Tag Archives: Economy

California Controller warns that economic downturn may be near

FILE PHOTO - The California flag flies above City Hall in Santa Monica, California, U.S. on February 6, 2009. REUTERS/Lucy Nicholson/File Photo

By Robin Respaut

SAN FRANCISCO (Reuters) – California’s state tax collections in April fell short of expectations, a sign that the state may be headed toward an economic downturn, State Controller Betty Yee warned on Wednesday.

Collections totaled $15.98 billion, $1.05 billion or 6.2 percent short of the governor’s projected budget for the month.

“April is usually the state’s biggest tax filing month, so lower-than-expected personal income tax receipts are troubling,” said Yee, the state’s chief fiscal officer, in a statement.

“While we await the governor’s May Revision, this is another signal that we may be inching towards an economic downturn, and we must tailor our spending accordingly.”

California has collected $96.88 billion during the first 10 months of fiscal 2017, which ends June 30. That means the state is $1.83 billion behind last summer’s budget estimates and $211.3 million shy of January’s revised fiscal year-to-date predictions.

Governor Jerry Brown plans to release on Thursday his mid-year revision of the proposed state budget for fiscal 2018. The revised budget is expected to reflect changes in the state’s financial position since January.

For the month of April, during which California tends to collect about 17 percent of its personal income tax receipts, collections lagged by 5.3 percent. Retail sales and use tax receipts fell short of projections in the governor’s proposed 2017-18 budget by $106.7 million, or 13.3 percent. Corporation tax receipts for April were 13.8 percent lower than estimates in the budget.

In January, Governor Brown proposed a $179.5 billion state budget for fiscal 2018, a 5 percent increase over this year, but he warned that the state must remain fiscally prudent ahead of an inevitable economic downturn.

California is especially vulnerable to downturns, because the state is more reliant than most on capital gains taxes, a volatile revenue source, and less on property tax revenue, which is more stable.

(Reporting by Robin Respaut; Editing by Richard Chang)

Mexico presses Trump to uphold NAFTA for good of both nations

U.S. President Donald Trump arrives aboard Air Force One at JFK International Airport in New York, U.S. May 4, 2017. REUTERS/Jonathan Ernst

MEXICO CITY (Reuters) – Mexico made a pitch to U.S. President Donald Trump on Wednesday to uphold the NAFTA trade deal, arguing that unwinding economic integration would hurt both nations, damaging U.S. exports, risking American jobs and hitting consumers north of the border.

Responding to a March 31 executive order by Trump for a review of the U.S. trade deficit, Mexico said its trade surplus with the United States was misunderstood and that the real hit to U.S. manufacturing jobs came with China’s accession to the World Trade Organization (WTO) in 2001.

Last year’s U.S. deficit with Mexico of $63.2 billion also reflected a weak peso after it was battered by uncertainty over the future of bilateral trade relations, according to a document published by the Mexican Embassy in Washington.

“The increasing integration of our economies makes Mexico critically important to the U.S. economy, not only as an export market, but also as a partner in production,” the director of the embassy’s trade and NAFTA office, Kenneth Smith, wrote.

Mexico was responding to the U.S. Commerce Department’s request for public input as it prepares a report for Trump on the United States’ $500 billion annual trade deficit. The report and public comments will be sent to Trump in June.

Mexico said that, without NAFTA, the average tariff on Mexican exports to the United States would be 3.5 percent, or about half the average tariff on U.S. exports to Mexico, because of the “most favored nation” clause that would apply under WTO rules.

U.S.-Mexican trade relations have been strained by Trump’s repeated vow to scrap the North American Free Trade Agreement if he cannot secure better terms for U.S. workers and industry.

Trump has cited the U.S. trade deficit with Mexico as proof that the United States was the loser in the relationship, saying the Americans would be better off if the two nations did not trade at all.

However, Mexico said 75 percent of its exports to the United States are inputs in U.S. production processes and that the United States has an $8 billion surplus in services.

