OTTAWA (Reuters) – Canada‘s finance minister on Wednesday welcomed the U.S. “fiscal cliff” agreement, but warned that significant risks remain and urged more action to put the U.S. fiscal situation on a sustainable path.
“Canada welcomes the agreement reached between the president and the Congress that protects the U.S. economy in the short term,” Finance Minister Jim Flaherty said in a statement.
“That said, there remain a number of significant risks to the U.S. economic outlook. It is my hope that leaders in the United States continue to work together to develop future action that will put the U.S. fiscal position on a sustainable path,” he said.
(Reporting by Louise Egan; Editing by Leslie Adler)
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The UK is assuming its year-long presidency of the G8 group of nations.
The presidency – which rotates through the G8 members – means it will host the annual leaders’ summit and choose the global priorities that are discussed.
June’s summit is to be held at Lough Erne, in County Fermanagh, while topics discussed will include tax havens.
The G8 is made up countries who have, historically, been the richest in the world – France, the US, Russia, Japan, Germany, Italy, Canada and the UK.
As prime minister of the presidency holding nation, David Cameron has said he wants to focus on combating trade protectionism, cracking down on tax havens and promoting greater government transparency.
These topics will be discussed in ministerial meetings ahead of the summit along with urgent issues like the crisis in Syria.
Although G8 summits are renowned for fine communiques, the group increasingly suffers from a credibility problem – some of the world’s largest economies like China, India and Brazil are not members, says BBC world affairs correspondent Emily Buchanan.
Our correspondent also adds that organisers will at least be hoping the June summit will be trouble-free.
The last time the UK was the host in 2005, in Gleneagles, more than 200,000 people marched against world poverty.
The proceedings were then overshadowed by the 7/7 bus and underground bombings in London.
Mr Cameron announced in November that the G8 summit would be held at the Lough Erne golf resort near Enniskillen.
It is the first time an event of this size has been held in Northern Ireland.
Speaking at the time, the prime minister said: “I want the world to see just what a fantastic place Northern Ireland is – a great place for business, a great place for investment, a place with an incredibly educated and trained workforce ready to work for international business.
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CAIRO (Reuters) – Egypt‘s pound fell to a record low on Monday as the president signaled his government would allow it to depreciate slowly for several more days to stop a drain on foreign reserves that has driven the economy into crisis since the fall of Hosni Mubarak.
Hit by a new bout of political turmoil in the last month, the pound had weakened to a record low on Sunday at a new dollar auction brought in by the central bank. It fell further at a second auction on Monday, last trading at 6.37 to the dollar on the interbank market.
The drop means the central bank has allowed the pound to slide by almost 3 percent over the last two days after limiting its decline to only 6 percent since the uprising that removed Mubarak from power almost two years ago.
The pound’s fall, which is certain to increase the price of imported staples such as tea and sugar, underlines the economic crisis facing President Mohamed Mursi as his administration tries to contain the political fall-out of his move to fast-track a contentious new constitution passed into law last week.
Egyptians panicked by street clashes between Mursi’s Islamist backers and his more secular-minded opponents on the streets of Cairo and other cities have rushed to change their pounds into dollars in recent weeks, fearing it would be devalued further.
“The market will return to stability,” Mursi told Arab journalists on Sunday evening, the state news agency MENA reported.
The pound’s fall “does not worry or scare us, and within days matters will balance out,” he said.
Having just sold their last dollar bills, dealers at one Cairo foreign exchange bureau did not bother changing their price board when the new low appeared on their trading screens.
“He took our last dollars,” said one of the traders, pointing to a man walking out of the door.
Outside, another man told a friend his dollar hunt had failed. “They have no dollars. What can I do?” he said by mobile phone. “I went to many dealers and could not find dollars.”
The fall has been driven mainly by ordinary citizens who have been trying to turn their savings into foreign currency, worried that the pound will weaken further because of the latest political turmoil.
The crisis wiped 10 percent off the value of Egyptian stocks when it erupted in late November. But the main index has mostly recovered since then, climbing in the two sessions since the introduction of the new foreign currency system.
Market participants attribute the rise to buying by Arab and international investors using the cheaper pound to bargain hunt.
FREE FLOATING POUND
The auctions are part of a shift announced on Saturday and designed to conserve foreign reserves, which the bank says are now at “critical” levels that cover just three months of the food, fuel and other goods Egypt imports.
Bankers have described the new system as a move towards establishing a free market value for the pound, which has been tightly controlled since a managed devaluation which ended in 2004.
The head of the Egyptian banking federation said the new system was an “important first step” towards a free float.
In remarks to MENA, Tarek Amer, who is also chairman of Egypt’s largest bank, state-owned National Bank of Egypt, said the new system was a success on its first day and had “significantly reduced” demand for dollars.
The central bank has sold about $ 75 million at each of Sunday’s and Monday’s auctions.
The run on the pound prompted officials last week to impose controls on how much cash could be physically carried out of the country. Security men at one Cairo bank branch had to remove one customer angered by a $ 10,000 limit on how much currency he could withdraw, witnesses said.
The changes announced on Saturday include regular foreign currency auctions and also limit how much foreign currency companies can withdraw at a time.
The central bank had spent more than $ 20 billion – or more than half of its reserves – over the past two years to defend the currency. The reserves fell by a further $ 448 million in November to about $ 15 billion.
Prices of imports have already started to rise. Pyramid Oil Field, a firm that imports chemicals for use in water treatment and oil fields, had put up its prices by 10 to 15 percent last week, fearing a further weakening of the pound.
“This instability obliges you to increase the price, to have a safety factor,” said Ashraf el-Gamal, president and managing director of the company, told Reuters. “From now on, the contracts will be of a very short validity.”
To be on the safe side, he was projecting that the pound would weaken to stand at 9 against the euro, compared to a previous level of 8.
ECONOMY FRAGILE
Prime Minister Hisham Kandil said on Sunday that the economy was in “a very difficult and fragile” situation, adding that he expected talks with the International Monetary Fund on a $ 4.8 billion loan to resume in January.
Egypt won preliminary approval in November from the IMF for the loan, but delayed seeking final approval until January after it suspended a series of tax increases to allow more time to explain a heavily criticized package of economic austerity measures to the public.
Kandil’s efforts to revive the economy have been hit by the latest turmoil, which scared off tourists who had begun to return. On the eve of the anti-Mubarak revolt, Egypt’s tourism industry accounted for one in eight jobs.
Mursi hoped that the passage of a new constitution would stabilize Egypt’s politics, giving him space to implement economic reforms and attract investment. The constitution, written by Mursi’s Islamist allies, was approved in a popular referendum in December.
But it remains the focus of controversy, and the opposition is likely to seize upon austerity measures demanded under an IMF deal as a stick to beat the Muslim Brotherhood ahead of a parliamentary vote expected in early 2013.
Two-fifths of Egypt’s 84 million population live around the poverty line and depend on subsidies that are straining the treasury.
Gamal of Pyramid Oil Field said he knew of at least three foreign companies that were hesitant to make large investments in the country because of the instability.
“They are feeling insecure because of everything that is happening,” he said. “One is looking to invest billions.”
(Additional reporting by Tom Perry; Writing by Tom Perry and Patrick Werr; Editing by Giles Elgood)
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In comic book publishing, the decision to kill off a long-running and beloved character may seem, at first glance, like a terribly unwise business move. But when Marvel Comics released its latest issue of Amazing Spider-Man—#700, which ends with Peter Parker, the webbed crusader’s alter ego, getting murdered—the issue began flying off the shelves.
