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US job growth: Payrolls to top 200K for 4th month

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Payrolls in the world’s largest economy are seen increasing by at least 200,000 for a fourth straight month.

Healthy US employment gains continued in March while wage growth moderated, indicating the nation’s labor market is poised to keep stoking the economy with limited risk of an inflation resurgence. Payrolls in the world’s largest economy are seen increasing by at least 200,000 for a fourth straight month, according to a Bloomberg survey of economists. Average hourly earnings are projected to climb 4.1 per cent from the same month last year, the smallest annual advance since mid-2021. Resilient hiring is keeping demand and the economy moving forward at the same time inflation is slowing, albeit unevenly. It’s also allowing Federal Reserve policymakers to hold off reducing interest rates as they await further declines in price pressures.

Fed Chair Jerome Powell, on Wednesday, headlines a large cast of Fed policymakers who are due to speak this week. Among others appearing are John Williams, Adriana Kugler, Mary Daly, Austan Goolsbee, Lorie Logan and Thomas Barkin. An increase in labor supply is helping to limit wage pressures that otherwise would risk filtering through to a sustained pickup in inflation. Friday’s payrolls report is also forecast to show the unemployment rate inched down to 3.8 per cent, just below a two-year high hit in February, suggesting the job market is losing a little momentum. “The two major surveys used to create the jobs report appear to capture different aspects of the US economy.

Spending on services by those benefiting from asset price appreciation — mostly baby boomers — has supported employment in leisure and hospitality and health care. At the same time, reduced demand from the less well-off part of the population has translated to slowing business sales, and reduced hiring or increased layoffs in other sectors. We expect that dichotomy to once again show up in the March report, sending mixed messages to policymakers.” — Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou, economists. February job openings data on Tuesday will offer a glimpse into labor demand.

While economists project a decline, vacancies remain above their pre-pandemic level. Other reports in the coming week include a pair of purchasing managers surveys from manufacturers and service providers. Turning north, surveys from the Bank of Canada will offer insights into inflation expectations ahead of its April 10 rate decision. Canada’s jobs data will be released concurrently with the US numbers, and trade data will also be published. Elsewhere, Chinese purchasing-manager surveys are scheduled and a raft of key inflation numbers are due from the euro zone to Turkey to Colombia. Central banks from India to Chile will set interest rates.

Asia

China’s PMIs, due Sunday, will dominate the start of the week as policymakers, investors and analysts try to gauge the current strength of the world’s second-largest economy. Activity in the factory sector is forecast to return to expansion for the first time since September, while growth in the services sector is seen maintaining largely the same pace as in February. The Caixin manufacturing gauge the following day is seen showing a smaller expansion in its measure of activity that focuses more on the private sector.

PMIs from economies throughout the Asia-Pacific region the same day will give a feel for the regional growth outlook. The Bank of Japan’s quarterly Tankan survey will probably reflect a continuing divergence in sentiment by industry. The gauge for large manufacturers is seen slipping for the first time in a year, while the reading for large non-manufacturers may soar to a 32-year high. Smaller firms will likely be pessimistic, an outcome that could jeopardize wage gains at SMEs needed to power the virtuous cycle sought by the BOJ.

South Korean export growth is forecast to cool in March, while consumer inflation data out Tuesday probably eased a tick there. Price gains may speed up moderately in Indonesia and the Philippines. Declines in Thai prices are predicted to ease. The Reserve Bank of Australia releases minutes from its March meeting on Tuesday, with two board members due to speak during the week. The Reserve Bank of India is expected to keep its main policy rates steady on Friday.

Europe, Middle East, Africa

After last week’s consumer price reports from France, Italy and Spain, and following a region-wide holiday on Monday, further puzzle pieces will emerge revealing the strength, or otherwise, of euro-area pressures. German inflation on Tuesday is anticipated to show further weakening toward the 2 per cent target. The European Central Bank will unveil its survey of consumer expectations the same day. The euro-zone inflation number will be published on Wednesday.

