Macro Snapshot —Fed expected to fight inflation with rate hike; French services sees strong growth

Macro Snapshot —Fed expected to fight inflation with rate hike; French services sees strong growth
The US Federal Reserve is expected to raise interest rates by half of a percentage point (Shutterstock)
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Updated 04 May 2022

Macro Snapshot —Fed expected to fight inflation with rate hike; French services sees strong growth

Macro Snapshot —Fed expected to fight inflation with rate hike; French services sees strong growth

RIYADH: The US Federal Reserve is expected to raise interest rates as it combats inflation levels, while  India's central bank raised its key rate by 40 basis points for similar reasons. 

Russian manufacturing activity shrank for the third month running in April, whereas Italy and France saw growth in their services activity, according to S&P Global Purchasing Managers’ Index. 

Germany’s exports fell more than expected in March, while Spain’s April unemployment shrank 2.77 percent to 3.02 million.

Australian retail sales sped ahead in Q1

Australian retail sales easily sped past forecasts for a third straight month in March as spending built a head of steam that should help it weather this week’s rise in interest rates.

Data from the Australian Bureau of Statistics showed retail sales jumped 1.6 percent in March to a record A$33.6 billion ($23.9 billion), topping forecasts of a 0.6 percent gain.

That came after hefty gains in January and February and left sales up 9.4 percent on a year earlier. 

While some of that spending would have been eaten up by surging inflation, it still points to an upbeat quarter for economic growth.

“Even allowing for a strong increase in retail prices, we estimate that volumes rose by a solid 1.5 percent q/q,” said Marcel Thieliant, a senior economist at Capital Economics.

“While falling consumer confidence amid soaring inflation and rising interest rates poses downside risks, we think that the still high savings rate will allow for further solid gains in spending over coming quarters.”

Fed expected to step up inflation fight with big rate hike

The US Federal Reserve is expected to raise interest rates by half of a percentage point and announce the start of reductions to its $9 trillion balance sheet as central bankers intensify efforts to bring down high inflation.

Fed policymakers have widely telegraphed a double-barreled decision that would lift the Fed’s short-term target policy rate to a range between 0.75 percent and 1 percent, and set in motion a plan to trim its portfolio of Treasuries and mortgage-backed securities by as much $95 billion a month.

The policy statement is due to be released at 1800 GMT following the end of the Fed’s latest two-day meeting.

Markets have priced in further rate increases through this year and into next, including at least a couple more half-percentage-point hikes, as traders bet the central bank moves much more quickly than it had anticipated it would in March to get borrowing costs up to where they will start actively curbing inflation.

With no fresh Fed economic or policy rate projections due until the central bank’s June meeting, most clues on how far and how fast it is prepared to go will come from Fed Chair Jerome Powell’s news conference.

Russian manufacturing activity shrinks again in April 

Russian manufacturing activity shrank for the third month running in April, driven by further output and employment declines, though at a slower pace than in the previous month, a business survey showed on Wednesday.

The S&P Global Purchasing Managers’ Index rose to 48.2 from 44.1 in the previous month, staying below the 50.0 mark that separates expansion from contraction.

The survey did not mention Ukraine, but S&P Global said sanctions had weighed on client demand and firms’ ability to source raw materials.

Western nations have imposed unprecedented sanctions against Moscow over Russia’s actions in Ukraine.

“Logistics delays and material shortages led to longer lead times for inputs, with April seeing the third-steepest lengthening of supplier lead times over 25 years of survey history,” S&P Global said in a statement.

The outlook was gloomy, impacted by expectations of reduced purchasing power among customers. Greater import substitution and hopes of a longer-term improvement of economic conditions kept the reading for future output above the 50.0 mark, but the degree of optimism was at its second-lowest in 23 months.

“Output expectations were historically subdued amid concerns regarding the impact of sanctions on future demand and new orders,” S&P Global said.

French services activity growth strongest in over four years in April

France’s dominant services sector enjoyed its sharpest increase in activity in more than four years in April as fewer COVID-19 restrictions gave businesses a boost, although inflation remained a concern, a survey showed on Wednesday.

S&P Global said its final services PMI was 58.9 points last month, up from 57.4 in March and broadly in line with a flash estimate.

Any reading above the 50 point mark indicates growth. The final services PMI number in April was the highest in any month since January 2018.

A final April reading of France’s composite PMI index, which includes both the services and manufacturing sectors, meanwhile rose to 57.6 points from 56.3 in March, broadly in line with an earlier flash forecast.

“It was another positive month for France’s services firms in April as business activity in the largest sector of the economy increased at the fastest rate in over four years,” said S&P Global senior economist Joe Hayes.