“Workers on both sides of the border work together in the production of goods to successfully compete in global markets,” Smith said.

The U.S. energy industry also relies on exports to Mexico, which is now the biggest export market for U.S. refined oil products and natural gas, Smith said.

(Reporting By Frank Jack Daniel, Writing by Dave Graham and Mitra Taj)

U.S. jobless claims fall; continuing claims lowest since 1988

FILE PHOTO: A "Now Hiring" sign hangs on the door to the Urban Outfitters store at Quincy Market in Boston, Massachusetts September 5, 2014. REUTERS/Brian Snyder

WASHINGTON – New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls hit a 28-1/2-year low, pointing to a rapidly tightening labor market that could encourage the Federal Reserve to raise interest rates in June.

Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 236,000 for the week ended May 6, the Labor Department said on Thursday. Claims for the prior week were unrevised.

Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 245,000.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 114 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is close to full employment, with the

unemployment rate at a near 10-year low of 4.4 percent.

Labor market strength, also marked by a sharp rebound in job growth in April, has left financial markets anticipating further monetary policy tightening from the Fed in June.

The U.S. central bank increased its benchmark overnight interest rate by 25 basis points in March and has forecast two more rate hikes this year. The economy created 211,000 job in April after adding only 79,000 positions in March.

A Labor Department official said there were no special factors influencing last week’s data and only claims for Louisiana had been estimated.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 500 to 243,500 last week.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid tumbled 61,000 to 1.92 million in the week ended April 29, the lowest level since November 1988.

The four-week moving average of the so-called continuing claims fell 27,500 to 1.97 million, the lowest level since February 1974.

((Reporting By Lucia Mutikani; Editing by Andrea Ricci))

Brazil readies $18.5 billion public spending plan: newspaper

FILE PHOTO: General view of a construction site of the railroad Transnordestina in the city of Salgueiro, Pernambuco state, northeast of Brazil, October 26, 2016. REUTERS/Ueslei Marcelino

SAO PAULO (Reuters) – Brazil plans to invest 59 billion reais ($18.50 billion) in public funds by the end of 2018 to accelerate the economic recovery and bolster aging infrastructure, newspaper Valor Econômico said on Wednesday.

More than a third of that, or 22.7 billion reais, would fund transportation projects, such as highways, railroads and airports, the report added, citing documents presented to ministers on Tuesday. The remaining funds would be distributed among three areas: housing, sewage and urban transit; defense; and health, education, water projects, tourism and sports.

President Michel Temer’s administration will propose the “Avançar,” or “Advance,” program to replace an ongoing plan known as PAC, Valor reported.

Representatives for the finance and planning ministries were not immediately available to comment.

Temer’s predecessor, Dilma Rousseff, introduced the PAC, or growth acceleration program, as her flagship policy in 2007 when she was chief of staff under leftist President Luiz Inácio Lula da Silva.

Economists have said the program had little effect on growth and weighed on public finances as Brazil’s economy, Latin America’s largest, slipped into its deepest recession in decades. Rousseff and center-right Temer have slashed PAC’s budget repeatedly in recent years to try to curb ballooning public debt and regain investors’ trust.

Increased public spending could make it harder for the government to plug a growing budget gap. It could also force additional austerity elsewhere at a time when the economy shows timid signs of recovery.

Temer has pursued a plan to streamline the country’s pension system to cut social security spending for years to come, triggering strong opposition. His infrastructure efforts have so far focused on privatization, with a successful airport auction in March demonstrating investors’ interest in Brazilian assets.

(Writing by Bruno Federowski; Editing by Lisa Von Ahn)

Dollar slips, yen gains, after Trump fires FBI chief

Dollar banknotes are seen in this picture illustration taken April 28, 2017. REUTERS/Dado Ruvic/Illustration

By Jemima Kelly

LONDON (Reuters) – The dollar fell and the perceived safe-haven yen gained on Wednesday, after U.S. President Donald Trump abruptly fired FBI Director James Comey in a move that shocked Washington and dampened some of this week’s strong risk appetite.

