Month: October 2023

Note: I am travelling this month. Posting will be sporadic and shorter due to limited time and equipment.

Economic Resilience on Display in Q3 GDP

U.S. economic output accelerated in the third quarter as real GDP rose at a 4.9% annualized rate. At the start of 2023, a number of forecasters, including many at the Federal Reserve, thought the U.S. economy would be either slowing or perhaps even entering a recession by the second half of the year. Instead, it is accelerating. Third quarter growth is more than double the pace of the prior period’s growth (+2.1%) and well-above what many observers estimate to be the potential growth rate in the U.S. economy today (~1.8%).

There’s no denying this is a strong outturn, but an $80.6 billion build in inventories was responsible for 1.3 percentage points of headline growth. Net exports were the largest surprise to us. We had anticipated a boost from trade, but net exports subtracted 0.1 percentage points from growth on stronger import activity, which does not immediately square with the advance monthly data. Real imports rose at a 5.7% annualized clip in Q3, or by the most in six quarters.

Still, growth is tempered a bit when we strip through some of these volatile components and look at the core parts of the economy. Real final sales to domestic purchasers were still robust but expanded at a more moderate 3.5% clip last quarter. As seen in the nearby chart, that’s still a pace well ahead of the roughly 2.3% quarterly annualized growth rate averaged over the previous expansion.

Economic growth was lifted by a robust pace of consumer spending throughout the period, as evidenced by fairly strong monthly retail sales data. Real personal consumption expenditures expanded at a 4.0% annualized pace, or the fastest rate of expansion since mid-2021 when the economy was bouncing back amid reopening. Growth was fairly broad based among major spending categories as well, though services continue to account for a majority of consumption (chart). Services spending rose at the fastest pace in over two years, and goods purchases bounced after a weak second quarter.

We will get the full release for September Personal Income & Spending tomorrow, which will include the monthly spending details, but we expect consumption ended the quarter quite strong, setting the fourth quarter up for a decent pace of growth as well.

Beyond consumer spending, residential investment was also pretty strong, seeing its first positive pace of growth in ten quarters (+3.9%). Nonresidential investment was weaker, but most of that weakness is attributed to slower equipment outlays during the period, which fell at an annualized rate of 3.8%. Structures investment (+1.6%) and intellectual property products (+2.6%) both expanded.

Source: U.S. Department of Commerce and Wells Fargo Economics

The pullback in equipment spending was a little larger than we had anticipated, though it is consistent with the separately released data on September Durable Goods out this morning. These data show that nondefense capital goods shipments, which feed into the BEA’s calculation of equipment investment, slipped 0.2% in September. The advance in broad durable goods orders in September was largely driven by a surge in aircraft orders, which we anticipated from previously released Boeing data. Equipment spending has been volatile in recent quarters, and we anticipate it will remain under pressure as borrowing conditions grow less favorable.

Third quarter growth demonstrates the U.S. economy remains resilient in the face of higher rates and still-elevated prices. While we still anticipate it will take a period of below-trend growth to ultimately sniff out inflation, we do not think this report changes much for monetary policymakers, who are set to meet next week. We still anticipate the FOMC will elect to leave rates unchanged at the conclusion of its meeting.

Policymakers had anticipated the strength exhibited in today’s report based on strong monthly data, with little of the underlying details coming as much of a surprise. Inflation also continued to moderate with the core PCE deflator easing to a 2.4% annualized pace in the third quarter.

Separately released data on jobless claims showed a slight uptick in initial claims for unemployment as well as those continuing to make claims. While both measures remain low and consistent with a tight labor market, the more persistent rise in continuing claims adds to some signs of moderation.

The recent upward move in longer-dated yields can also add to financial tightness in the economy. We thus anticipate the FOMC will remain cautious to take further action at this point. We also ultimately still anticipate the economy will show more meaningful signs of slowing later this year and early next year as tighter financial conditions more meaningfully materialize and begin to weigh on spending and investment decisions.