“The economy is still reaping the benefit of reduced COVID-19 restrictions as many companies linked strong and sustained growth in their order books to the pandemic recovery.”

Italian services activity expands in April amid stronger demand 

Italy’s services sector expanded in April at the strongest pace since November, a survey showed on Wednesday, brightening hopes for economic growth prospects in the second quarter amid reports of stronger domestic and foreign demand.

S&P Global’s PMI for services rose to 55.7 in April from 52.1 in March, pushing further above the 50 mark that separates growth from contraction.

The reading beat the median forecast of 54.5 in a Reuters survey of 14 analysts.

The sub-index for new business in the service sector jumped to 56.0 in April from 52.6 in March.

Italy’s service sector took longer to recover from COVID-19 lockdowns than the smaller manufacturing sector, which has seen growth for nearly two years.

The manufacturing PMI recorded its 22nd consecutive month of expansion in April, though growth slowed from the month before. 

German exports fall more than expected in March

German exports fell more than forecast in March, easing by 3.3 percent, while imports rose by 3.4 percent, according to data released by the Federal Statistical Office on Wednesday.

A Reuters poll had predicted a month-on-month fall in exports of 2.0 percent.

Exports to Russia plunged by 62.3 percent in March compared with February partly because of sanctions imposed as a result of the war in Ukraine, the Office said in a statement.

In March, Germany had a seasonally adjusted trade surplus 3.2 billion euros ($3.4 billion), the Office reported, versus a forecast 9.8 billion euros.

Spain’s April jobless falls 2.77 percent from March to 3.02 mln

The number of people registering as jobless in Spain fell 2.77 percent in April from March, or by 86,260 people, leaving 3.02 million people out of work, Labour Ministry data showed on Wednesday.

Spain added 33,244 net jobs during the month, separate data from the Social Security Ministry showed.

The data marks the third consecutive month of falling jobless figures and the lowest number of unemployment in a month of April since 2008, the ministry said.

Polish central bank to hike rates by 100 bps to tackle inflation

The National Bank of Poland is expected to deliver its second 100 basis point hike in a row on Thursday, a Reuters poll showed, bringing the cost of credit to 5.5 percent as it grapples with the highest inflation in almost a quarter of a century.

Consumer price inflation surged past analysts’ estimates to hit 12.3 percent in April, according to a flash estimate from the statistics office, and analysts expect a sharp rise in rates to counter price growth that has reached its highest level since 1998 in part due to the war in Ukraine. 

UK consumer and mortgage lending rise again in March 

British consumer borrowing rose solidly in March and mortgage lending hit its highest since September as house prices surged, according to Bank of England data that showed no early sign of a hit to the economy from the country’s cost-of-living squeeze.

Lending to consumers rose by £1.3 billion ($1.6 billion) in net terms, as expected in a Reuters poll of economists and following a nearly £1.6 billion increase in February.

Credit card lending accounted for more than half of the increase in March, which was before a sharp rise in energy costs and an increase in taxes in April.

The BoE reported £7 billion of net mortgage lending, up from £4.6 billion in February, and 70,961 mortgage approvals, down slightly from the previous month but still well above the pre-pandemic norm.

Britain’s housing market retained much of its momentum in the first months of 2022, despite the phasing out of temporary tax breaks on property purchases in the second half of 2021.

The BoE is watching for signs of how fast-rising inflation is affecting the economy as it considers how much further it needs to raise interest rates. The central bank is expected to increase its bank rate to 1.0 percent from 0.75 percent on Thursday

India cenbank raises key rate by 40 bps to tame inflation

The Reserve Bank of India’s monetary policy committee raised the key lending rate by 40 basis points on Wednesday, in a surprise move, as it sought to take calibrated steps to exit the extraordinary accommodation and contain rapid inflation.

The MPC raised the key lending rate or the repo rate by 40 basis points to 4.40 percent, Governor Shaktikanta Das said in a virtual address, announcing the decision after an off-cycle meeting of the committee on May 2 and May 4. 


Saudi-Uzbek trade exceeds $95m in the first half of 2022

Saudi-Uzbek trade exceeds $95m in the first half of 2022
Updated 17 August 2022

Saudi-Uzbek trade exceeds $95m in the first half of 2022

Saudi-Uzbek trade exceeds $95m in the first half of 2022
  • The two countries will bolster ties further with the signing of 12 new deals this week

RIYADH: The mutual trade between Saudi Arabia and the Republic of Uzbekistan reached $95 million in the first half of 2022, a substantial increase considering that bilateral trade barely exceeded $17 million last year.