Outcomes anticipated by economists at 2.5 per cent — and 3 per cent for the underlying gauge that strips out volatile energy and food items — may keep officials only inching toward cutting rates in the coming months as they gauge how their policy is constricting growth. Governing Council members have until the end of day Wednesday to share their views before a blackout period kicks in ahead of their April 11 decision. Further clues about their thinking may emerge the following day, when an account of their last meeting is published.

On Thursday, Sweden’s Riksbank will release minutes of its March decision, shedding light on an outcome that saw officials firm up plans to cut rates at some point in the second quarter. Switzerland will release inflation numbers on Thursday. While an acceleration is expected, if it comes in as forecast at 1.4 per cent that would still be well below the ceiling targeted by the Swiss National Bank, which recently cut rates. And in Turkey, where the central bank has been aggressively tightening, data on Wednesday may show another acceleration in consumer price growth toward 70 per cent.

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Economic

China: Consumer prices up 2nd month, factory deflation persists

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China’s consumer prices showed a modest increase in March, but factory deflation persists, indicating a continuation of weak demand.

In March, China experienced a greater-than-expected cooling of consumer inflation, alongside persistent deflation in producer prices. This maintains pressure on policymakers to implement additional stimulus measures, given the ongoing weakness in demand. While deflationary pressures in the world’s second-largest economy seem to be gradually alleviating, concerns persist due to the prolonged property crisis, which continues to undermine both consumer and business confidence.

Consumer prices rose by a muted 0.1 per cent in March from a year earlier, National Bureau of Statistics (NBS) data showed on Thursday, versus a 0.7 per cent rise in February which was the first gain in six months and a 0.4 per cent rise in a Reuters poll. “Seasonal effects definitely played a role – food prices rose sharply during the Chinese New Year in February and subsequently came back down,” said Xu Tianchen, senior economist at the Economist Intelligence Unit. “More broadly, the over capacity issue is passing into prices in a way that will thwart the People’s Bank of China’s efforts to reflate the economy,” Xu added.

“Vehicle prices fell an annual 4.6 per cent, which could suggest manufacturers are introducing deeper price cuts in the distribution and sales process.” Factory-gate prices fell 2.8 per cent in March from a year earlier, with the producer price index (PPI) widening a 2.7 per cent slide from the previous month and extending a year-and-a-half long stretch of declines. On a month-on-month basis, the PPI fell 0.1 per cent. “Although consumer prices are no longer falling, rapid investment in manufacturing capacity is still weighing on factory-gate prices,” said Julian Evans-Pritchard, head of China economics at Capital Economics.

In recent months China has rolled out a raft of incentives to spur household spending including easier car loan rules, but consumers remain cautious about big-ticket purchases amid worries about the sputtering economy and the weak job market. Earlier this month, China’s central bank vowed to strengthen efforts to expand domestic demand and boost confidence. Core inflation, excluding volatile food and energy prices, in March was at 0.6 per cent from a year earlier, slower than 1.2 per cent in February.

The CPI fell 1.0 per cent month-on-month, cooling from a 1 per cent gain in February and worse than a 0.5 per cent drop forecast by economists. “Interestingly, CPI inflation surprised on the upside in the U.S. and downside in China,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “This indicates the monetary policy stances in these two countries may continue to diverge as well, hence the gap of interest rates in these two countries will likely persist,” he added.

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Economic

India’s UPI transactions way more than US digital payments: EAM S. Jaishankar

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During a recent address, External Affairs Minister (EAM) S Jaishankar highlighted India’s significant progress in digital payments, revealing that the country now conducts transactions worth Rs 120 crore monthly through the Unified Payments Interface (UPI). In comparison, Jaishankar noted that the United States records digital transactions amounting to only Rs 40 crore annually.

Speaking at an event in Rajasthan’s Bikaner, Jaishankar emphasized, “Today, we conduct cashless payments via UPI. Our transactions amount to Rs 120 crore per month, while the US manages Rs 40 crore per year in digital transactions. This substantial progress in certain sectors has been commended by the global community.”