• Mounting challenges point to weaker growth in coming quarters (ING)

(…) Unfortunately, we don’t see this stellar growth rate being repeated in the fourth quarter of the year. The cumulative effects of Federal Reserve interest rate increases and reduced credit availability are showing signs of finally biting. Credit card borrowing costs are the highest since records began, car loan and personal loan rates are soaring while mortgage rates are up at 8%. At the same time, the sources of funds to spend are looking less supportive. Real household disposable income is flat lining, savings are being run down and consumer credit is starting to be paid back, with student loan repayments restarting. As such, we expect consumer spending to grow at a weaker pace in the fourth quarter with this decelerating trend continuing in 2024.

Home builder sentiment is also starting to sour, which weakens the outlook for residential construction as we head towards 2024 while that big surge in inventories seen in the third quarter may not come in as strongly in the fourth quarter.

It is obviously early days, but at this stage we see GDP growth coming in closer to 1.5% in the final three months of the year. Not terrible, but with those challenges facing the consumer sector likely intensifying, growth is set to be even weaker in 2024.

• The U.S. consumer is ‘walking towards a cliff,’ strategist warns Trouble is brewing for the U.S. economy and its pivotal consumer component.

(…) “I think the U.S. consumer is walking towards a cliff, basically,” Chris Watling, chief executive of financial advisory firm Longview Economics, told CNBC’s “Squawk Box Europe” on Tuesday.

He said that a slew of recent economic indicators had showed consumers are quickly running out of excess cash, while household savings are coming under pressure.

“Of course, retail sales have been quite strong for the last few months and everyone gets quite excited about that, but, actually, if you look at what’s going on, the household savings ratio has been run down, and, in fact, real income growth has been negative for three months,” Watling said.

“So, it’s not quite all good news. I mean, quite the reverse, I think there are some real challenges coming for the U.S. consumer.” (…)

“We see at the margins the consumer is under a lot of pressure and, in fact, the labor market is under a lot of pressure as well. We had a good payrolls month, but if you look at a lot of the indicators of where the labor market is likely to go, a lot of them are fraying at the edges,” Watling said.

“We’re going to get to the point in the next months when I think the labor market starts to deteriorate more meaningfully and that’ll kickstart the recession when we get there,” he added. (…)

Some facts FYI:

• Since the pandemic, real expenditures have exceeded both real disposable income and real labor income. Sustainable?

• Sustainable only with more credit or lower savings, which did not happen this cycle:

• Helicopter money is responsible for the spending surge. The so-called excess savings generated excess spending. Wells Fargo says that “the benchmark revisions to the National Accounts caused some pretty big changes to our measure of excess savings again. Essentially, the data now suggest there is $1.1T remaining in excess savings through August, whereas the previous data suggested only about $339B remaining through July.”
• Not everybody agrees with this but Wells Fargo supports its view with this chart showing “excess deposits”:

• The only problem with these “excess deposits” is that inflation has brought their real spending power below trend. In real terms, helicopter money has disappeared.

So we are back to the old normal where consumption generally grows with labor income, up 5.6% YoY in September, +5.3% a.r. in the last 3 months and +6.6% a.r. in the last 2 even if wages grew only 2.7% a.r..

The October flash PMI provides a few clues of the most recent trends:

At 51.0 in October, the headline S&P Global Flash US PMI Composite Output Index rose from 50.2 at the end of the third quarter to signal a modest uptick in business activity. Growth in output was the strongest since July, albeit only slight overall.

The overall upturn was supported by expansions in activity at manufacturers and service providers at the start of the fourth quarter. Production at manufacturing firms rose at the quickest pace since April, while output growth at service sector firms was the fastest in three months. (…)

US businesses continued to hire additional workers during October, albeit at a slightly reduced pace compared to September. (…)

Companies raised their average selling prices for goods and services at the slowest pace since June 2020 in October.

Slow growth, but growth nonetheless, with subdued inflation.