According to a joint news statement, the value is expected to grow rapidly by the end of 2022. The numbers assume significance in the aftermath of the pandemic.

In fact, the number of Uzbek companies running on Saudi funds increased from about nine to 38 in the last five years. Of the 38, 19 are sole proprietors, and the rest are joint ventures.

The two nations will bolster the ties further by signing 12 new agreements on Wednesday and Thursday when Uzbekistan President Shavkat Mirziyoyev visits the Kingdom.

According to an Uzbek state agency, high-level talks will take place in Jeddah, where the two nations will discuss opportunities to enhance multilateral cooperation further.

The discussion will focus on the green economy, technology and digitalization, innovations, small business and entrepreneurship. 

Following the meeting, new agreements are expected to be signed in the energy, telecommunications, agriculture, chemical and petrochemical industries, besides encouraging ties in culture, sports and education.

The Kingdom has become one of the largest foreign investors in energy infrastructure and one of Uzbekistan’s most significant developers of green energy projects.

ACWA Power’s Uzbek interests

Recently, the Ministry of Energy of Uzbekistan and Saudi energy company ACWA Power signed several investment agreements for about $3 billion.

ACWA Power will develop and operate a wind energy project with a production capacity of 1,500 MW in the Karakalpakstan region of Uzbekistan.

When commissioned, the plant will become the largest of its kind in Central Asia and one of the largest wind power plants in the world. 

FASTFACTS

• The number of Uzbek companies running on Saudi funds increased from about nine to 38 in the last five years.

• Recently, the Ministry of Energy of Uzbekistan and Saudi energy company ACWA Power signed several investment agreements for about $3 billion.

• The Saudi Fund for Development has contributed to the implementation of many projects in Uzbekistan, including funding the Samarkand-Gozar Road project, with a total value of $30 million.

ACWA Power also signed an agreement to establish the 100MW Nokus wind farm project, the first renewable energy project to be implemented in partnership with Uzbekistan’s public and private sectors.

The power generating company also won a $108 million wind contract after proposing a tariff of 2.56 cents per kilowatt-hour, the lowest in Uzbekistan.

Additionally, the Ministry of Energy of Uzbekistan signed a 25-year power purchase agreement with ACWA Power to establish a combined-cycle gas turbine power plant in Shirin, located in Syrdarya, Uzbekistan. The deal amounts to $1.2 billion.

According to the statement, these projects will contribute to achieving Uzbekistan’s national goal of raising the total renewable energy generation capacity to 30 percent by 2030.

Saudi Fund for Development

Moreover, the Saudi Fund for Development has contributed to the implementation of many projects in Uzbekistan, including funding the Samarkand-Gozar Road project, with a total value of $30 million.

The fund also contributed to 20 projects in the republic, including building pumping stations and other projects involving sewage, chemicals, mining, building materials, water and agriculture.

According to the Ministry of Agriculture of Uzbekistan, the Saudi and Uzbek delegations have discussed issues of cooperation in agriculture, including the prospects for enhancing mutual trade in agricultural products.

Both parties will likely sign memorandums of cooperation in agriculture, veterinary medicine and livestock development at the meeting.

They also agreed to deepen cooperation in the agricultural sector to enhance trade in farming, livestock and other products between the countries.

After signing the memoranda, action plans will be prepared, including specific measures and areas for developing cooperation and joint projects.

The Saudi side invited the Uzbekistan delegation to attend its most prominent exhibition of the agro-industrial complex, which will be held at the end of October in Riyadh.


American Airlines bets on supersonic travel with Boom jet deal

American Airlines bets on supersonic travel with Boom jet deal
Updated 16 August 2022

American Airlines bets on supersonic travel with Boom jet deal

American Airlines bets on supersonic travel with Boom jet deal

CHICAGO: American Airlines Group Inc. on Tuesday agreed to buy up to 20 jets from aircraft maker Boom Supersonic, becoming the second major US airline to bet on ultra-fast passenger travel in the last two years.

The deal brings Boom’s order book to 130 airplanes, including options, valued at about $26 billion, Boom Chief Executive Blake Scholl said in an interview.

The return of interest in supersonic jets comes nearly two decades after Concorde, flown by Air France and British Airways, was retired following a deadly crash and high costs of fuel and maintenance.

Last year, United Airlines Holdings Inc agreed to buy 15 Boom Overture aircraft provided they meet certain safety, operating and sustainability requirements. A similar condition was part of the American Airlines agreement as well.

American also has an option to purchase 40 more of the jets, each of which can carry 65 to 80 passengers, the companies said.

The four-engine Overture jet can fly from Miami to London in just under five hours, cutting the nearly nine-hour flight time between the cities by about half.