“The sales are phenomenal,” says Axel Alonso, the editor in chief at Marvel Comics, “Amazing Spider-Man #700 has sold nearly 250,000 copies in print alone; final digital orders aren’t in yet. This is the best-selling comic book at this price-point of the last decade, at least.”Photograph Courtesy Marvel
Marvel isn’t the first comics company to lift sales by employing a shocking new creative direction. In fact, it’s actually a common practice, which gained attention in the 1970s but reached new heights in the early 1990s, when DC Comics destroyed its most famous character, Superman, in a publishing event that fueled sales across the world.
Here are four of the most surefire, lucrative, and reliably controversial methods that comic book creators use to gain readership and boost the bottom line.
I. Embrace alternative lifestyles
Gay characters are nothing new—an X-Men superhero called Northstar came out of the closet in 1992—but the subject is still controversial enough to cause a public outcry. The comic Life With Archie No. 16, which featured the first same-sex wedding in the series’ otherwise conservative history, hit newsstands in early 2012 and quickly became a target for One Million Moms, a conservative group that called for Toys R Us to stop selling the comic or be boycotted. The threat didn’t work. “[The Million Moms] really propelled the book,” says Archie Comics Chief Executive Jon Goldwater. “It was selling well anyway, but they made it a collector’s item. Last I heard it was selling on eBay for $ 50.” Dan Parent, a writer and illustrator who has worked for Archie for 20 years and penned the gay wedding issue, says he’d “love to send the Million Moms a big box of chocolates and flowers, to thank them for helping the Life With Archie book to sell out. It was a marketing dream.”
II. Court ethnicity
Marvel Comics unleashed an entirely new Spider-Man in August 2011. The costume was the same, but under it was a half-African American, half-Latino teenage boy named Miles Morales. Glenn Beck discussed the new biracial Spider-Man on his radio show. “The new Spider-Man looks just like president Obama,” he said. “I think a lot of this stuff is being done intentionally.” Stan Lee, the legendary comic book writer who co-created Spider-Man, dismisses the conspiracy theories. In fact, he says bringing a little ethnicity to comics is nothing new for his company. “Years ago at Marvel, in the 60s, we had a war book called Sgt. Fury and his Howling Commandos,” he says. “We introduced a black soldier, an Italian soldier, a Jewish soldier. We had every ethnic group represented in this platoon. And I was told, ‘Oh this book will never sell in the South.’ Or ‘it will never sell in the West.’ Or the North, or the East, or wherever the marketing department was worried somebody would be offended. But it was one of our best-selling books ever!”
III. Sex it up
Superheroes have always been synonymous with sex—their costumes aren’t skintight by accident—but in recent years, the characters have gotten far more steamy and intense. Several new titles released as part of DC Comics “New 52″ relaunch in 2011 included intimate scenes with over-the-top NSFW drawings. Catwoman #1, published in September 2011, gained attention for the eponymous character’s violent sex scene with Batman.
But sex in comics can come bearing consequences—as an issue of Dark Horse’s Buffy the Vampire Slayer series proved in February. Buffy, after discovering she’s pregnant, decides to get an abortion. “We wanted to court controversy,” admits Scott Allie, the editor in chief at Dark Horse Comics. “We were fed up with America’s glamorization of teenage pregnancy and wanted to do a story that explored the reasonable choice of terminating a pregnancy.” He says they anticipated the media headlines and even worked with their marketing department to encourage them, but “I don’t know that they really impact sales. Since it is a genuinely controversial issue, it probably costs us as many sales as it gets us.” In the end, Allie says, the issue sold well, but not in record numbers. “I think in order to do controversy in a way that would really boost sales, we’d have to try a little harder,” he says. “And that’s not a great reason to do it.”
IV. Kill your icons
Comic books have been killing off popular characters since the early 1970s, when Peter Parker’s girlfriend Gwen Stacy was murdered by the Green Goblin, which, at the time, was akin to superhero heresy. Since then, seemingly immortal characters like Superman, Robin the Boy Wonder, and Captain America have all been killed off at one time or another, usually followed by a tsunami-size media response and a comic-buying frenzy. “As far as what kind of controversy equates to biggest sales, it’s always been and always will be the death of a major character,” says Brandon Zuern, the store manager of Austin Books & Comics in Austin, Tex. “I think death in comics is way overused, but people keep buying them.” The best part of killing an iconic character is that the fans do most of the work for you. “The story kind of markets itself,” says Marvel Comics Editor in Chief Alonso. “You just get the word out, and people want to know more. ‘Peter Parker Death’ has been the No. 1 trending topic on Yahoo for the last two days, which speaks volumes about their love for Peter Parker.”
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WASHINGTON (Reuters) – Contracts to buy previously owned U.S. homes rose in November to their highest level in 2-1/2 years, an industry group said on Friday, further evidence of a strengthening housing market recovery.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, increased 1.7 percent to 106.4 – the highest level since April 2010 when the home-buyer tax credit expired.
Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to rise 1.0 percent after a revised 5.0 percent increase in October. It was the third straight month of gains.
“Home sales are recovering now based solely on fundamental demand and favorable affordability conditions,” said NAR chief economist Lawrence Yun.
Pending home sales were up 9.8 percent in the 12 months through November.
The housing market has turned the corner after a dramatic collapse, which dragged the economy through its worst recession since the Great Depression of the 1930s.
Home sales and prices are rising, encouraging builders to undertake new construction projects.
Home resale contracts were up in three of the country’s four regions. They were unchanged in the South.
(Reporting By Lucia Mutikani; Editing by Neil Stempleman)
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“It looks like that’s where we’re headed,” Harry Reid said of the fiscal cliff
The US appears to be heading over the “fiscal cliff”, with prospects dim for a deal to avoid tax rises and spending cuts, the US Senate leader says.
Speaking on the Senate floor, Democrat Harry Reid said there did not seem to be enough time to craft a deal before Monday night’s end-of-year deadline.
Senators and President Barack Obama have returned to Washington, while the House of Representatives is in recess.
Analysts say heading over the “cliff” could tip the US into recession.
Bickering over the cliff has divided Washington in recent weeks, with President Obama and House Speaker John Boehner unable to reach a deal before Christmas.
The president wants to ensure that taxes do not rise for Americans earning under $ 400,000 (£250,000), and insists on raising new tax revenue in any deal.
‘Dictatorship of the speaker’
But many Republicans oppose new taxes, and an alternative plan proposed by Mr Boehner – which would have seen taxes rise only on those earning over $ 1m – failed in the House late last week.
Continue reading the main story
On 1 January 2013, tax increases and huge spending cuts are due to come into force – the so-called fiscal cliff
Deadline was put in place in 2011 to force president and Congress to agree ways to save money over the next 10 years
Fear is that raising taxes while massively cutting spending will have huge impact on households and businesses
Experts believe it could push the US into recession, and have a global impact on growth
Republicans left Washington for Christmas and said responsibility for avoiding the cliff rested with the Democratic-led Senate.
But in the Senate chamber on Thursday Mr Reid said the requirement to get at least 60 of 100 votes to move to a vote on any legislation almost certainly doomed any new plan unless Republicans gave it strong backing.