Evergrande Talks With Holdout Creditors Ahead of Wind-Up Hearing Risk of liquidation looms as builder reassesses restructuring

(…) The clock is ticking on Evergrande, the world’s most indebted developer with about 2.39 trillion yuan ($327 billion) of total liabilities. It faces a winding-up hearing in Hong Kong on Monday, where it needs to present “concrete” restructuring progress to help avoid the once-unthinkable risk of a liquidation. The fate of Evergrande and even bigger peer Country Garden Holdings Co.—deemed in default for the first time ever this week—is of broader significance to an economy where the property market and related industries account for about 20% of gross domestic product.

Evergrande said last week that it’s revising the terms of its restructuring plan without giving details, after scrapping creditor meetings at the last-minute in September and saying it would need to reassess its proposals. (…)

• Country Garden’s Missed Bond Payment Triggers CDS Payout Note’s trustee says coupon nonpayment an ‘event of default’

(…) With $186 billion of total liabilities, Country Garden is one of the world’s most indebted builders and a symbol of China’s broader property debt woes. (…)

A messy overhaul by Country Garden risks sending the sector into deeper turmoil and posing a threat to social stability, given its large number of projects and heavy presence in smaller cities. (…)

• China Selloff Threatens $27 Billion of ‘Snowball’ Derivatives Hitting knock-in level may trigger selling of index futures

Another 10% decline in a major Chinese equity gauge may trigger a wave of selling in index futures tied to structured products, adding fresh risks to the slumping stock market.

Investors face losses in complex “snowball” derivatives at maturity when a benchmark falls below a so-called knock-in level. For those tied to the CSI Smallcap 500 Index, the average threshold is 4,865, according to estimates by China International Capital Corp. The gauge traded at around 5,417 as of 9:52 a.m. Friday.

A relentless rout in Chinese stocks has turned the spotlight on the risk of those derivatives, which promise bond-like coupons as long as underlying assets trade within a certain range. Snowballs, similar to autocallables in other countries, gained popularity in 2021 among China’s institutional and wealthy investors and have expanded into a market worth $27 billion. Brokers may rush to liquidate hedging positions once the knock-in level is reached.

Investors in South Korea, another huge market for structured notes, have billions of dollars worth of bets placed on products tied to the Hang Seng China Enterprises Index that are also at risk.

Snowball notes with the CSI 1000 as the underlying index have an average knock-in barrier at 4,997, according to CICC estimates. That’s about 14% below Friday morning levels. (…)

“If there is forced selling of index futures, the impact could spill over as the drop in derivatives will hit sentiment or could force closing of long stock positions,” said Yu Yingbo, fund manager at Shenzhen Qianhai United Fortune Fund Management Co. Ltd. Still, the regulators should be less worried due to the tighter oversight in recent years, he added.

CICC estimated that any selling of index futures triggered by the breach of knock-in levels will still have limited impact on the spot stock market, as traders will reduce positions in a “diversified manner” and the volume will be small when compared to the total futures market.

Note: I am travelling this month. Posting will be sporadic and shorter due to limited time and equipment.

FLASH PMIs

US private sector growth edges higher while inflationary pressures ease in October

At 51.0 in October, the headline S&P Global Flash US PMI Composite Output Index rose from 50.2 at the end of the third quarter to signal a modest uptick in business activity. Growth in output was the strongest since July, albeit only slight overall.

The overall upturn was supported by expansions in activity at manufacturers and service providers at the start of the fourth quarter. Production at manufacturing firms rose at the quickest pace since April, while output growth at service sector firms was the fastest in three months.

Goods producers in particular noted that stronger demand conditions drove the expansion amid a renewed increase in new orders.

Although some service providers highlighted a pick-up in customer numbers, many continued to note that high interest rates and challenging economic conditions weighed on client demand. Some mentioned smaller and less frequent orders being placed by customers. As such, service sector new business fell for a third month running, albeit at a softer pace than seen in September. In contrast, manufacturers registered the fastest rise in new orders in just over a year. Some factories attributed this to the diversification of products and sales strategies.