The UPI, a platform launched on April 11, 2016, by former Reserve Bank of India (RBI) Governor Raghuram Rajan, integrates various bank accounts into a unified mobile application. It combines multiple banking functions, enabling seamless fund transfers and merchant transactions.

In a recent development, the RBI proposed allowing users to deposit cash in cash deposit machines (CDMs) via UPI. Presenting the monetary policy outlook for the fiscal year, RBI Governor Shaktikanta Das announced, “Currently, depositing cash in CDMs is primarily done using debit cards. Building on the success of cardless cash withdrawal via UPI at ATMs, we propose enabling cash deposits in CDMs through UPI.”

Das further explained, “Currently, UPI payments from Prepaid Payment Instruments (PPIs) can only be made using the web or mobile app provided by the PPI issuer. We now propose allowing third-party UPI apps for UPI payments from PPI wallets. This will enhance customer convenience and drive digital payments adoption for small value transactions.”

Additionally, Das suggested broadening the accessibility of Central Bank Digital Currency (CBDC) to a wider customer base by permitting non-bank payment system operators to offer CBDC wallets.

India’s UPI services have also expanded to Sri Lanka, Mauritius, and Nepal, marking a significant regional outreach in digital payment solutions.

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Business

India to grow 7 % in FY24, 7.2 % in FY25, driven by robust investment, services exports

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The 2024-25 growth estimate is, however, lower than 7.6 per cent projected for the 2022-23 fiscal. The ADB’s growth forecast for FY25 is in line with projections made by the RBI.

After a slew of upgrades in growth projection , the Asian Development Bank (ADB) on Thursday raised India’s gross domestic product (GDP) growth forecast for fiscal year (FY) 2024 from 6.7 per cent to 7 per cent and 7.2 per cent in FY2025, attributing the robust growth to public and private sector investment demand, gradual improvement in consumer demand and strong services sector.

The 2024-25 growth estimate is, however, lower than 7.6 per cent projected for the 2022-23 fiscal. The ADB’s growth forecast for FY25 is in line with projections made by the RBI. Strong investment drove GDP growth in the 2022-23 fiscal as consumption was muted, the ADB said and expects India to affirm its position as a major growth engine within Asia, driven by strong investment, recovering consumption, and gains in electronics and services exports.

While in the rest of developing Asia, faster growth will be driven by domestic demand and some improvement in semiconductor and services exports, including tourism. Stronger growth in South Asia and Southeast Asia will offset lower growth in other subregions. “Notwithstanding global headwinds, India remains the fastest growing major economy on the strength of its strong domestic demand and supportive policies,” said ADB Country Director for India Mio Oka. “The Government of India’s efforts to boost infrastructure development while undertaking fiscal consolidation and provide an enabling business environment will help in increased manufacturing competitiveness to augment exports and drive future growth,” said Oka.

With inflation moderating to 4.6 per cent in FY2024 and easing further to 4.5 per cent in FY2025, the ADB suggests monetary policy may become less restrictive, which will facilitate rapid offtake of bank credit. Demand for financial, real estate and professional services will grow while manufacturing will benefit from muted input cost pressures that will boost industry sentiment. Expectations of a normal monsoon will help boost growth of the agriculture sector. The report lauds the government’s focus on fiscal consolidation, with a targeted deficit of 5.1 per cent of GDP for FY2024 and 4.5 per cent for FY2025, which will enable the government to reduce its gross marketing borrowing by 0.9 per cent of GDP in FY2024 and create further room for private sector credit.

India’s current account deficit will widen moderately to 1.7 per cent of GDP on rising imports for meeting domestic demand. Foreign direct investment will be affected in the near term due to tight global financial conditions but will pick up in FY2025 with higher industry and infrastructure investment. Goods exports will also be affected by lower growth in advanced economies but pick up in FY2025 as global growth improves.

