US Business

Amazon workers at an upstate New York warehouse began voting Wednesday on whether to unionize in the latest labor battle following a surprise union win earlier this year at another Amazon site.

Amazon Labor Union (ALU), which won a unionization vote in April at the 8,000-employee JFK8 warehouse in Staten Island in New York City, is hoping to follow up that upset with another win at a much smaller Amazon facility near the state capital Albany.

Some 400 full-time hourly workers at the ALB1 site in Castelton-On-Hudson, about 150 miles (240 kilometers) north of Manhattan, will vote between Wednesday and Monday on whether to be represented by ALU.

The National Labor Relations Board, which is overseeing the election, plans to begin counting ballots on Tuesday, October 18.

The NLRB moved ahead with the election after the ALU submitted signatures from more than the 30 percent of employees needed.

Amazon has signaled complete opposition to the effort.

“We remain skeptical that there are a sufficient number of legitimate signatures to support the union’s petition for an election, but the NLRB is moving forward,” said Amazon spokesman Paul Flaningan.

“We’ve always said that we want our employees to have their voices heard, and we hope and expect this process allows for that.”

Led by its president Christian Smalls, a former worker at the Staten Island site, the ALU gave a jolt to the US organized labor movement this spring after a solid majority voted for representation.

However, just weeks later, the ALU suffered a setback when the LDJ5 warehouse, also in Staten Island, voted against the group.

Amazon has refused to accept the election outcome in the first Staten Island vote, arguing the results should be tossed out in light of alleged improprieties.

Last month, an NLRB official rejected Amazon’s claims as groundless after a 24-day hearing on the e-commerce giant’s claims. 

Flaningan said Amazon “strongly” disagrees with the NLRB official’s decision and plans to appeal.

The ongoing fight over the election has prevented contract talks between the ALU and Amazon at JFK8.

Britain will introduce a cap on the revenues of companies that produce low-carbon electricity in an attempt to mitigate the impact of soaring energy prices on consumers.

The temporary cap on energy companies that produce electricity from renewables and nuclear is being introduced in England and Wales, the government said in a statement late Tuesday.

The measure “will reduce the impact of unprecedented wholesale prices on consumers and the taxpayer by introducing a revenue limit, curbing the amount generators can make”, the government said.

The main opposition Labour party called the measure a “windfall tax”, which business minister Jacob Rees-Mogg denied. 

He told the BBC that, after intervening on retail energy prices, the British government was now acting on wholesale prices.

“This is simply mischaracterising what’s being done, and misunderstands how the market works,” he said.

“What this is doing is rationalising the market in a way that energy companies have been in favour,” he added.

“It’s clearly not a tax. It’s nothing to do with the profits these companies are making.”

Liz Truss successfully campaigned to become prime minister by saying she was opposed to the idea of a tax on the profits of energy giants. 

The previous government of Boris Johnson introduced a one-off tax on the profits of oil and gas companies, but this could largely be offset by investment in hydrocarbon production.

– ‘Double standard’ –

Before the introduction of recent energy subsidies, “businesses and consumers had been left facing increasing financial turmoil, with energy bills estimated to increase to as high as £6,500 before the government stepped in,” the government said. 

Truss last month introduced a two-year cap on energy bills for domestic consumers at £2,500 ($2,770) a year per average household.

Businesses will have around half their bills covered for six months. 

The UK is particularly reliant on gas for its electricity, the price of which has soared since the Russian invasion of Ukraine began on February 24. 

Shell boss Ben van Beurden last week told an energy conference that in light of soaring energy prices and resulting inflation, governments should be imposing more taxes on companies in the sector.

Dhara Vyas, policy director at industry lobbyists Energy UK, warned that the new revenue cap mechanism, the details of which are yet to be worked out, must not “risk the very investment the UK needs to ensure long-term, sustainable economic growth”. 

Dan McGrail, chief executive of renewable energy organisation RenewableUK, added that the move risked “skewing investment towards the fossil fuels that have caused this energy crisis”.