“It looks like that’s where we’re headed,” Mr Reid said of the fiscal cliff.
The Senate leader said the House of Representatives was “being operated with a dictatorship of the speaker”, accusing Mr Boehner of holding up a vote on a Senate-passed bill to avoid the fiscal cliff.
“John Boehner seems to care more about keeping his speakership than about keeping the nation on sound financial footing,” Mr Reid said. Mr Boehner faces an internal re-election contest among House Republicans on 3 January.
The term fiscal cliff refers to the combination of almost $ 600bn (£370bn) of tax rises and spending cuts due to come into force on 1 January if Congress does not pass new legislation.
Sweeping tax cuts passed during the presidency of George W Bush will expire, affecting people of all income levels.
‘Extraordinary accounting’
In addition, spending cuts mandated by a law passed to break a previous fiscal impasse in Congress will come into force.
The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans’ support.
On Wednesday, Treasury Secretary Timothy Geithner warned Congress the Treasury would have to enact a series of extraordinary accounting measures to free up about $ 200bn from the government’s official borrowing figure.
Those measures would stop the government from hitting its $ 16.4tn “debt ceiling” – the legal limit set by Congress on how much the US government can borrow – for about another two months beyond 31 December.
But Mr Geithner warned that without them, the government would run out of cash on Monday and “the United States would otherwise default on its legal obligations”.
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Here’s some bad news for those making New Year’s resolutions now: January is the worst month to try to change your life, according to data from StickK, one of several websites designed to help people achieve personal goals. “Everybody wants to make a New Year’s resolution,” says Jordan Goldberg, chief executive of the 18-employee New York company, which see its traffic triple at the start of the year as thousands of people commit to exercising more, losing weight, and quitting smoking. “Their willpower to do so varies considerably.”
The best month to try to change, according to StickK’s data, is August, when students are preparing to go back to school and many people are settling into new routines.
There’s no clinical research on the ideal time of year to make improvements, says John Norcross, a psychologist at the University of Scranton and author of Changeology, a new book on behavior change. One explanation for January’s high failure rate: “People rushing in are likely to fail,” Norcross says. That can demoralize them and make it harder to modify their habits later. “They should be changing when they’re prepared,” he says.
The good news: Those who keep their commitments for at least three months tend to stick long-term, no matter what time of year they’re made. Here’s a chart of data from a 1989 study of resolutions Norcross published in the Journal of Substance Abuse, showing when people relapse:
Goldberg agrees that when you make a resolution is less important to succeeding than how you do it. StickK lets you set up a contract that will cost you money if you fail to meet your goals. The funds are charged to a credit card entered when you set the goal and forfeits go to a charity or a person you designate; if you claim success, you lose nothing. For added incentive, you can pick an “anti-charity” whose cause you oppose. (Some British soccer fans even select a rival football club to get their cash if they fail.) Unless the money is going to another individual, StickK takes a cut of about 20 percent to 30 percent; it also makes money by selling its techniques to corporate wellness programs.
For a further layer of enforcement, StickK lets you designate a friend to hold you accountable and post your progress on social networks. “It’s about having skin in the game,” says Goldberg. With money on the line and a friend nudging you along, your chances of success rise from 29 percent to 74 percent, according to StickK’s data, based on users’ self-reported results.
Goldberg says he made two resolutions at the start of 2012: to go to the gym three times a week and to get to bed earlier. He says he’s succeeded at the first, but getting enough rest has been trickier. “When you’re running a startup, doing a lot of traveling, it’s tough to maintain a good sleep schedule,” he says. Maybe he should try again next August.
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When Hu Bin started his blog in early 2008, he was a skinny 22-year-old college dropout with a perpetually skeptical look on his face and little doubt he’d soon be a household name. The previous year the Shanghai Stock Exchange had been flooded by speculators. For a brief period, it was the second-busiest exchange in the world. It was also beginning a dramatic fall ushered in by the global financial crisis. Hu says he considered the market, considered his audience, and sensed it was time to make his mark. “It really started when Premier Wen Jiabao announced a 4 trillion renminbi rescue plan for the economy,” Hu says. “I knew I just needed to be clever and use this chance of high liquidity in the market to make myself famous.”
Now 26, Hu is China’s most popular online market commentator. His blog has gotten more than 400 million visits. His posts are equal parts outlandish and thoughtful, and employ liberal use of bolded, multicolored text and exclamation points. Hu writes under the name Yerongtian—a character from a real estate-themed Hong Kong soap opera—and has been known to pick fights with other commentators, whom he says suffer from a “lack of emotion.” He has posted at least one picture of cats, and multiple pictures of himself wearing sunglasses to help illustrate his opinions. In 2009 the state-run newspaper China Daily listed him (under his alias) among the 10 people in the nation with the most influence on China’s stock market. “Back then,” Hu says of 2008, “any eccentric behavior would attract people’s attention. If you understood this vital point, you could control people’s minds.”
Hu grew up in Kunming, a southwestern city of 6.4 million that’s far from China’s centers of finance. He learned about the stock market, he says, by watching his mother invest in her spare time. She put money into the market in the 1990s, early days for Chinese investment, and lost it all. “Now she invests her money in gold,” Hu says.
He started at Kunming University, intending to study philosophy and Marxism, but quit, thinking he would take up investing himself. “I was interested in psychology,” he says. “I wanted to know why everyone wanted to bet their future on an uncontrollable thing.”
Hu admits that in the early days of his blog, his knowledge of the market was thinner than it is now. He has always, however, understood his audience and how to keep it interested. Hu’s approach to his blog is purposefully bombastic, earning him vocal critics along with followers. In 2009 he got into a spat with another stock commentator, a man named Hou Ning. Hou, at least according to Chinese news reports from the time, holds the record for the longest nickname of any stock commentator in history—“Commander in Chief of the Stock Market Army.” The two made a 1 million yuan (roughly $ 160,000) bet on the future of the Shanghai Stock Exchange Composite Index, with Hu wagering it would reach 4000 by the end of the year. It didn’t, and Hu didn’t pay, but he got what he wanted out of the rivalry. “Who would have paid attention to me if I had said 3000?” he asks. “Everyone already knew it would reach 3000.” In 2010 he promised to throw himself off one of Shanghai’s tallest buildings if the SSE Composite Index didn’t reach 5800 by the end of the year. It didn’t: Hu is still with us.
Photograph by Ka Xiaoxi“Chinese investors aren’t as mature as American investors, and I write to meet their immediate needs,” says Hu
Stunts aside, Hu has spent the last four years working through his thinking on the ups and downs of China’s economy in public, slipping thoughtful essays in between bouts of hyperbole. He spent his early days predicting the rise of the Shanghai Stock Exchange and now foresees its continuing decline. One recent headline: “Doomsday Runs Wild, the Stock Market will likely drop 200 points!!” In another post, he explains that a drop in the market may not be bad. It could give the authorities some space to make reforms without worrying about overheating, and help to attract more foreign investment. “The stock market is not only an economic weather vane,” he writes. “It is a political weather vane.”
