Mexico’s annual inflation slowed roughly in line with expectations in August as a spike in food prices faded, giving the central bank more room to consider another interest rate cut this month.

Consumer prices rose 4.99% from a year earlier, a touch below the 5.06% median estimate from analysts in a Bloomberg survey, the national statistics institute reported on last Monday.

Core inflation, which excludes volatile items such as fuel, eased to 4%, at the top of the bank’s target range of 3% plus or minus one percentage point. 

Mexico’s central bank, known as Banxico, is expected to mull its second-straight rate cut at its Sept 26 decision. Food items, including tomatoes, onions, and lemons had caused an inflation spike in recent weeks after a period of drought was followed by heavy rains. Still, that didn’t stop policymakers from lowering borrowing costs in August as economic activity weakened.

“Banxico is on track to lower its policy rate,” Kimberley Sperrfechter, emerging markets economist at Capital Economics, wrote in a research note . She expects borrowing costs to drop by another quarter-point this month, as activity shows signs of weakness and the Federal Reserve is expected to kick off its own easing campaign. 

Still, print showed “continued strength in core services inflation,” reflecting “the tightness in the labour market, which is keeping wage growth elevated.”

"Mexico’s non-core prices fell quickly in August as supply shocks faded, while core inflation extended a gradual downtrend. Price gains remained above target, but were in line with central bank forecasts for continued moderation into next year. And with tight monetary conditions, weak growth and increasing economic slack, that’s likely to be enough for most policymakers to support additional interest-rate cuts. Accumulated peso depreciation since April, higher labour costs and persistent high inflation expectations are the main risks for inflation to stay above target over the two-year monetary policy outlook," said Felipe Hernandez, Latin America economist at Bloomberg Economics.

Weather impact

Prices of fruits and vegetables were the main driver of the slightly better-than-expected print, dropping 5.21% on the month. Energy costs, on the other hand, rose 0.48% and services picked up 0.27%. central bank deputy governor Jonathan Heath said in an interview that it was uncertain how soon food price pressure would cool to bring policymakers relief.

“The impact of adverse weather conditions is gradually easing, reducing upward pressures in the non-core component,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. 

Headline inflation should cool further to 4.4% by December, as demand remains soft amid tight financial conditions, Abadia said. “The biggest risk in the short-term comes from domestic politics and its impacts to the currency,” he added. 

Recent political tensions in the Mexican Congress, where the ruling party and its allies are preparing to pass a Bill that would change the constitution and overhaul the judiciary, has added to uncertainty about the path of the currency and inflation. 

The peso has declined nearly 15% year-to-date, one of the worst performances in emerging markets, as government reforms worry investors. A weaker exchange rate risks fanning inflation by making imports more expensive.

Still, Mexico’s economic slowdown could help damp consumer prices, with the central bank in August dialing down its forecast for 2024 gross domestic product growth to 1.5% from 2.4%.

Source: Theedgemarkets

The insight comes from EY, which found in its annual Mobility Consumer Index that only 34% of surveyed Americans planning a car purchase over the next 24 months wanted this car to be electric. That’s down from 48% in last year’s survey.

“While we’ve seen substantial increases in interest and purchasing of EVs since 2020, this year’s MCI shows dips in demand for the first time,” Steve Patton, EY Americas Automotive Leader, said.

“This decrease is due partly to a lack of consumer education around the long-term value of an EV and maintenance requirements vs. traditional ICE (internal combustion engine) vehicles,” Patton also said.

EVs have been long advertised as cheaper over the long term due to lower maintenance requirements resulting from fewer moving parts in an electric engine. However, increasingly frequent reports of battery damage that necessitates costly replacement and battery fires have put many off electric cars.

“Expensive battery replacement was the top deterrent to purchase an EV for US consumers, overtaking lack of charging stations for the first time,” EY said in its report. “This is especially true for potential first-time EV buyers, as 27% noted concerns about expensive batteries compared to 23% of current EV owners.”

At the same time, the number of people concerned about chargers is on a decline overall. While in 2023 34% worried about charger availability, this year the percentage is down to 23%. There was also a decline in the number of people worried about rage, from 30% in 2023 to 24% this year. This decline, however, does not seem to have translated into a higher willingness to buy an electric car.

Source: OILPRICE

Today’s data for the second quarter of 2024 reconfirms the first reading’s negative surprise. Private consumption annual growth picked up visibly, broadly in line with what retail sales data had already been signalling. Its overall positive contribution to growth was a solid 4.9pp to the total of 0.8% GDP growth. And as far as investment growth is concerned, it's still at robust levels, but it's slowing, contributing to GDP growth by 1.4pp. 