Environmental NGO Greenpeace UK accused the government of a “glaring double standard”.

“Was it just a dream or did we all hear the prime minister say, just weeks ago, she was against a windfall tax?,” said policy director Doug Parr.

“Now she’s going to impose a de facto one after all but only on electricity generators, not a proper one on oil and gas firms. This glaring double standard makes no sense.” 

Soaring food and energy prices are raising the risk of social unrest, but attempting to tame costs through tax cuts, subsidies and price controls would be too costly, the IMF said Wednesday.

The fund’s comments, in its latest Fiscal Monitor report, come as food prices have surged by half since 2019 while energy bills soared in the wake of Russia’s invasion of Ukraine.

“Countries all around the world are facing more pressing and more painful trade offs,” Vitor Gaspar, director of the International Monetary Fund’s fiscal affairs department, told AFP as the crisis lender holds its annual meetings in Washington this week.

The combination of inflation along with food and energy price surges point to a cost-of-living crisis, he said.

Countries spent heavily to protect their economies during the pandemic, then faced supply chain issues as they emerged from Covid lockdowns.

Inflation soared further after Russia invaded Ukraine in February, with food and energy costs going through the roof, forcing central banks to raise interest rates aggressively.

“Households are struggling with elevated food and energy prices, raising the risk of social unrest,” the IMF Fiscal Monitor report said.

But, it added, “fiscal policy trade-offs are increasingly difficult, especially for high-debt countries where responses to the Covid-19 pandemic exhausted their fiscal space.”

– ‘More generous’ food aid –

As governments operate within tighter budgets, prioritizing policies and programs becomes vital, the report said, adding that key goals are ensuring access to affordable food and protecting low-income households from inflation.

There appears to be an “association between social unrest and episodes of spikes in food prices,” while fuel prices are politically sensitive, IMF fiscal affairs department deputy director Paolo Mauro told reporters.

Countries have to be selective in giving support, he said, but the IMF recommends being “more generous” on food as a need for survival.

However, with long-lasting supply shocks and broad-based inflation, attempts to cap surging costs through price controls, subsidies or tax cuts will be “costly to the budget and ultimately ineffective,” the IMF warned.

Officials should instead allow prices to adjust and provide targeted cash transfers to the most vulnerable.

Most countries should continue “tightening” their budgets, the report said.

Asked about Britain’s controversial tax-slashing plans, which rocked the pound and raised the country’s borrowing costs, Gaspar told reporters that monetary and fiscal policies should be consistent, with markets “looking for certainty in a very uncertain world.”

“The expectation is that the announcement of a full-fledged fiscal plan on October 31 accompanied by a macroeconomic forecast… will contribute to give to the market the certainty that it seeks,” he said.

Countries may need to raise added revenues and contain the growth of other expenditures as they prioritize policies, the IMF report said.

Fiscal costs can be offset by measures like taxes, it added, suggesting that a permanent tax on “windfall profits” from fossil fuel extraction based on excess gains “can be considered” if an adequate instrument is not already in place.

But the report cautioned that low-income countries will need more global humanitarian assistance and emergency financing given their limited resources, adding that the biggest challenge comes from the food price surge.

The Bank of England on Wednesday insisted it would end emergency buying of UK bonds by the weekend but sent markets into further frenzy as economic uncertainty grips Britain.

The BoE launched a bond-buying drive in late September aimed at quelling market turmoil triggered by an uncosted budget unveiled by the government of new Prime Minister Liz Truss.

Following a Financial Times report on Wednesday that the BoE could extend its buying of UK government debt, the central bank insisted it would end purchases of long-dated bonds on Friday.

Amid all the uncertainty, the yield on Britain’s 30-year bond, or gilt, rose back above five percent close to a 24-year peak.

The yield on the 10-year gilt reached 4.64 percent, the highest level since the 2008 global financial crisis.

The BoE on Wednesday insisted that “its temporary and targeted purchases of gilts will end on 14 October”.

It also confirmed, however, that measures to boost liquidity would remain in place beyond Friday.