Hu says he is not a financial rabble-rouser. Most laypeople, he says, should stay away from investing in individual stocks. The people who read his blog, however, are generally not professionals; retail investors make up the majority of the volume of trading in the Chinese market. According to the Chinese Securities Regulatory Commission, there are around 72 million retail investors in China, accounting for three-quarters of the trading on domestic exchanges. And according to China’s state media, the majority of these investors have less than 1 million yuan in the market. It’s a group of people Hu says he understands well, even if it means giving sometimes conflicting advice. He may advise them to stay out of the market, but he knows the irresistible pull of equities on the newly wealthy, particularly in a country where there are few opportunities for investment. In effect, he’s giving advice to people he knows probably shouldn’t be in the market but are going to invest anyway.
“The stock market in the United States is managed by regulations,” Hu says. “The Chinese market is managed by humans. Chinese investors aren’t as mature as American investors, and I write to meet their immediate needs.”
Hu’s interest in the human story behind the market sets him apart from other bloggers, at least in his eyes. “They regard their blogs as livelihood, while I take my blog as my friend and pour my emotions and love into it. The emotion is what connects me to the readers—they feel more attached to my words.” The connection is important in part, says Hu, because Chinese investors have been taught that networking can solve anything. Even in the stock market, relationships are the deciding factor. “When it comes to stock investment, Chinese people always try to get inside information from someone within their social network. Americans like to read through financial statements, but Chinese people like to believe that their stocks go up because they have more inside information than anyone else.”
Today, Hu spends most of his time in Beijing, where he moved in 2009. On a recent Sunday, he is drinking tea at one of Beijing’s most expensive hotels, wearing a tie and a tan Calvin Klein puffy jacket that he does not take off. Instead, he stuffs his hands in his jacket pockets while he talks, looking exactly like what he is—a blogger who’s hit it big, though he’s coy about, financially, how big. His sense of humor is also just slightly out of step with the tie. When asked about online nicknames, he says he’s not aware of any and then, unblinking and serious, says: “I prefer the nickname Batman.”
For all his success, Hu still considers blogging a hobby, not a career. “Fame is vanity,” he says, “while investment asks for real competence.” He’s now in the process of raising money for a private equity fund that, over the next few decades, he hopes to build into something like Berkshire Hathaway (BRK/A). Again, he won’t say how much he’s raised. Although his blog posts are currently predicting dark times, Hu has faith that the Chinese market will recover, and he’s optimistic about the market and the future in general. “New Chinese leaders are going to take over, which will offer China economic opportunity in the following 10 years,” he says. China’s new leader, Xi Jinping, has promised the country will push forward with reforms, something that Hu is excited about. He’s also upbeat about China’s recent leadership transition. Political stability, he says, is a market good. “The opportunity will be mainly in China’s capital market, because it’s still in an initial stage,” he says. “I need to take advantage of this initial stage before everyone realizes there’s a gold mine when the market matures.”
Hilgers is a Bloomberg Businessweek contributor.
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Central Bankers “We face a broader challenge—to defend the market economy amongst so many who suffered during the financial crisis. This was expressed memorably by William McChesney Martin when he spoke to the Economic Club of New York in 1957. He said, ‘Men begin to question whether the merriment was worth the misery, especially when the misery was worse among the millions who had never got in on the merrymaking in the first place.’ ” —Mervyn King, governor, Bank of England
Africa “Africa remains on course to double its GDP every decade. This will be the decade of infrastructure investment.” —Charles Robertson, chief economist, Renaissance Capital
Indonesia “What matters for Indonesia now is China and Chinese domestic spending.” —Timothy Condon, chief economist, Asia, ING Investment Management in Singapore
Russia’s Energy Squeeze “Russia is OK for now but their system gets shaky two to three years down the road. They’ve been riding a decade of high energy prices, but with all the new oil and gas coming from everywhere, prices will fall. That’ll wipe out Gazprom’s profits. They’re worried about U.S. natural gas exports to Europe. Russia’s days as Europe’s main energy supplier are numbered.” —Anders Aslund, senior fellow, Peterson Institute for International Economics
Argentina “Investors have been burned before, but I think Argentina’s worst days are behind them. Basically, I don’t think they can mess up any further than they already have.” —Walter Molano, chief economist, BCP Securities
China “Beijing understands that it needs to rebalance away from investment toward household consumption. Next year will be a crucial step toward that, causing growth to slow in the second half. Most importantly, it needs to tighten up credit. That’s going to be hard on the state-owned enterprises that’ve become so dependent on what has essentially been free capital. But China has reached a point where the growth of investment and credit is no longer wealth creating, it’s wealth destroying.” —Michael Pettis, finance professor, Peking University
Oil Prices “Look for more demand weakness and rising supply. In the U.S., we’ve had six straight quarters where GDP rises and petroleum demand falls. We’re finally becoming more energy efficient. On the flip side, we continue to see crude production rising. The latest data has the U.S. producing 6.9 million barrels per day, up 16 percent from 2011. That rate’s not slowing down.” —Tim Evans, energy analyst, Citi Futures Perspective
Bullish on East Asia “We expect quarter four also to be good, and that then feeds into a very strong next year.” —Bert Hofman, World Bank chief economist for East Asia
Japan Prime Minister Shinzo Abe “Abe is going to hit the ground running. He can get broad agreement on a 10 trillion yen ($ 120 billion) stimulus package with infrastructure spending to jolt the economy out of recession. That will add to Japan’s pile of debt, but after you [top 200 percent] of GDP, what’s another 10 trillion yen? —Jeff Kingston, director of Asian Studies, Temple University
U.S. Employment “So much depends on how quickly people continue to fade from the labor force out of frustration. That could actually bring down the unemployment rate rather quickly without a strong recovery in job growth. A stronger economy might actually hold up that rate longer than a weak one, because people will … jump back in and look for work. But remember, the unemployment rate is murky as a signal for the strength of the economy.” —James Galbraith, economist, University of Texas
Chinese Reform “Xi has signaled he intends to change things. And there are people watching with a billion cell phones.” —Robert Lawrence Kuhn, author of How China’s Leaders Think
Temporary Hiring “I’m beginning to see U.S. companies spend more and make a few more gambles. Give me all the IT, engineers, scientists, trained technicians, machinists you have. In Europe a lack of certainty has caused a halting of behavior. There’s downward pressure in Mexico, Brazil, and China. By no means do I see 2013 as a rock ‘n’ roll year.” —Carl Camden, CEO, Kelly Services
Japan-China Tension “China’s intention to topple the status quo by use of coercion is clear. Does China want to see the Japan-China relations pass the point of no return?” —Japan Foreign Ministry statement
U.S. Housing “We turned bullish on housing in the summer of 2011. Demand is greater than supply. It’s that simple. We, unlike other mature countries, still have people fall in love and get married and have babies. The big driver of demand is adult children moving out of the home. New home inventory is at a record low. [Credit is] more widely available than perceived. We are not complacent. I am a worrier beyond worrier. But it’s exciting right now.” —Ivy Zelman, Zelman & Associates
U.K. Economic Forecast “Growth in the coming year will be just about zero.” —Michael Saunders, economist at Citi Research in London
India “The budget deficit target will be missed. You have slower growth, revenues are weaker, and you still have a high level of subsidies in energy items that cost government money. There is an election that has to be called by May 2014, so there is always a risk you will get populist-type spending measures that could inflate the budget deficit.” —Art Woo, director of sovereigns, Fitch Ratings in Hong Kong
U.S. Capital Spending “There is a lot of pent-up demand for investment spending that we think will get unleashed next year. Businesses have delayed capital projects in anticipation of the fiscal cliff. Capital spending has been notably weak in the last six months, much weaker than during the rest of the recovery. So a political deal, or even just some clarity about the future, could result in a nice bounceback in capital spending after the beginning of the year.” —Jan Hatzius, chief economist, Goldman Sachs
Italian Politics “When people need me, I don’t abstain from acting.” —Silvio Berlusconi, former Italian Prime Minister, on why he’ll be a candidate in the 2013 elections
Federal Reserve “Businesses that went right to the brink during the crisis are focused on survival and liquidity. Hopefully, that’s just a matter of healing and time. It’s one reason the Fed wants to be very consistent. If you put together a real consistent year of growth, that might cause companies to invest more.” —Julia Coronado, chief economist for North America, BNP Paribas
Data: International Monetary Fund, Fitch, Federal Reserve
Businessweek.com — Top News
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UK tax authorities are not doing enough to tackle alcohol duty fraud, claims a leading off-licence chain.