Rekindled fears that North Korea could be gearing up for another weapons test also underpinned the yen, which had sunk to an eight-week low the previous day as investors’ appetite for riskier currencies increased on the back of a weekend French election result that eased euro break-up fears.

The dollar, which had strengthened to as much as 114.325 yen on Tuesday <JPY=>, slipped back to 113.87 yen.

Trump said he had sacked FBI Director James Comey – who had been leading an investigation into the Trump 2016 presidential campaign’s possible collusion with Russia to influence the election outcome – over his handling of an email scandal involving presidential nominee Hillary Clinton.

But the move ignited a political firestorm, raising suspicions among Democrats and others that the White House was trying to blunt the FBI probe involving Russia.

The dollar slipped 0.2 percent against a broad index <.DXY>.

“There’s not much risk sentiment – that’s to some extent the main driver today, mainly with respect to geopolitical questions,” said Credit Agricole currency strategist Valentin Marinov in London.

Comments from European Central Bank President Mario Draghi failed to have any clear impact on the euro, which was flat at $1.0878 <EUR=>. Draghi said it was too early for the ECB to declare victory in its quest to boost euro zone inflation.

“Draghi is repeating the same message that he made at the last ECB press conference – there are no big surprises. He’s defending the ECB’s dovish policy stance,” said Marinov.

The euro had risen to a six-month high above $1.10 on Monday, after Emmanuel Macron defeated the anti-EU Marine Le Pen in France’s presidential run-off, as worries over European political risk faded and focus returned to central bank policy.

The Swiss franc, another safe-haven currency, fell to its lowest in seven months on Tuesday and stayed close to that at 1.09575 francs per euro, flat on the day <EURCHF=>.

Commerzbank currency strategist Esther Reichelt, in Frankfurt, though, said risk appetite could only drive the currency market so far before new drivers were needed.

“Dollar strength could materialize more, given the more benevolent risk environment, but that can only move the market for so long – you always need new impetus,” she said.

U.S. political uncertainty has tended to weigh on the dollar in recent months, on the view that a divided Congress could derail Trump’s promised tax reform and stimulus programme.

(Reporting by Jemima Kelly, editing by Larry King)

Germany eyes new North Korea sanctions: government sources

The City Hostel Berlin beside the compound of the North Korean embassy is pictured in Berlin, Germany, May 9, 2017. REUTERS/Fabrizio Bensch

BERLIN (Reuters) – Germany will tighten economic sanctions against North Korea over its nuclear program in line with a U.N. resolution passed in November and subsequent EU regulations, German government officials said on Tuesday.

Berlin plans to ban Pyongyang from leasing properties that belong to its embassy in the heart of the German capital, foreign ministry sources said, confirming news first reported by Sueddeutsche Zeitung newspaper and broadcasters NDR and WDR.

“We must increase pressure to bring North Korea back to the negotiating table. That means we must consistently implement sanctions imposed by the United Nations and the European Union,” said foreign ministry state secretary Markus Ederer.

“In that regard, it is particularly important that we do even more to dry up the financial resources used to fund the nuclear program,” he said in a statement. “The German government is in complete agreement and the responsible authorities will now take the necessary steps.”

Before Germany’s reunification in 1990, North Korea had diplomatic relations with Communist East Germany and owned an embassy and several buildings in East Berlin.

The embassy has continued to operate while one building has since be turned into a low-cost hotel and another into a conference center, according to German media reports.

The embassy collects “high five-digit” sums in rent for the properties leased to two operators since 2004, they say.

The United Nations explicitly banned such leasing arrangements by North Korean embassies worldwide as part of U.N. Security Council Resolution 2321, passed in November 2016 after Pyongyang’s fifth nuclear test.

The resolution says: “All member countries shall prohibit North Korea to use real estate that it owns or leases for other than diplomatic or consular activities.”