Nonetheless, foreign client demand remained subdued in October. With the exception of a fractional rise in July, total new export orders have fallen in each month since June 2022. Dollar strength leading to reduced competitiveness, alongside difficult economic conditions in key export markets, led to a dearth of new export orders, according to panellists.

More encouragingly, October data signalled improved expectations among firms regarding the 12-month outlook for output. The degree of confidence picked up to the joint-highest since May 2022, and was led by greater optimism among service providers. Positive sentiment was supported by hopes of stronger demand conditions, an improved ability to hire workers and expand capacity, and an increase in sales initiatives. In contrast, manufacturers reported lower optimism as backlogs of work dwindled, despite a marginal rise in new orders

US businesses continued to hire additional workers during October, albeit at a slightly reduced pace compared to September. The rate of employment growth was only marginal overall as many firms noted that voluntary leavers were not replaced due to uncertainty surrounding future demand conditions and efforts to make cost savings.

The rise in workforce numbers was led by service providers, as manufacturing firms registered a fractional drop in staffing numbers on the month. This signalled the first decline in manufacturing jobs seen since July 2020.

Backlogs of work at firms fell for the sixth month running in October, with the pace of decline easing to the slowest since July. That said, some companies stated that the level of outstanding business moved towards stabilization as incomplete work dwindled and businesses had sufficient capacity to process the new orders inflows

Following a renewed uptick in inflationary pressures in September, rates of increase in input costs and output charges slowed at the start of the fourth quarter. Weaker demand for inputs reportedly led suppliers to reduce material prices, therefore relieving some pressure on cost burdens.

The pace of increase in operating expenses was the slowest in three years, as some firms also noted the removal of some surcharges on components. The softer rise in costs was led by service providers, however, as goods producers recorded the sharpest uptick in input prices since April. Hikes in oil and oil-derived material prices pushed up cost burdens in the manufacturing sector.

To drive sales and entice customers, companies raised their average selling prices for goods and services at the slowest pace since June 2020 in October. Manufacturers continued to increase output prices at a modest pace, but service providers saw a notable slowdown in charge inflation amid competitive pressures and customer requests for concessions

The S&P Global Flash US Manufacturing PMI posted 50.0 in October, up fractionally from 49.8 in September, to signal a stabilization in operating conditions at manufacturing firms. The headline index was the highest since April, despite indicating no change in the health of the sector on the month.

A further improvement in supplier performance and still soft demand conditions led firms to cut their input buying for the fifteenth month running in October. The rate of decline was the slowest since April, but firms continued to highlight the rundown of safety stocks, with pre-production inventories falling at a faster pace. Stocks of finished goods also fell further. The rate of contraction softened, however, as some firms noted that cancelled orders were moved to inventories following a reduction in backlogs of work.

Meanwhile, some reports of labor and material shortages at suppliers led to the least marked improvement in lead times since January.

Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:
“Hopes of a soft landing for the US economy will be encouraged by the improved situation seen in October. The S&P Global PMI survey has been among the most downbeat economic indicators in recent months, so the upturn in US output growth signalled at the start of the fourth quarter is good news. Future output expectations have also turned up despite rising geopolitical concerns and domestic political tensions, climbing to the joint-highest for nearly one-and-a-half years.

“Sentiment has improved in part due to hopes of interest rates having peaked, something which looks increasingly likely given the further cooling of inflationary pressures witnessed in October. In spite of higher oil prices, firms’ input cost inflation fell sharply to the lowest since October 2020, and average selling prices for goods and services posted the smallest monthly rise since June 2020.

“The survey’s selling price gauge is now close to its pre-pandemic long-run average and consistent with headline inflation dropping close to the Fed’s 2% target in the coming months, something which looks likely to be achieved without output falling into contraction. That said, the tensions in the Middle East pose downside risks to growth and upside risks to inflation, adding fresh uncertainty to the outlook.”

Eurozone downturn deepens in October, price pressures cool

The eurozone economic downturn accelerated at the start of the fourth quarter, according to provisional PMI survey data for October, with private sector output declining at the steepest rate for over a decade if pandemic affected months are excluded.