But here's the stinger: net exports wiped out most of the gains, subtracting a whopping 4.4pp. The strong internal demand boosted imports, subtracting 3.0pp from growth, while weak external demand led exports to subtract the remaining 1.4pp.

Net exports' negative growth contribution is increasing

Source: NSI, ING

It's clear that strong private consumption momentum and loose fiscal policy are generating a stimulus that is spreading primarily outside the local economy to the benefit of the country’s trading partners. While there is also a rapid investment boom, consisting of multiple large-scale projects with tight deadlines, this is also showing up in higher imports as the local supply side cannot match the demand.

Moreover, the fact that almost all of last year’s trade balance gains were lost as a result of the strong response of consumers to their wage increases shows that Romania’s structural supply-demand imbalances still have a long way to go before they can improve. The leu’s overvaluation, indeed useful in the fight against inflation, is also weighing on the trade situation.

In the first six months of the year, the economy has advanced by only 0.7%. The reconfirmation of the first half’s growth picture has led us to revise our 2024 GDP growth projection from 2.0% to 1.3%, which still needs fairly robust growth rates over the next two quarters. We don’t see room for major structural improvements in either the dissipation of the strong internal demand through imports or in higher external demand from key trading peers.

Given all this, the chances of one more rate cut from the NBR in the fourth quarter have increased. However, while weak GDP growth can indeed be an argument for less monetary policy restrictiveness, the strong credit activity still requires policymakers’ caution.

Former private banker Peter Georgiou has been fined $980,020 (about Dh3.6 million) for misleading conduct and his involvement in the violations of his former employer, Mirabaud (Middle East) Limited (MMEL), said the Dubai Financial Services Authority (DFSA).

Georgiou, a former private banker at MMEL, has also been banned from holding any office or working for a DFSA-authorised firm and is restricted from providing financial services in the Dubai International Financial Centre (DIFC).

The DFSA found that Georgiou lacked integrity and was unfit to work in the DIFC’s financial sector. Specifically, the authority discovered that the former banker:

Deliberately misled MMEL’s compliance team and withheld crucial information to bypass MMEL’s anti-money laundering (AML) systems and controls.Sent a forged, deceptive email to a client.Provided false information to the DFSA during an interview.

In July 2023, the DFSA fined MMEL $3 million for having inadequate AML systems and controls. Georgiou was found to have played a role in MMEL’s failure to:

Conduct proper due diligence on existing customers, especially when there were doubts about their documents or suspicions of money laundering.Assess clients’ financial markets experience adequately when classifying them as Professional Clients.

Ian Johnston, chief executive of the DFSA, said: “The DFSA expects those working in financial services within the DIFC to comply with the DFSA’s AML rules. We also expect firms and individuals to engage with the DFSA in an open and honest manner, and to uphold the highest standards of integrity.

"The DFSA remains committed to holding those who fail to meet these expectations to account. The sanctions imposed on Georgiou reflect the severity of his misconduct and serve as a strong warning to others who may consider engaging in similar behaviour.”

The DFSA's decision notice is available in the regulatory actions section of its official website.

Source: khaleejtimes

 Larsen & Toubro Ltd ( L&T) plans to invest more than US$300 million (RM1.3 billion) to create a chip company, joining other Indian conglomerates in a push to build out a semiconductor industry in the world’s most populous country.

The tech-to-construction company will spend the money over three years to establish a fabless chipmaker, which designs and sells semiconductors but contracts out their production. It plans to design 15 products by the end of this year and start sales in 2027, Sandeep Kumar, head of L&T Semiconductor Technologies (LTSCT), said in an interview.

Global, as well as local companies are trying to capitalise on India’s effort to build local semiconductor capacity and cut down expensive imports, seeking to tap government subsidies. Tensions between Beijing and Washington are prompting electronics manufacturers, including chipmakers, to diversify beyond China and Taiwan, with India emerging as a beneficiary.

L&T’s investment is modest compared with outlays by leading fabless chipmakers such as Nvidia Corp and Advanced Micro Devices Inc. The Indian company targets products such as power chips, radio-frequency semiconductors, and mixed-signal integrated circuits, rather than areas such as AI (artificial intelligence)-enabling graphics processing units.

“Automotive, industrial and energy — those are the sectors we’ve picked, as they are going through very heavy transformation,” Kumar said. “There is space to compete, succeed and even capture the market.”