Tensions between North Korea and the global community have increased over the past year amid repeated missile tests by Pyongyang.

U.S. President Donald Trump warned in an interview with Reuters this month that a “major, major conflict” was possible with North Korea, but then raised eyebrows by saying he would be “honored” to meet North Korean leader Kim Jong Un under the right circumstances.

(Reporting by Andrea Shalal and Andreas Rinke; Editing by Madeline Chambers and Tom Heneghan)

Brazil annual inflation in April likely hit lowest in nearly 10 years

FILE PHOTO: A woman looks on prices at a food market in Rio de Janeiro, Brazil, January 21, 2016. REUTERS/Pilar Olivares/File Photo

By Silvio Cascione

BRASILIA (Reuters) – Brazil’s annual inflation rate in April likely eased to its lowest level in nearly 10 years, which could help prod the central bank to make another steep interest rate cut this month, a Reuters poll showed on Monday.

The IPCA benchmark consumer price index was seen rising 4.10 percent in the 12 months through the end of April compared with a 4.41 percent increase in the year to the middle of the month, according to the median estimate of 26 economists surveyed. The data is due to be released on Wednesday.

Brazilian annual inflation has tumbled from a 12-year peak of 10.7 percent in January 2016 amid slack consumer demand stemming from a severe recession and the highest unemployment on record.

President Michel Temer has hailed the drop in inflation as evidence that his austerity agenda was putting Latin America’s largest economy on a solid footing for recovery.

As inflationary pressures have eased, the central bank has steadily cut its benchmark interest rate from 14.25 percent in October.

Last month, it slashed it by 100 basis points, taking it to 11.25 percent. It was the deepest cut to the rate in nearly eight years.

“The (inflation) numbers should strengthen the case for another 100 basis point cut this month,” said Leonardo Costa, an economist with the São Paulo-based consultancy Rosenberg & Associados.

On Monday, a central bank survey of economists forecast a central bank interest rate of 8.5 percent and 4 percent annual inflation by December.

In the month of April, consumer prices were expected to have increased 0.16 percent from March, slowing from a 0.25 percent rise in the previous month, according to the median of 28 forecasts in the Reuters poll.

Forecasts for the monthly inflation rate ranged between 0.12 percent and 0.27 percent, while estimates for the 12-month rate varied between 4.07 percent and 4.22 percent.

Housing and transportation prices probably fell in April, while education costs slowed their increase, according to economists in the Reuters poll.

A one-off cut in electricity rates also likely contributed to last month’s anticipated inflation slowdown, as the government reversed a tariff surcharge related to the Angra 3 nuclear power plant, economists said. The central bank, however, said last month that this drop, however sizable, should not have relevant implications for monetary policy.

(Reporting by Silvio Cascione Editing by W Simon)

U.S. inflation expectations edge up: NY Fed

A shopper walks by the sodas aisle at a grocery store in Los Angeles

NEW YORK (Reuters) – Measures of U.S. inflation rebounded slightly last month, according to a Federal Reserve Bank of New York survey released on Monday that also showed a sharp drop in Americans’ spending expectations.

The survey of consumer expectations, one of several gauges of prices for the U.S. central bank, showed median inflation expectations for one year ahead edged up to 2.8 percent in April, from 2.7 percent in March. The three-year measure was 2.9 percent, compared to 2.7 percent a month earlier.

The bump, which the New York Fed said was driven by those with lower income and education, keeps the price measures roughly in a range since late last year.

The central bank has raised interest rates twice since December in large part on expectations that inflation will keep edging higher.

The survey also showed median household spending growth expectations dropped to 2.6 percent last month, from 3.3 percent in March. It was the lowest level since the New York Fed began measuring in mid-2013.