New orders also fell at an accelerating rate, pointing to a worsening demand environment for both goods and services. Companies cut employment as a result, representing the first drop in headcounts since the lockdowns of early 2021, and remained focused on cost-cutting inventory management.

Despite some upward pressure on costs from higher oil prices, the rate of inflation for goods and services moderated slightly in October, down to its lowest since February 2021. An ongoing sharp fall in manufacturing selling prices was accompanied by a moderation in service sector selling price inflation. (…)

A broad-based downturn was again evident, as a seventh successive month of falling output in the manufacturing sector was accompanied by a third month of contracting service sector activity.
The goods-producing sector continued to report the steeper rate of contraction, the pace of output decline unchanged on the marked pace seen in September to indicate that factories remain in the deepest downturn since 2009 barring the early pandemic lockdowns. (…)

New orders received by manufacturers fell sharply again in October, dropping at a slightly faster rate than September to sustain one of the sector’s steepest downturns in demand since 2009.

Service sector activity meanwhile contracted at an accelerating rate in October, dropping at a rate not seen since early-2021 and since May 2013 if the height of the pandemic is excluded. Recent months have seen the service sector’s performance alter markedly, as a strong resurgence of activity earlier in the year has moved into reverse, in part reflecting a cooling of a post-pandemic surge in spending on travel and recreation.

Measured overall, new business received by service providers fell for a fourth straight month in October, the rate of decline accelerating to the fastest since January 2021.

Measured across goods and services, the resulting drop in new orders was the largest since May 2020 and, if early pandemic months are excluded, since May 2009. The drop in orders was also steeper than the reported decline in output, meaning companies once again relied on backlogs of previously-placed orders to help sustain activity levels. Backlogs of orders were consequently depleted at a rate not seen since June 2020, dropping at slightly faster rates in both manufacturing and services.

Despite reports of higher oil prices having added to firms’ costs over the month, the average cost of inputs into factories fell sharply in October amid discounting as supply exceeded demand. Manufacturing input prices were down for an eighth consecutive month, although the rate of decline eased for a third month in a row.

Service sector input costs were also buoyed by higher fuel prices, though nonetheless rose at a slightly reduced rate compared to September. The overall rate of increase remained elevated, however, often linked to higher wage rates amid the rising cost of living. Although service sector cost inflation has fallen sharply compared to a year ago, the rate of inflation remains higher than at any time in the pre-pandemic period since 2008.

Encouragingly, average prices charged for goods and services rose at a marginally weaker rate in October, the rate of inflation edging down to its lowest since February 2021 and notably continued to run below the average seen in the three years preceding the pandemic. A further marked fall in manufacturing selling prices was accompanied by a cooling of service sector inflation to the lowest since May 2021.

• The United Kingdom: Industrial orders weakened more than expected in October.

Source: The Daily Shot

Japan: Private sector activity stagnates

After having progressively lost growth momentum in the past months, the Japanese private sector economy saw its first fall in business activity since December 2022, albeit one that was only marginal. This was primarily attributed to a sharper fall in manufacturing output, the quickest in eight months. Services activity meanwhile remained in expansion but grew at the weakest pace in the year-to-date amid reports of worsening economic conditions in October

Firms were also the least upbeat since January, reflecting reduced optimism with regards to future output. Such an outlook was reinforced by other forward-looking indicators from the survey, including the new orders and new export business indices, which both pointed to contractions from September, thereby signalling weaker business activity performance ahead.

One bright spot was the renewed rise in employment, though driven entirely by higher service sector staffing levels amid indications of labour shortages. Firms across both the manufacturing and service sectors also faced reduced cost pressures, which led to overall output prices rising at the slowest rate since February 2022 within the Japanese private sector economy.

• China: Leading indicators point to softer household consumption.

Source: BCA Research

Canada: Sluggish Growth, Slowing Inflation, Softer Currency

• Incoming data continues to point to increasing challenges and slower growth for the Canadian economy ahead. Past monetary tightening has led to a significant rise in the household debt servicing burden, while forward-looking surveys point to a softening business outlook. Amid this backdrop, we have lowered our Canadian GDP growth forecasts for 1.1% for 2023 and 0.7% for 2024.