Bargain Booze told the BBC that the number of stores telling HM Revenue and Customs that they face illegal competition is rising.
Last year HMRC received over 600 reports to its tax hotline relating to alcohol fraud.
The Revenue said it acted on every piece of intelligence, but admitted investigations could take years.
The government has given HMRC £17m to tackle the gangs behind the fraud.
‘Paper event’
Continue reading the main story
“Start Quote
There are outlets all over the country which are selling at prices we couldn’t get even get close to matching and nobody is stopping them”
End QuoteDavid VisickThe Federation of Wholesale Distributors
Alcohol duty fraud in the UK often involves exporting alcohol to the EU – untaxed – and then bringing it back into the UK with false paperwork.
This method exploits EU rules which state duty does not have to be paid on alcohol when it is being transferred between registered producers or wholesalers – it is only paid when it enters the marketplace.
But the BBC’s 5 live Investigates programme has learned that some lorries containing duty-unpaid alcohol meant for export never even leave the UK.
“Increasingly it’s just a paper event – the lorry never goes abroad, so the actual product never leaves the UK. The lorry just stops on a lay-by somewhere and gets turned around,” says Keith Webb, acting managing director of Bargain Booze.
The illicit alcohol ends up in the hands of rogue wholesalers and retailers who then sell it on at prices which legitimate traders say are only possible if duty has been evaded.
A study published by the All Party Parliamentary Beer Group earlier this year, said HMRC estimates up to 1 in 5 cans and bottles of beer sold in the UK is illicit, and beer smuggling could be costing the Treasury around £500m per year in lost duty alone.
Representatives from the alcohol retail industry claim the total cost to the Exchequer could be billions of pounds: “HMRC view the loss of revenue to the Exchequer at £1.2bn, but that excludes wine. Within the trade, the real cost to the Exchequer is viewed as something in excess of £4bn a year,” says Keith Webb.
Illegal off-licences
5 live Investigates visited one suspected illegal wholesaler in the North West of England – a warehouse on an industrial estate. The programme team saw a wide range of alcohol being sold at very low prices, compared to what is offered on the high street.
For example, six bottles of Echo Falls Chardonnay was priced at £16.99 and 24 cans of Foster’s lager was £13.49.
Continue reading the main story
Alcohol duty fraud in the UK
EU law requires that alcohol can be moved “duty unpaid” between registered warehouses
Duty becomes payable at the point it enters the market – when it is sold to a non-bonded customer
HMRC estimates duty fraud accounts for lost legitimate sales in the UK of over £1bn, with beer estimated at around half that total
HMRC estimates that beer smuggling may be currently costing the Treasury around £500m in lost duty per year
They believe that at least 1 in 10, and possibly 1 in 5, of all cans and bottles of beer on sale in the UK is duty unpaid
Once fraudsters have smuggled beer back to the UK it can enter the legitimate supply chain, reappearing undetected alongside duty-paid beer in supermarkets and off-licences
HMRC believes wine duty fraud is also significant in the UK and the Federation of Wholesale Distributors says its members have seen a decline in sales of an estimated £750m
A leading legitimate cash-and-carry operator said it could not find beers and wines so cheap even at wholesale prices, let alone match the on-the-shelf price offered to members of the public.
The cash-and-carry owner, who did not want to be named due to fear of reprisal from criminal gangs, says it would have to pay around £19.35 for a box of six bottles of Echo Falls Chardonnay – of that, £11.40 would be duty.
The same amount and brand of lager would cost £16.56, with duty at £9.36 per case.
Another legitimate wholesaler based in the West Midlands told the BBC its beer sales have fallen by around £20m in the last seven years as a direct result of illegal wholesalers operating in the same area.
Another legal retailer in the North West of England said it may stop selling alcohol altogether in the next 10 years because it cannot compete with the illegal trade.
“There are outlets all over the country which are selling at prices we couldn’t even get close to matching and nobody’s stopping them,” says David Visick from The Federation of Wholesale Distributors.
“That’s the responsibility of HMRC, but HMRC is more interested in chasing the problem to the root, to find the big criminals gangs who are behind this.”
Tackling criminal gangs
The BBC has been told one wholesaler suspected of alcohol fraud has been reported to HMRC over 30 times in the last 18 months – yet is still operating.
Continue reading the main story
5 live Investigates
Listen to the full report on 5 live Investigates on Sunday, 23 December at 21:00 GMT.
Sixteen people were convicted of alcohol fraud between 2009/2010, according to HMRC figures, and 40 civil penalties have been issued this year.
“We could chalk up a cricket score of prosecutions of small players and pawns in the organisations and that would make our outputs look good,” says Andy Leggett, HMRC’s deputy director of alcohol, tobacco & gambling taxes.
Continue reading the main story
“Start Quote
Every single piece of intelligence is acted upon, but that does not necessarily mean we will go and knock on that specific door in the next week”
End QuoteAndy LeggettHMRC
“But the reality is, that would have zero impact on the fraud because those people would be replaced within days.”
The government has allocated £917m to HMRC to tackle tax avoidance, evasion and criminal attack over the next four years – £17m of that is to specifically target the organised criminal gangs behind alcohol fraud.
“Every single piece of intelligence is acted upon, but that does not necessarily mean we will go and knock on that specific door in the next week,” says Andy Leggett. “That may lead to an investigation many years down the track or may lead to an investigation elsewhere.”
Mr Leggett says HMRC is determined to tackle the criminal gangs, but disrupting their trade takes time. Enforcement officers will use criminal prosecutions and civil penalties to dismantle the illicit trade, but he acknowledges the frustration felt by other traders operating lawfully.
Earlier this year, HMRC smashed a £50m-a-year alcohol tax evasion scam – the biggest uncovered. The gang imported beers and wines from France duty-free for onward export, but the stock never left the UK and was diverted for sale without taxes and duties being paid. The ringleader, Kevin Burrage, was jailed for 10 years.
You can listen to the full report on 5 live Investigates on Sunday, 23 December, at 21:00 GMT on BBC 5 live. Listen again via the 5 live website or by downloading the 5 live Investigates podcast.
BBC News – Business
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ONS chief economist Joe Grice: “There are straws in the wind that look promising”
The government had to borrow slightly more than expected in November.
It borrowed £17.5bn, £1.2bn higher than a year earlier, official figures show. Economists had predicted borrowing would fall slightly to about £16bn.
However, the Office for National Statistics said a 0.1% growth in the all-important services sector of the economy was “promising”.
It also revised down its estimate for growth between July and September to 0.9% from 1%.