The internet-based survey is done by a third party and taps a rotating panel of 1,200 household heads.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

Oil spill leaves commodities spinning, safe-havens shine

Investors look at an electronic board showing stock information at a brokerage house in Shanghai, China, March 7, 2016. REUTERS/Aly Song/File Photo

By Marc Jones

LONDON (Reuters) – A slump in oil prices to the lowest in almost six months rattled markets on Friday, prompting a rally in safe-haven bonds, the yen and gold and taking the shine off a record-breaking week for world stocks.

Bourses flinched in both Asia and Europe and Wall Street also looked set for a subdued start as investors, who had been expecting to spend the day mostly looking ahead to U.S. jobs data and Sunday’s French elections, were caught off guard.

Traders had had to duck for cover overnight as both Brent <LCOc1> and U.S. <CLc1> crude fell more than 3 percent amid record trading volumes on mounting concerns about global oversupply.

Things only fully stabilized when Saudi Arabia’s OPEC chief hit the wires in European hours, saying there was a growing consensus among oil pumping countries that they needed to continue to “rebalance” the market.

Brent clawed back to $46.86 a barrel almost two dollars better off than its overnight low, but the scars left it an eye-watering 6 percent lower than at the start of the week.

“The whole commodity complex has been affected by this and it could have some pretty big implications if it continues for much longer,” said Saxo bank’s head of FX strategy John Hardy.

“If you look at global risk appetite, equities have been pretty quiet and that feeds into FX as well if carries on and there is a risk switch.”

Big commodity price drops do not just have an immediate impact on financial markets either.

As was seen during a slump between 2014 and 2016, they cause major headaches for countries that rely on their revenues. They also unleash deflationary forces, but can help energy-importing economies, firms and households by lowering their energy bills.

Oil has not been the only commodity that has suffered this week. Chinese iron ore futures <DCIOcv1> fell almost 7 percent in Shanghai overnight after tumbling 8 percent on Thursday.

Mining giant Rio Tinto <RIO.L> hit a six-month low, Glencore <GLEN.L> was set for its worst weekly loss in two months and copper miner Antofagasta <ANTO.L> since December.

The Canadian dollar <CAD=>, the Australian dollar <AUD=> and Russia’s rouble <RUB=> – some of the world’s most commodity- sensitive currencies – were all sent spinning, falling respectively to 14-month, four-month and seven-week lows.

They all fought back, though, after the Saudi OPEC governor’s comments to Reuters that: “A six-month extension (to production cuts) may be needed to rebalance the market, but the length of the extension is not firm yet.”

Rio Tinto <RIO.L> hit a six-month low on Friday, and Glencore <GLEN.L> was set for its worst weekly losses in two months, while for copper miner Antofagasta <ANTO.L> since December

LE PEN TO THE SWORD?

In calmer waters, the euro <EUR=> touched a six-month high of almost $1.10 ahead of France’s weekend election, in which polls now expect centrist Emmanuel Macron to convincingly beat right-wing and anti-euro rival Marine Le Pen.

The gap between French and German 10-year government borrowing costs also hit a six-month low and despite the dip on the day, European shares <.STOXX> were heading for a healthy 1.2 percent rise for the week. World shares <.MIWD00000PUS> hit a record high on Wednesday.

“I think now this election is no longer an issue and the market is already starting to focus on new issues: inflation, the (euro zone) economy, and the U.S. data,” said DZ Bank strategist Daniel Lenz.

He was referring to U.S. non-farm payroll numbers due out at 1230 GMT (8:30 a.m. EDT) are expected to show 185,000 jobs were created in April following March’s underwhelming 98,000 figure.

The dollar <.DXY> and U.S. government bond yields <US10YT=RR> had both been nudged lower by the commodity market worries. It is set to be the fourth weekly fall on the trot for the greenback which is now at its lowest since November.

The yen <JPY=> and gold <XAU=> rose in tandem as investors took refuge in safe havens, though the latter remained on track for its biggest weekly decline in nearly six months on bets that U.S. interest rates will rise again in the coming months.

“I think the payrolls will be under consensus,” said fund manager Hermes chief economist Neil Williams.