• Although Canada’s September CPI surprised to the downside, inflation remains elevated for now and continues to move only gradually in a more favorable direction.

• The Bank of Canada (BoC) held its policy rate at 5.00% at its October announcement, and maintained a moderate tightening bias. However, we believe the BoC’s interest rate pause will be an interest rate peak. Given we forecast slower growth and inflation than the central bank, we expect policy rate to hold steady for an extended period, before rate cuts begin in Q2-2024.

• As Canadian growth remains subdued and in the absence of further BoC tightening, we also see potential for further Canadian dollar weakness over the next several months.

Source: Datastream and Wells Fargo Economics

  

Bank of Canada holds rate steady, trims growth forecast as inflation risks rise

• Bank of Canada’s Tiff Macklem: 10 quotes from today’s interest rate announcement

The Bank of Canada held interest rates steady at 5 per cent on Wednesday in a widely anticipated decision. But central bank also said inflationary risks have increased and repeated that it is prepared to further raise rates in the future, “if needed.”

After 10 interest rate increases during the past year and a half, the bank says supply and demand in the Canadian economy are “now approaching balance” – a prerequisite for stabilizing prices. (…)

“We want to see clear evidence that core inflation is moving down. That will give us more confidence that headline inflation will move down towards our target on a sustainable basis … In assessing that, we have two preferred measures of core inflation – CPI-trim, CPI-median – we’re going to be watching those very closely.”

“There’s a few guideposts we use that we know affect underlying inflation. Those are the balance between demand and supply in the economy. Wage growth at 4 to 5 per cent, with virtually no productivity growth, is not consistent with getting inflation back to our target.

Corporate pricing behaviour: When inflation went up a lot, we saw companies were increasing their prices more frequently, and they were increasing them by more. That has started to normalize but it’s still not back to normal.”

“If those things are starting to normalize … we probably won’t have to raise interest rates. But we’ve been very deliberate: we’re leaving the door open to further interest rate increases because there is uncertainty about that, and if we see inflationary pressures persist, we are prepared to raise our interest rate further.”

“What we’re not getting [from high interest rates] is we’re not getting the direct effect of an appreciation [of the CAD] to lower important inflation. So that does mean, everything else equal, we’ve got to rely more on interest rates. So that is something we’ve had to take into account.”

“Our best estimate is the potential output in the economy is growing at about 2 per cent. So supply in the economy is expanding around 2 per cent. Government spending is growing at 2 per cent or less. It’s not adding more demand. It’s not adding faster demand, and supply is growing. So, it’s not adding sort of undue inflationary pressures.”

“If you look at our forecast in the Monetary Policy Report, what you can see is that when we add up the spending plans in the budgets of all levels of government – provincial, federal – for next year, we expect government spending to grow at about two-and-a-half percent. So, what that means is if all those spending plans are realized, government spending will be adding to demand more than supply is growing. And in an environment where we’re trying to moderate spending and get inflation down, that’s not helpful.”

(…) [House prices] they’ve come off a bit this time … but we’re not seeing the decline in house prices that we would expect.”

“There is a structural lack of supply in the Canadian housing market. So really until we address that, that supply issue, interest rates on their own are not going to help us get back to a housing affordability situation or solution. So we’re really pleased to see the degree of focus that governments are putting on this issue right now.”

(…) Near-term inflation expectations are still above the target… Corporate pricing behaviour is not normal… If we saw evidence that higher energy prices were passing through to broader prices because of higher transportation costs, for example, that would be a signal that that increase in oil prices is starting to feed through the rest of the economy and that would really be something of concern to us.”

“It’s not a recession, it’s low positive growth. Having said that, if you’re predicting low positive growth, you can’t rule out that … we’re going get some small negative numbers. So, there could certainly be two or three small negative quarters.”