The UK’s official statistics authority regularly revises its data on the value of the output of the economy as more information is collected from businesses.
Economists were divided as to what the different figures said about the state of the UK economy.
“All in all, the UK appears to be ending 2012 not in particularly great shape,” said James Knightly from ING.
However, for Alan Clarke from Scotiabank, the growth in services “makes it all the more likely that the UK did not slip into a triple-dip recession at the end of the year”.
The Bank of England said earlier this week that it thought the UK economy would contract again in the last three months of the year following the strong growth between July and September, when the economy received a boost from Olympic ticket sales.
Continue reading the main story ‘Significant’ investment
The services sector grew 1.2% over the period and “held on” to those gains in October, the Office for National Statistics said.
Joe Grice, chief economist at the ONS, described the service sector gains as “promising straws in the wind” for the UK economy.
He also described a £1.1bn rise in business investment to £31.5bn as “significant”.
But the economy as whole still remains 3% below its pre-recession 2008 peak, he said.
Meanwhile consumer confidence remains volatile, according to a survey by research firm GfK on Friday showing a “dramatic” fall in confidence in December, contrasting strongly with an equally sharp rise in November.
Public borrowing
The BBC’s Declan Curry explains just what GDP stands for, and why we should care
The bigger-than-expected increase in government borrowing adds to the problems faced by Chancellor George Osborne as he struggles to reduce public borrowing in the face of a stuttering economy.
November’s figure takes total borrowing so far this financial year to £92.7bn, £8.3bn more than the same period in 2011.
Danny Alexander, Chief Secretary to the Treasury said: “These figures reflect the fact that this country continues to be on a hard and difficult road back to economic prosperity.
“We’re making real progress getting public spending down; we’ve reduced the deficit by a quarter over the last couple of years and a million jobs have been created in the private sector.”
“But these figures today on borrowing and on growth reflect the fact that this country continues to face tough economic challenges, and that will continue to be the main priority for the coalition as we go into the new year.”
Rachel Reeves MP, Labour’s shadow chief secretary to the Treasury, said: “For all the chancellor’s smoke and mirrors in the autumn statement, these figures show that borrowing is rising and is up by almost 10% so far this year.
“The failure of David Cameron and George Osborne’s policies on jobs and growth means they are now even failing on the one test they set themselves – to get the deficit and debt down.”
BBC News – Business
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Immediately after House Speaker John Boehner’s Plan B fell apart Thursday night, Dow futures plummeted and the media freaked out (Huffington Post headline: “END OF THE WORLD“). Boehner and his deputies skulked out of the Capitol, humiliated. His Hail Mary plan to create leverage for Republicans in the fiscal cliff negotiations with Republicans lay in tatters. Soon, his speakership may, too.
But Plan B’s demise doesn’t ensure we’re going over the cliff—it simply narrows the options. And two bits of good news are embedded in the failure. First, if we do go over the cliff, a resolution will arrive sooner than it would have otherwise. That’s because Plan B’s biggest effect, had it passed, would have been to inoculate Republicans against the charge that they blew up the economy to protect “millionaires and billionaires” from tax hikes. Now that they’re vulnerable to that charge, public pressure will be much more intense and likely to elicit a quick concession.
Second, it’s now clear that the only way to avoid the cliff is through a bipartisan bill that can pass the House, probably with substantial Democratic support. The GOP’s self-defeating revolt will shift the center of gravity to the left. Here’s where things get tricky: Boehner has said he won’t bring a bill to the floor unless it has the support of the majority of his caucus. Lost in Thursday night’s disarray was that the overwhelming majority of House Republicans—all but 30 or so of his 241 members—supported Plan B’s tax hike on millionaires. So it’s not impossible to imagine him gaining the support of 121 Republicans (he may need fewer because of vacancies) for a deal that raises taxes on households earning, say, $ 400,000 or $ 500,000, especially if that deal also contains cuts to entitlement programs and removes the dreaded sequester.
But gaining that support is far from a sure thing. It’s what Republicans and Democrats are now frantically trying to gauge. If Boehner can’t get a majority of his caucus on board, then he’ll truly be facing the end of the world—or at least the end of his speakership. The conservatives I polled Thursday night agreed (contra some media chatter) that Plan B’s failure doesn’t threaten Boehner’s job. But they also thought that if Boehner were to pass a cliff bill without a majority of his caucus, he’d be doomed.
In a drama Aaron Sorkin might have scripted, Boehner may soon be faced with the choice of holding firm and hurtling everyone into the abyss or saving the country from chaos by passing a Democratic-friendly bill with only a minority of Republicans—at the cost of his speakership, which (more Sorkin drama) is up for a vote on Jan. 3.
Either way, though, there’s a little more certainty this morning that things will end sooner rather than later. So despite the hyperbole and market turmoil, last night’s vote actually brought some good news.
Businessweek.com — Top News
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OTTAWA (Reuters) – Canadaretail sales in October jumped by a stronger-than-expected 0.7 percent from September to hit a record, but analysts said the figures were less impressive than they seemed and would not do much to boost recent sluggish economic growth.
Statistics Canada said on Thursday that retail sales in October reached C$ 39.45 billion ($ 39.85 billion), the third consecutive all-time high. Sales have now grown for four straight months.
But analysts, who had expected a month-over-month increase of 0.2 percent, noted that in volume terms sales were only up by 0.3 percent.
This, they predicted, would not have a major effect on October gross domestic product data due out on Friday. The consensus forecast is for a 0.1 percent increase.
“It’s volume that matters to GDP such that while the (October) gain was positive, it will translate into GDP much less powerfully than the headline would suggest,” Scotiabank economists Derek Holt and Dov Zigler said in a note to clients.
Canada’s economy grew at a sluggish 0.6 percent pace, annualized, in the third quarter. Although the Bank of Canada is predicting fourth-quarter growth of 2.5 percent, annualized, that looks to be too optimistic given exporters’ problems with weak markets and the strong Canadian dollar.
The retail sales data helped push the Canadian dollar up to a session high of C$ 0.9875 versus the U.S. dollar, or $ 1.0127, compared with C$ 0.9890, or $ 1.0111, before the release. It later slipped back and at 10:05 a.m. (1505 GMT) was trading at C$ 0.9893, or $ 1.0111.
In October, gains were reported in eight of 11 subsectors, representing 92 percent of retail trade.
On annualized terms, fourth-quarter retail sales growth so far is an anemic 0.6 percent, compared with the 2.2 percent rise recorded in the third quarter.
Benjamin Reitzes, senior economist at BMO Capital Markets, also noted sales growth from October 2011 was just 1.7 percent, matching June’s figure and the second-lowest since Canada emerged from recession.
“Underlying sales continue to slow, which has been the story for much of the past year, as modest job growth, warnings about over-indebtedness and the allure of cross-border shopping weigh on retailers,” he said in a note to clients.
Sales at motor vehicles and parts dealers grew by 1.6 percent on the back of a 1.6 percent increase in sales by new car dealers, who posted a fifth consecutive monthly gain. Sales at gasoline stations also advanced by 1.6 percent.
Food and beverage store sales were up by 0.5 percent. Furniture and home furnishings store sales fell by 2.0 percent while electronics and appliance stores recorded a decline of 1.6 percent.
(Editing by Nick Zieminski)
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Nissan says it is investing £250m in Sunderland to make a small luxury car, creating “hundreds of jobs” in the UK.