“It fits with my view that the U.S. is going to peak out at a far lower interest rate than markets expect. The Fed’s dot plots says 3 percent, but I’m going closer to 1.5 percent.”

Emerging markets were also caught in the commodities sell-off. The main emerging currencies were all on track for weekly losses and MSCI’s closely-followed EM stocks index <.MSCIEF> hit a 10-day low.

China markets have also been wobbling in recent weeks but the commodity market woes have been the central focus.

Brent traded volumes on Thursday reached an all-time high of nearly 542,000 contracts, suggesting that big betting hedge funds may have been ripping out long positions.

“It is now-or-never for oil bulls,” said U.S. commodity analysis firm The Schork Report. “They either put up a defence here or risk further emboldening the bears for a run at the $40 threshold (for WTI).”

(Addition Reporting by Abhinav Ramnarayan, Veronica Brown and Helen Reid in London; Editing by Hugh Lawson and Ed Osmond)

U.S. job growth rebounds sharply, unemployment rate hits 4.4 percent

A job seeker fills out an application at the King Soopers grocery store table at a job fair at the Denver Workforce Center in Denver, Colorado, U.S. February 15, 2017. REUTERS/Rick Wilking

By Lucia Mutikani

WASHINGTON – U.S. job growth rebounded sharply in April and the unemployment rate dropped to a near 17-year low of 4.4 percent, signs of a tightening labor market that could seal the case for an interest rate increase next month despite moderate wage growth.

Nonfarm payrolls jumped by 211,000 jobs last month, the Labor Department said on Friday, well above the monthly average of 185,000 for this year and a jump from the gain of 79,000 in March.

Job gains were driven by a surge in hiring in the leisure and hospitality sector as well as business and professional services.

The drop of one-tenth of a percentage point in the unemployment rate took it to its lowest level since May 2007.

The decline reflected both an increase in hiring and people leaving the labor force.

The labor force participation rate, or the share of

working-age Americans who are employed or at least looking for a job, fell to 62.9 percent from an 11-month high of 63 percent.

The rebound in hiring supports the Federal Reserve’s contention that the pedestrian 0.7 percent annualized economic growth pace in the first quarter was likely “transitory,” and its optimism that economic activity would expand at a “moderate”

pace.

The Fed on Wednesday kept its benchmark overnight interest rate unchanged and said it expected labor market conditions would “strengthen somewhat further.”

The U.S. central bank raised its overnight interest rate by a quarter of a percentage point in March and has forecast two more increases this year.

Average hourly earnings rose seven cents, or 0.3 percent, last month, partly because of a calendar quirk. While that lowered the year-on-year increase to 2.5 percent, the lowest since August 2016, there are signs that wage growth is accelerating as labor market slack diminishes.

A government report last week showed private sector wages recorded their biggest gain in 10 years in the first quarter.

NEAR FULL EMPLOYMENT

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. Job growth averaged 178,000 per month in the first quarter.

With the labor market expected to hit a level consistent with full employment this year, payroll gains could slow amid growing anecdotal evidence that firms are struggling to find qualified workers.

Construction payrolls rose 5,000 last month and manufacturing employment advanced by 6,000 jobs. Leisure and hospitality payrolls jumped by 55,000 in April. Professional and business services payrolls rose by 39,000.

Retail payrolls gained 6,300 after two straight months of declines. Retailers including J.C. Penney Co Inc <JCP.N>, Macy’s Inc <M.N> and Abercrombie & Fitch <ANF.N> have announced thousands of layoffs as they shift toward online sales and scale back on brick-and-mortar operations.

Government payrolls jumped 17,000 last month.

Other labor market measures also showed strength last month.

A broad measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, dropped to 8.6 percent from 8.9 percent in March.

The employment-to-population ratio rose one-tenth of percentage point to a fresh eight-year high of 60.2 percent.

((Reporting by Lucia Mutikani; Editing by Paul Simao))