American Airlines spokesperson Matt Miller said it was too early to discuss ticket prices, given the aircraft isn't expected to carry its first passengers until 2029.

Supersonic jets have come under criticism from environmentalists for burning more fuel per passenger than comparable subsonic planes.

The Overture jet, being designed to run fully on sustainable aviation fuel or a blend, will be rolled out of Boom’s Greensboro, North Carolina factory in 2025, followed by test flights in 2026.

Third Bridge senior analyst Christopher Raite sounded a word of caution on Boom’s delivery target, saying the delay in conducting test flights for Boom’s other jet, the XB-1, signaled that delivery of the Overture will be delayed.


87,467 families benefit from Saudi housing program in 2022

87,467 families benefit from Saudi housing program in 2022
Updated 16 August 2022

87,467 families benefit from Saudi housing program in 2022

87,467 families benefit from Saudi housing program in 2022

RIYADH: The number of families benefiting from Saudi Arabia’s Sakani housing options and financing solutions has reached 87,467 since the beginning of the year until the end of July. 

Some 104,492 families also received possession of their first homes during that period, the Saudi Press Agency reported. 

The program seeks to raise the proportion of housing ownership for Saudi families to 70 percent by 2030.

The Ministry of Housing and the Real Estate Development Fund formed Sakani in 2017 to facilitate homeownership in the Kingdom through the creation of new housing stock, allocating plots and homes to nationals, and financing their purchase.

Earlier this year, Sakani program announced that it aims to enable 180,000 new families to benefit from the program’s housing options and solutions during 2022. 


Oil prices drop over 1% on potential global recession concerns

Oil prices drop over 1% on potential global recession concerns
Updated 16 August 2022

Oil prices drop over 1% on potential global recession concerns

Oil prices drop over 1% on potential global recession concerns

NEW YORK: Oil prices fell over 1 percent on Tuesday in volatile trading as economic data spurred concerns about a potential global recession, while the market awaited clarity on talks to revive a deal that could allow more Iranian oil exports.

Brent crude futures fell $1.41, or 1.5 percent, to $93.69 a barrel, after hitting a session high of $95.95. West Texas Intermediate crude decreased $1.33, or 1.5 percent, to $88.08 a barrel, after rising to $90.65.

The contracts fell about 3 percent in their previous sessions.

The EU is assessing Iran’s response to what the bloc has called its “final” proposal to save a 2015 nuclear deal, and consulting with the US, an EU spokesperson said on Tuesday.

Iran responded to the proposal late on Monday but neither Tehran nor the EU provided any details on the content of the reply.

“It is still unclear what Iran has told the EU last night, so some tricky items might impact the outcome of the nuclear deal,” UBS analyst Giovanni Staunovo said.

Weak economic indicators weighed on prices.

US homebuilding fell to the lowest level in nearly 1-1/2 years in July, weighed down by higher mortgage rates and prices for construction materials, suggesting the housing market could contract further in the third quarter.

“Oil traders reacted because of concerns about an economic slowdown and housing uses energy,” said Phil Flynn, an analyst at Price Futures group. “That caught us by surprise.”

China’s central bank cut lending rates to try to revive demand as the nation’s economy slowed unexpectedly in July after Beijing’s zero-COVID policy and a property crisis slowed factory and retail activity.

State media quoted Premier Li Keqiang as saying that China will reasonably step up macro policy support for the economy.

Barclays lowered its Brent price forecasts by $8 per barrel for this year and next, as it expects a large surplus of crude oil over the near-term due to “resilient” Russian supplies.


Saudi Cabinet authorizes transport minister to discuss MoUs with Bahrain

Saudi Cabinet authorizes transport minister to discuss MoUs with Bahrain
Updated 16 August 2022

Saudi Cabinet authorizes transport minister to discuss MoUs with Bahrain

Saudi Cabinet authorizes transport minister to discuss MoUs with Bahrain

RIYADH: Saudi Arabia’s Cabinet on Tuesday authorized the minister of transport and logistic services to discuss with Bahrain two draft agreements to boost cooperation in the fields of road safety and maintenance. 

During the meeting, the council of ministers also authorized the chairman of Education and Training Evaluation Commission to discuss with the UAE a draft initial agreement to cooperate in the development of assessment, measurement and accreditation tools.

The ministers also approved two agreements in the fields of employment and domestic workers with Burundi, the Saudi Press Agency reported. 

The Cabinet has also authorized the health minister to discuss a draft memorandum of understanding with the Uzbek side for cooperation in the field. 

It also approved the rules governing the competency and contractor program.