On the regional front, growth in developing Asia will remain healthy at 4.9 per cent in 2024 and 2025, despite a slowdown in China. In fact, while growth in the PRC will decline from 5.2 per cent in 2023 to 4.8 per cent this year and 4.5 per cent next year, it will accelerate in the rest of developing Asia—from 4.8 per cent in 2023 to 5.0 per cent this year and 5.3 per cent in 2025. The slowdown in the PRC will be driven by the weak property market and amplified by fading domestic consumption growth after last year’s reopening.

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Tech

For equipment upgrades, China eyes fresh $69 bn credit in tech sector

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The Hong Kong-based ‘South China Morning Post’ (SCMP) newspaper, China has unveiled a plan to reintroduce two relending mechanisms previously utilized to mitigate the economic effects of Covid-19. The People’s Bank of China (PBOC) will facilitate loans through 21 banks to support small and medium-sized technology firms at an interest rate of 1.75 per cent. These loans can be extended twice, each extension lasting up to one year, as per the report. The move, announced on Sunday, comes amid challenges posed to the Chinese economy by a property crisis and geopolitical tensions with key trading partners. China’s policymakers are aiming to enhance liquidity and bolster confidence in the world’s second-largest economy.

Relending mechanisms these measures will allocate a combined 500 billion yuan (US $69.1 billion) to incentivise loans supporting technological innovation and large-scale equipment upgrades – two sectors that have been explicitly prioritised by the country’s leadership, said the report. The refinancing programme will cover 60 per cent of the principal amount for eligible loans extended to technology-focused small and medium-sized enterprises (SMEs) and can be renewed twice, each time for an additional year.

By the end of last year, the PBOC had 17 active structural support tools with a cumulative outstanding size of 7.5 trillion yuan – equivalent to 16.4 per cent of central bank assets. What are China’s relending programmes? These targeted monetary instruments gained prominence in 2014 when pledged supplementary lending was first utilised to directly provide loans to commercial banks to renovate outdated residential buildings. Among the tools, 13 were introduced as temporary measures during the pandemic to support small businesses, toll roads, private firms, property delivery, logistics, and carbon emissions reduction. Seven of them have already expired.

SCMP said the move has sparked speculation among market participants regarding the extent to which Chinese authorities are willing to implement monetary easing, in light of the US Federal Reserve postponing anticipated interest rate adjustments and the Chinese economy concluding the first quarter of 2024 on a stronger footing. The previous relending mechanism for technology, with a quota of 400 billion yuan (US $55.2 billion), was initiated in April 2022 and has since concluded. Similarly, the earlier equipment renovation program, with a quota of 200 billion yuan (US $27.6 billion), was active from September to December 2022.

BEIJING GUIDELINES

This relending programme aligns with Beijing’s guidelines for domestic banks, encouraging them to provide funding for five essential finance categories outlined by President Xi Jinping: technology finance, green finance, inclusive finance, pension finance, and digtal finance.

Furthermore, it corresponds with the objective of large-scale equipment upgrades mentioned during the February meeting of the Central Financial and Economic Affairs Commission. This objective serves dual purposes: Leveraging the country’s substantial fixed-asset investment to stimulate economic growth and advancing its vast manufacturing sector, the Hong Kong-daily said. The relending program and other structural measures aim to aid China amidst ongoing challenges in the property market and fragile investor sentiment.

These hurdles will scrutinize the country’s aspirations to attain a 5 percent economic growth rate this year, as reported by SCMP.

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Economic

African economies to grow 3.4 per cent in 2024, says World Bank

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The report said increased private consumption and declining inflation were supporting an economic rebound in Sub-Saharan Africa.

The latest Africa’s Pulse report by the World Bank indicates an economic rebound in Sub-Saharan Africa, driven by increased private consumption and decreasing inflation. However, the recovery remains fragile due to uncertain global economic conditions, mounting debt service obligations, frequent natural disasters, and escalating conflict and violence.