“The Sunderland factory is very competitive,” said Nissan’s chief performance officer Colin Dodge.
The Infiniti model was penned by Nissan’s design team in London and engineered at its technical centre in Bedfordshire.
Their brief was to appeal to buyers in Europe, where the marque’s sales are weak.
Business Secretary Vince Cable visited the Sunderland plant on Wednesday for the investment announcement.
“Today’s news is a strong endorsement of the quality of Britain’s car industry, which is creating jobs, taking on apprentices and contributing to building a stronger economy,” he said.
“The auto sector is living up to being one of the great success stories of our industrial strategy and a testimony to government and private sector working together in close partnership.”
‘Pivotal car’
Business Secretary Vince Cable: “It’s a tremendous vote of confidence in the British car industry”
Mr Dodge said it was too early to be specific about how many jobs would be created as a result of the fresh investment.
It was suggested, however, that it could be about 280 directly at the factory, with a further 700 or so created with suppliers.
However, to make space for the Infiniti, a previously announced investment of £127m to build a hatchback, involving some 125 jobs, will now be moved from Sunderland to another Nissan factory in Europe, for instance in Spain or Russia, an Infiniti spokesman said.
The Infiniti investment will be made during the next two years and the new Infiniti will start rolling off the assembly line in 2015, Mr Dodge said.
Nissan said it would produce up to 60,000 Infiniti cars per year.
The new car has not yet been named, beyond an announcement that it will be called something starting with Q followed by a digit and ending with 0, but it will be based on the Ethera concept vehicle that was displayed at the Geneva motor show in 2011.
“It is a pivotal car for Europe,” Mr Dodge said.
Ambitious target
Infiniti has made little headway since it was first launched in Europe in 2008 with a series of large, thirsty cars with powerful V6 and V8 petrol engines.
“The Infiniti brand has been very American-centric for years,” Mr Dodge said, “but the new, smaller model is the size of car for Europe rather than for the US.”
Infiniti has set itself an ambitious sales target in Europe of 100,000 cars by 2016, compared with 16,700 cars sold in 2011.
Between a third and half the sales of the new Infiniti are expected to come in Europe, said Mr Dodge.
The car will be the first Infiniti to be offered with a diesel engine, an option seen as crucial to win over European drivers, Mr Dodge said, though he declined to reveal further details about the engine options for the car.
The Ethera concept was a petrol-electric hybrid with a 2.5-litre four-cylinder engine. Nissan is developing engines jointly with Mercedes-owner Daimler, it works closely with alliance partner Renault, and in March this year it unveiled a high performance petrol-electric hybrid model, the Emergenc-e, that will use a three-cylinder petrol engine made by Hethel, Norfolk-based Lotus.
Efficient factory
Sunderland was awarded the model thanks to its reputation for efficiency, both in terms of quality and cost as well as ability to deliver, said Mr Dodge, who worked at the plant from 1984 until 2007 before he was promoted and moved to the Nissan headquarters in Japan.
Nissan used to claim that its Sunderland plant, which currently employs more than 6,000 people, was the most efficient car factory in Europe, though these days it tends not to mention this.
“But it is,” said Mr Dodge. “We just don’t keep chest-beating about it year in, year out.”
Nissan said Sunderland is on schedule to become the first car factory in the UK to have produced more than 500,000 cars in one calendar year. “Even during British Leyland times, they didn’t do that,” said Mr Bolt.
Global production
The decision to produce the new Infiniti outside Japan was based on a number of factors.
“Historically, we’ve made Infiniti in Japan,” said Mr Dodge, though in recent years, he explained, the yen has been very strong, thus making it difficult to make money from cars exported from Japan.
In response, the carmaker is shifting production to the UK, the US and China.
It is “heartbreaking” for Nissan’s Japanese staff to see production moved out of the country, Mr Dodge said.
“They can make cars as well as anybody,” he said, “but they’re at a significant disadvantage when compared with rivals selling cars in dollars, euros or pounds.”
But the strong yen is not the only reason why Nissan makes ever more cars abroad.
Investment and production in growth markets around the world would probably continue even if the yen was to fall in value, as it is expected to do under the country’s next prime minister, Shinzo Abe.
“If you’ve got a manufacturing base and a supply base set up, it is best to produce and sell in one currency,” said Mr Dodge.
BBC News – Business
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UK consumer prices inflation remained unchanged at 2.7% in November, according to official data.
The fastest price rises were seen in the cost of fruit, bread and cereals, as well as in energy bills, the Office for National Statistics (ONS) said.
Car fuel and plane ticket prices fell in November from the month before, as did the cost of carpets and beer.
Retail prices index (RPI) inflation, which includes housing costs, fell to 3% last month, from 3.2% in October.
The consumer prices index (CPI) rate, which is targeted by the Bank of England, had jumped from a three-year low of 2.2% to 2.7% in October, a much bigger rise than had been expected and which came as a nasty shock in the City.
Separate data released by the ONS also showed that the annual rate of increase in producer prices – charged by manufacturers for their products – also held steady in November, at 1.4%, excluding the more volatile prices of food and fuel.
Continue reading the main story
The kind of stability delivered by inflation targeting today may be the stability of the grave yard”
End Quote
Energy bills
CPI inflation is now expected by many investors and economists to creep up further next year as further increases in electricity and gas prices take effect.
“UK inflation paused for breath in November before it resumes its assault on the 3% mark over the next few months,” said Rob Wood, economist at Berenberg Bank.
“The figures included the first of this winter’s gas and electricity price rises, from Scottish and Southern Energy,” he added, saying that the other companies’ bill rises would push the inflation rate higher.
A further rise in supermarket food prices is also widely anticipated, after droughts in the US and Russia, and light monsoons in India, pushed up worldwide prices for grain and other foodstuffs.
CPI inflation has been above the Bank’s 2% target for more than three years and until May this year had exceeded 3% for 29 consecutive months, prompting the governor Sir Mervyn King to write regular letters to the government explaining the Bank’s failure.
The Bank has tolerated the elevated inflation rate because of the depressed state of the economy, which has led the Bank to consistently overestimate how quickly CPI would fall back to its target.
The Bank now expects inflation to fall back to its target only in the autumn of 2014.
New target?
Mark Carney, the Canadian central bank head who is due to take over from Sir Mervyn as governor from June, has hinted at the possibility of scrapping inflation targeting.
That has led to speculation that the Bank may switch to an alternative target – with nominal gross domestic product (NGDP) seen as the most likely candidate.
NGDP measures the economy’s total economic output, but without adjusting for rising prices.
Targeting NGDP instead of CPI inflation would enable the Bank to tolerate higher inflation during the current period of depressed economic growth, and would also oblige the Bank to seek an even faster rise in prices if it had fallen short of its target in previous months.
Economist Chris Williamson: “The Bank of England will tolerate inflation to get the economy growing”
Some economists think that the resulting bias towards higher inflation – at least while the economy remains depressed – would help to make debts more manageable by eroding their value, and would encourage people to spend more for fear that their savings would also be eroded by rising prices.
Opinion is divided among analysts as to whether the Bank of England is likely to push ahead in its next monetary policy meeting with more monetary stimulus – likely to come in the form of further purchases of government debt with newly created money, or Quantitative Easing.
