Worsen as Tanker Drivers Threaten Strike.
“The current fuel supply shortages nationwide may get worse in the coming days if the Petroleum Tanker Drivers branch of the National Union of Petroleum and Natural Gas Workers known as PTD-NUPENG, makes good its threat to embark on a nationwide strike.”
https://www.arise.tv/nigerias-nationwide-fuel-scarcity-may-worsen-as-tanker-drivers-threaten-strike/
“Peru’s tourism sector hurt by protests amid mass cancellations.
“Weeks of deadly protests in Peru after the ouster and detention of President Pedro Castillo have taken a toll on the country’s economy, particularly its tourism sector, a minister and industry representatives said. Up to 60% of travel bookings for the first half of the year have been canceled since the protests began.”
“At least 12 people were injured, including four police officers, during clashes as anti-government protesters allegedly tried to take over an airport near Peru’s border with Bolivia on Friday, officials said.
“Protesters marched outside the Inca Manco Capac airport in Juliaca, in Peru’s southern Puno region.”
https://www.laprensalatina.com/at-least-12-injured-in-airport-takeover-bid-by-peru-protesters/
“Mexican city [Mazatlan] erupts in violence, residents ordered to stay indoors after drug cartel leader’s arrest. Multiple airports in Sinaloa state are closed after an Aeromexico flight was reportedly hit by gunfire…
“Mexican authorities on Thursday confirmed the arrest of Ovidio Guzman, a 32-year-old senior member of the Sinaloa Cartel and a son of jailed kingpin Joaquin “El Chapo” Guzman. His arrest unleashed a violent backlash by gang gunmen…”
https://www.cbc.ca/news/world/ovidio-guzman-arrest-violence-1.6704936
“Hope vies with death for Cubans on 90-mile voyage to America.
“…amid deepening economic hardship, social repression and political punishment, more and more people are gambling on the voyage as a risk worth taking, contributing to a humanitarian crisis both at sea and on land as the US authorities struggle to cope with their end of the biggest ever Cuban migration.”
“Florida is seeing a rise in the number of migrants from Cuba and Haiti arriving by boat. The Miami sector of U.S. Customs and Border Protection has reported a 400% increase in migrant encounters since October.
“Dry Tortugas National Park, which is about 70 miles west of Key West, temporarily closed this week after more than 300 migrants made 10 landings there.”
https://www.cbsnews.com/news/florida-migrants-boat-cuba-haiti/
“Migration rights advocates in the United States have condemned the Biden administration’s new border restrictions for asylum seekers, saying the expansion of a contentious expulsion policy put peoples’ lives in danger.
“US President Joe Biden unveiled the new measures on Thursday, including the forced return to Mexico each month of as many as 30,000 migrants…”
“Crypto Panic at Silvergate Spawns a New Breed of Bank Run.
“In other modern bank crises, such as the 2008 credit crunch that claimed Bear Stearns Cos. and Lehman Brothers Holdings Inc., problems began as souring loans and other assets chewed holes in lenders’ balance sheets. As those losses mounted, funding sources panicked and pulled away assets.
“But in Silvergate’s case, the firm made relatively few loans… Instead, the pressures started on the other side of Silvergate’s balance sheet. Almost 94% of the firm’s liabilities were deposits, with about $11.9 billion from digital-asset customers. That figure plunged to $3.8 billion by the end of the fourth quarter.”
“No One Will Escape the FTX Fallout.
“Genesis Global Trading, one of crypto’s oldest and most storied institutions, is in dire straits. In November, in the wake of the implosion of the crypto exchange FTX, the company’s lending unit was forced to freeze customer withdrawals—never a good sign. Almost two months later, Genesis is reportedly on the brink of bankruptcy.”
https://www.wired.com/story/no-one-will-escape-the-ftx-fallout/
You can read the previous “Economic” thread here. I’ll be back on Monday with a “Climate” thread.
If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.
““Global economy hinges on US wage growth as policymakers fight inflation and recession…”
I have read that the US wage and jobs growth figures are misleading, as the workforce is also showing a drop in hours/week worked. So incomes, especially discretionary spending, may not be actually rising as strongly as they imply. This also implies increasing casualisation of the workforce.
Rain, right. IIRC, labor-force drop outs stop being counted in unemployment figures after only a few weeks. Also, so many are in the gig economy or poor but working. All that said, the US economy has been doing a better job of late than I had feared. It’s not palpably going off a cliff yet, as we are in the UK. 😬