The report emphasizes the necessity for transformative policies to address entrenched inequality, ensuring sustained long-term growth and effective poverty reduction. While the region’s growth is expected to rebound from 2.6% in 2023 to 3.4% in 2024 and 3.8% in 2025, the recovery remains precarious. Despite a decline in inflation across most economies to 5.1% in 2024 from a median of 7.1%, it remains elevated compared to pre-COVID-19 levels.

Additionally, while growth of public debt is slowing, more than half of African governments grapple with external liquidity problems and face unsustainable debt burdens. Overall, the report underscores that despite the projected boost in growth, the pace of economic expansion in the region remained below the growth rate of the previous decade (2000-2014) and is insufficient to have a significant effect on poverty reduction. Moreover, due to multiple factors including structural inequality, economic growth reduces poverty in Sub-Saharan Africa less than in other regions.

“Per capita GDP growth of 1 percent is associated with a reduction in the extreme poverty rate of only about 1 percent in the region, compared to 2.5 percent on average in the rest of the world,” said Andrew Dabalen, World Bank Chief Economist for Africa. “In a context of constrained government budgets, faster poverty reduction will not be achieved through fiscal policy alone. It needs to be supported by policies that expand the productive capacity of the private sector to create more and better jobs for all segments of society.”

The World Bank’s Africa’s Pulse report called for several policy actions to foster stronger and more equitable growth. These include restoring macroeconomic stability, promoting inter-generational mobility, supporting market access, and ensuring that fiscal policies do not overburden the poor.

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Business

Expectation of better demand conditions in Q1 FY25 lifts manufacturers’ sentiments

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The business expectations index of the survey remains firmly in growth terrain at 127.2 in Q1 of 2024-25.

The Indian manufacturing sector is optimistic on demand conditions in the April-June (Q1) of the new financial year 2024-25, with a strong community of the industry reporting better demand conditions in their assessment of production, order books, capacity utilisation and overall business situation for Q4 (January-March) of FY24.

This is despite expectation that cost pressures from raw materials and salary outgo are likely to persist during April-June 2024. Though respondents expected some moderation in growth of selling prices and profit margins in synchrony with their expectations for demand conditions, according to a recent Reserve Bank of India’s Industrial Outlook Survey of the Manufacturing Sector for Q4 (January-March) of 2023-24.

In all, 1,354 companies responded in this round of the survey, which was conducted during January-March 2024. While there was improvement in employment situation vis-à-vis the previous quarter, input cost pressures increased during Q4 FY24 but the pace of rise in remuneration, however, moderated. Sentiments on overall financial situation and availability of finance remained positive, with some improvement vis-à-vis the previous survey round.

The manufacturers polled lower rise in selling prices and assessed some deterioration in profit margins. The business assessment index for the manufacturing sector increased marginally to 114.2 in Q4 FY 2023-24 from 113.9 in the previous quarter. The business expectations index of the survey remains firmly in growth terrain at 127.2 in Q1 of 2024-25. For the July-September (Q2) of FY2024-25, manufacturers remain optimistic on production, capacity utilisation, order books, employment conditions and overall business situation even as input cost pressures are expected to continue till end-2024 and selling price is anticipated to uphold during Q2 and Q3 of 2024-25.

The RBI’s survey of the quarterly order books, inventories and capacity utilisation (OBICUS), conducted during Q4 FY 2023-24 and covering 813 manufacturing companies shows that at the aggregate level, the capacity utilisation (CU) in the manufacturing sector increased to 74.7 per cent in Q3 FY24 from 74.0 per cent in the previous quarter.

The value of new orders received by the responding companies during Q3 FY24 remained close to that in the previous quarter. On an annual (y-o-y) basis, however, the value of new orders increased by nearly 10 per cent. The finished goods inventory to sales ratio increased marginally in Q3 FY24 from its level in the previous quarter while the raw material inventory to sales ratio remained stable.

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