“Higher inflation makes it harder for them to restart QE,” said Alan Clarke, economist at Scotiabank. “I don’t think it makes any difference to the Bank of England. They know these things are outside of their control. Gas bills, droughts, they can’t control that.”
Some Monetary Policy Committee members have resisted increasing QE in recent meetings, according to minutes released by the Bank, with one member, Paul Fisher, publicly saying that he would wait for inflation to start falling before he would personally endorse more money creation.
BBC News – Business
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The energy regulator will permit firms running the UK’s electricity and gas grids to add an average £12 to annual energy bills for the next eight years to pay for upgrades and maintenance.
Ofgem said it had cut £7bn from the total cost of work on UK transmission networks planned by energy firms.
The biggest of these firms by far – National Grid – said it was reviewing the “lengthy and wide ranging” plans.
Meanwhile a lobby group warned 300,000 more homes faced imminent fuel poverty.
Energy prices have risen 7% on average this year, according to the Fuel Poverty Advisory Group, and are set to leave more households paying more than 10% of their income on home heating unless the government takes action.
Tax change
Ofgem’s announcement will enable £24bn in total investment in the energy networks up until 2021.
However, an Ofgem spokesperson told the BBC that over half of the £12 bill increase was not due to physical investment in the network, but was instead because of a change in accounting rules which would mean that energy firms could no longer claim back tax on the cost of replacing parts of the network.
The regulator’s announcement represents a slight increase on the £22bn investment allowance that Ofgem initially proposed in July – adding an average £11 to bills – which was attacked by National Grid for being insufficient.
Continue reading the main story
A household is considered to be in fuel poverty if more than 10% of its income is spent on home heating.
“In analysing the proposals, we find numerous errors and questionable judgements which we cover in detail in our response,” the company had said of the initial plans in an open letter to Ofgem.
Under Ofgem’s revised proposal, the average increase in annual bills between 2013 and 2021 will equal £12, starting close to £8 at the beginning of the period, and rising to £15.10 by the end.
If National Grid chooses to challenge Ofgem’s new decision, it has until March to refer the matter to the Competition Commission.
National Grid and the distribution firms do not charge households directly for the cost of maintaining the grid, but the cost is instead passed through by electricity and gas suppliers.
The total cost of transmission and distribution comprises about 21% of gas bills and 10% of electricity bills.
Underground cables
Ofgem said that the increase in allowances compared with their July proposal was because the regulator had agreed to let gas network firms charge more for the cost of replacing gas mains.
Energy Secretary Ed Davey: “The big drivers on energy bills are wholesale and network costs”
National Grid operates the UK’s national electricity and gas grids, as well as four of the country’s eight regional gas distribution networks.
The electricity network in Scotland is owned by two other firms – Scottish and Southern and SP Energy Networks.
Ofgem had already reached an agreement with the Scottish firms in March over their investment plans, the cost of which will contribute £3.70 of the £12 average bill increase, to be borne equally across all UK households.
The planned investment spending across the UK is split between £15.5bn on electricity transmission and distribution, and £8.7bn on gas.
The investments will, among other things, hook up new wind farms and nuclear power stations to the electricity grid to replace traditional coal-fired power stations, and enable more liquefied natural gas imported from Qatar and elsewhere to be added to the gas network as North Sea gas supplies dwindle.
Other improvements will include the running of new and some existing high voltage cables underground, particularly where they affect areas of outstanding natural beauty, and the construction of a new undersea link connecting Scotland with England and Wales.
The spending on the gas network will also finance spending by the energy firms on raising public awareness about the risk of carbon monoxide poisoning.
BBC News – Business
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It seems like only yesterday that Apple’s stock was testing the $ 700 mark. Apple (AAPL) broke through that barrier on Sept. 18 and closed a day later at its high for the year of $ 702.10. Since then, it’s been mostly downhill amid worries about growth in China and renewed tablet competition. Apple took a particularly sharp drop on Friday, falling $ 20, or about 4 percent, as of noon on a gloomy report from Steven Milunovich, a UBS AG analyst, about prospects for the iPhone 5 and iPad. (Update: Apple closed Friday down $ 19.90, to $ 509.79.)
BAGHDAD (AP) — The first new Boeing Co. jetliner sold to Iraq in 30 years touched down in Baghdad on Saturday, signaling the country’s determination to rebuild its economy after decades of war and sanctions.
Iraq is eager to improve its creaky aviation industry, which lags far behind that of its energy-rich neighbors. Boeing‘s delivery of the twin-aisle 777-200LR plane comes less than two weeks after the company’s chief rival Airbus announced the delivery of one of its own wide-body planes to Iraq.
“The arrival of this plane represents a big chance for Iraqi Airways to turn around,” Iraqi Transportation Minister Hadi al-Amiri said.
More planes are coming. Iraq has ordered another 30 of Boeing’s smaller 737-800 model and 10 of its new 787. The first of the 737s will be delivered in the middle of next year, according to the Chicago-based plane maker.
Airbus in early December said it had delivered its first A330-200 to Iraq. Iraqi Airways, which plans to use that plane on European and other international routes, already operates two Airbus A321s.
Boeing last sold Iraq a commercial plane — a version of the 747 jumbo jet — in 1982, said Donald Galvanin, the company’s sales director for the Middle East. He said this weekend’s delivery is an important step toward improving Iraq’s economy.
“To bring in business, you need a connection with outside … and a viable airline,” he said.
Iraq was able to get the 777 delivered now because another customer was unable to take it, Galvanin said. He said he expects Baghdad may be interested in buying more of the long-range jets down the road because “they realize they would need a few more.”
The U.S. Embassy said it worked closely with Boeing and Baghdad to complete the 777 sale. Financial terms were not disclosed.
Iraqi Airways’ efforts to turn itself around have been hobbled by ageing equipment, a lack of adequately trained staff and a long-running dispute with Kuwait stemming from Saddam Hussein’s invasion in 1990.
The disagreement centered on Kuwait’s accusations that Saddam’s regime stole 10 airplanes and millions of dollars’ worth of equipment and spare parts during the invasion. Kuwait earlier wanted to $ 1.2 billion in reparations, which Iraq’s postwar leaders had resisted paying.
Iraq and Kuwait earlier this year reached a $ 500 million deal to settle the airline feud, paving the way for Iraqi Airways to resume normal operations. The dispute had scuttled at least one planned Iraqi Airways route, between Baghdad and London, after Kuwait attempted to confiscate the Iraqi plane in the British capital.
As Iraqi Airways has struggled, foreign airlines have increasingly begun flying to the country, eating into the national carrier’s share of the market.
They include airlines from neighboring countries, including Turkish Airlines and Royal Jordanian, and well-funded Gulf airlines such as Emirates and Etihad Airways. Austrian Airlines last year became the first major western carrier to resume regular flights to Baghdad since the 2003 U.S.-led invasion.
Foreign airlines are increasingly offering flights to other Iraqi cities as well, particularly Irbil in the self-ruled Kurdish region. The Kurds’ northern enclave is much safer than the capital and is a popular destination for foreign investors looking to break into the Iraqi market.
No U.S. commercial airlines fly regularly to Iraq. The U.S. Federal Aviation Administration last week lifted a 16-year-old a ban on American carriers flying to Irbil and Sulaimaniyah, also in the Kurdish area. The agency said flights to other Iraqi airports may be allowed in the future.
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Associated Press writer Sameer N. Yacoub contributed reporting.
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