Semiconductors have grown into a crucial resource across the world, especially as the US-China trade war threatens to make chip imports even more expensive. Several countries including the US, Germany, Japan and Singapore are boosting domestic chipmaking, trying to ensure supply of the components needed for technologies from AI to electric cars.

LTSCT now employs about 250 people, a bulk of them chip designers. It will double that by the end of 2024, Sandeep said.

The company has urged the government to help with chip designing subsidies or incentives for large companies, but it won’t seek funding from outside of the L&T group, he said.

Prime Minister Narendra Modi’s administration has created a US$10 billion programme to woo chipmakers and their suppliers. That plan has led Tata Group to build the country’s first major chip factory and driven US memory maker Micron Technology Inc to set up a US$2.75 billion assembly facility in Modi’s home state of Gujarat. The Adani Group plans to build a chip plant with an Israeli partner.

Source: Theedgemarkets

U.S. inflation-adjusted household income increased but poverty rates showed only modest changes last year, the U.S. Census Bureau reported , offering a mixed snapshot of how American households fared as the economy returned to pre-coronavirus pandemic growth levels, job growth boomed and inflation eased.

Real median household income rose to $80,610 in 2023, up 4.0% from 2022, back to the peak reached in 2019, while earnings for workers as a whole were higher than before the pandemic, a boost to households after multiple years in which workers' wages were outpaced by high inflation.

But the report also showed a main gauge of the nation's poverty rate, adjusted for government support such as food assistance and tax credits as well as household expenses, rose to 12.9% from 12.4% in 2022. The so-called official poverty rate declined to 11.1% from 11.5%.

Census noted, however, that the adjustments to income levels used to determine whether a person lived in poverty were larger for the supplemental measure than for the official measure in 2023. Had the official threshold increase been applied for the supplemental rate, that rate would have declined to 12.0% from 12.4% the prior year.

In 2023, the threshold for the official rate increased by 4.1% to $30,900 for a two-adult, two-child household.

The supplemental child poverty rate, also adjusted and referring to those under the age of 18, rose to 13.7% in 2023 from 12.4% the previous year. The rise in the supplemental child poverty rates was impacted by the end of extra pandemic-related government benefits. For example, extra pandemic-related food assistance programs ended in March of last year in a majority of U.S. states and school meal aid also narrowed.

The income and poverty data for 2023 comes two months before the U.S. presidential election. The shadow cast by a surge in inflation following the onset of the pandemic in early 2020, and how much that has squeezed pocketbooks of voters once government support programs designed to shore up household incomes expired, remains a key issue.

Last year saw the economy continue to post stronger-than-expected growth as it returned to its pre-pandemic path while the unemployment rate by January 2023 was 3.4%, lower than just before the health shock struck. While it ticked up to 3.7% by last December, that was still the lowest level in more than 50 years.

MORE WORKERS

Employment growth averaged around 250,000 new nonfarm payroll jobs a month over the course of 2023, well above the 183,000 average over the decade preceding the pandemic.

This was echoed in the findings of the report. There were 2.1 million more full-time, year-round workers in 2023, and worker earnings were the main driver of household incomes, said Liana Fox, assistant chief of the Economic Characteristics, Social, Economic and Housing Statistics Division. "We're seeing people are working more."

The worst inflation in more than 40 years has vexed both households and the U.S. Federal Reserve. The central bank ratcheted up interest rates to more than 5% by the middle of last year and has kept them there since, in a bid to reduce the pace of price increases back to the normal annualized trend of around 2%.

Inflation, by the central bank's preferred measure had fallen from a high of 7.1% on an annual basis in June 2022 to 5.5% at the beginning of 2023, before more than halving to 2.6% by last December. Inflation currently remains at 2.5%.

Household income rose throughout the income distribution, Census said in the report.

Real median household income rose by 5.4% for white households and 5.7% for non-Hispanic white households between 2022 and 2023. There was no significant change in median incomes for Black, Asian, and Hispanic households, the Bureau said.

However, the female to male earnings ratio fell for the first time since 2003, as women's earning growth was outpaced by men's. Real median earnings for men who worked full-time, year-round increased by 3.0%, compared to 1.5% for women with the same working patterns. This could be partly due to a rise in the number of Hispanic women in the workforce last year, Census officials said, as they tend to earn less.

The report also showed that 92.0% of Americans were covered by health insurance for at least part of 2023, roughly unchanged from the previous year.

Source: Theedgemarkets