“When people say the word recession, I think what they have in mind is a steep contraction of output and a large rise in unemployment. That’s not what we’re forecasting. I’ll just close by saying, you know, we’ve been saying for some time that the path to a soft landing is narrow. And in this projection, that path has gotten narrower.”

(…) “To be confident the policy rate is high enough to get inflation back to 2 per cent, we need to see downward momentum in our measures of core inflation.”

“Core inflation on a year-over-year basis has come down, but if you look over the last good eight months or so, on a three month basis, there’s really been very little downward momentum. We need to see clear downward momentum in core inflation. And there are a number of indicators that we’re watching closely.” (…)

Ford Reaches Tentative Labor Deal with UAW The proposed agreement to potentially end the six-week strike contains a 25% pay bump for assembly line workers. If approved, it marks the union’s biggest contract gains in decades.

(…) The labor agreement, which is subject to a member vote before being ratified, contains a 25% wage increase during the span of the contract, including an 11% bump in the first year, according to Chuck Browning, the UAW’s lead bargainer with Ford. The overall increase, which will be spread out over four years, would put the top wage for assembly workers at around $40 an hour.

Workers will also receive cost-of-living adjustments, which were suspended in 2009, and the right to strike over plant closures, Browning said.

Terms of the deal additionally cut the time it takes for new hires to reach the top wage, to three years from eight in the contract that expired last month, the UAW said. (…)

Under the contract that expired last month, Ford’s average hourly labor cost, which includes wages and benefits, was about $64 per worker. Tesla’s all-in labor cost is estimated to be around $45, while the average for the foreign automakers is closer to $55 an hour, according to industry analysts. (…)

• Bloomberg adds:

With cost-of-living allowances, the top wage rate is expected to increase by 33%. (…)

“We won things nobody thought was possible,” said UAW President Shawn Fain Wednesday night in a video posted on X. “Since the strike began, Ford put 50% more on the table.” (…)

Left out of Wednesday’s announcement were details on key issues including wages and benefits at battery plants and Fain’s initial demand for a 32-hour workweek.

Fain did not address whether the tentative agreement covers Ford’s four battery plants that are under construction or helps the UAW organize the new electric truck assembly plant the automaker is building in Tennessee. (…)

What Bloomberg Intelligence Says:

“Ford’s tentative labor agreement with the UAW may increase its costs by more than $900 million in its first year, based on an 11% raise in year one, putting additional pressure on the company’s efforts to enhance its mediocre profitability.” (…)

If approved, the contract could be of historic proportions. A Bloomberg Law review of the last 10 contracts between the Big Three automakers and the UAW show that raises in that period never topped 3% in a single year. In fact, for 21 of the 36 years covered under these earlier contracts, workers received no annual wage increase at all. (…)

NAKED SWIMMERS

StanChart shares plummet on almost $1 billion hit from China exposure StanChart shares fell as much as 17% in London on Thursday before trading was temporarily halted, after it announced a profit slump driven by a combined nearly $1 billion hit from its exposure to China’s real estate and banking sectors.

(…) The bank said pre-tax profit dropped 33% in the third quarter, far worse than analyst estimates, as it booked a $700 million impairment from its stake in China Bohai Bank (9668.HK), and a $186 million charge from Chinese commercial real estate. (…)

StanChart said the hit on its 16% stake in China Bohai, a lender in the eastern coastal city Tianjin, was due to lower forecast interest rates and decreased lending margins reported in the Chinese bank’s half-year results.

China Bohai booked a 17.8% fall in January-June net interest income, leading to a nearly 7% decline in its overall profit, according to company filings.

StanChart’s Chinese real estate exposure totalled $2.7 billion, down $200 million from the previous quarter.

THOSE WERE THE DAYS, MY FRIEND

The CFA Level III exam pass rate slipped to 47%, below the decade average but above historic lows set two years ago. More than 16,000 candidates sat for the test in August at 456 testing centers worldwide.

I passed Level III in 1979 when the pass rate reached 76% if I recall well. Surely the exam was easier then…