The bank has jumped into bond markets to protect financial stability after yields rocketed and the pound tumbled to a record dollar-low following Britain’s tax-slashing budget.

In particular, the BoE feared for British pension funds that invest in traditionally low-volatility state bonds.

Speaking on the sidelines of an International Monetary Fund gathering in Washington on Tuesday, BoE governor Andrew Bailey confirmed that pension fund managers had “three days left” until the bank’s bond purchases ended.

“We think the BoE has put itself in a no-win situation,” said Matthew Ryan, head of market strategy at financial services firm Ebury.

“Either Bailey is forced to backtrack on his pledge and extend intervention beyond Friday, potentially damaging the bank’s credibility, or end the measures as planned and risk another blowout in gilt yields.”

– ‘Bank sector resilience’ –

Separately, the BoE on Wednesday judged that Britain’s banks were “substantially more resilient” than before the 2008 crisis thanks to strong capital and liquidity.

Nevertheless, the BoE this week launched a temporary facility aimed at easing liquidity pressures that arose after the UK budget shocked markets.

The BoE’s Temporary Expanded Collateral Repo Facility allows “banks to help to ease liquidity pressures facing” client funds beyond the end of this week, it said on Monday.

In volatile trading Wednesday, the pound rallied above $1.10 as markets price in more aggressive interest-rate hikes from the BoE to try and cool decades-high inflation.

It came as official data showed the UK economy contracted in August on surging prices.

The BoE’s emergency bond-buying programme offered to buy up to £65 billion ($72 billion) in long-dated gilts, although the current total is far below the limit.

The bank this week widened the scope of its daily purchases of gilts to include debt linked to the UK inflation rate, currently at around 10 percent.

In a bid to address markets chaos, finance minister Kwasi Kwarteng has brought forward UK growth and inflation forecasts to October 31, when he will also unveil plans to reduce debt.

His budget included a freeze on energy prices as millions of Britons struggle with a cost-of-living crisis.

The International Monetary Fund and ratings agencies have warned that the costly budget would cause UK government debt to balloon.

Fitch last week lowered the outlook on its credit rating for British government debt to negative from stable.

– Truss vow –

Addressing parliament Wednesday, Truss vowed not to cut public spending to bring down debt.

“We will do that not by cutting public spending but by spending public money well,” she said. 

The BoE has piled on further pressure by ramping up its main interest rate to a 14-year high of 2.25 percent in a bid to cool inflation — and is expected to hike even further at a policy meeting next month.

“Given the uncertain world and volatile markets we face, November can seem a long time away,” BoE chief economist Huw Pill said in a speech Wednesday.

“At present, I am still inclined to believe that a significant monetary policy response will be required to the significant macro and market news of the past few weeks,” he added.

The pound rallied and UK government bond yields rose Wednesday as the Bank of England came under criticism for fuelling market uncertainty.

The BoE insisted it would halt on Friday a short-term programme of bond-buying support aimed at quelling volatility triggered by a debt-fuelled UK budget following a Financial Times report the central bank stood ready to intervene further.

“The Bank of England’s messaging to the market over the last 24-hours has been conflicted and confused, causing unnecessary gyrations to the pound and adding to the sense of instability in the markets,” said Interactive Investor analyst Victoria Scholar.

On Wednesday, the yield on the government’s 30-year bond returned above a relatively high level of five percent, and the yield on 10-year bonds hit 4.64 percent, the highest level since 2008 in the midst of the global financial crisis and higher than the level which prompted the BoE’s bond market intervention.

The UK government’s higher borrowing costs are a reflection of market unease regarding the affordability of upcoming tax cuts aimed at supporting Britain’s recession-threatened economy.

The pound rose against the dollar as traders bet on more aggressive interest rate hikes from the BoE on concerns the budget of uncosted tax cuts would further fuel sky-high UK inflation.

Meanwhile, London’s benchmark FTSE 100 index slumped 1.2 percent, with sentiment also dampened by news that the UK economy unexpectedly shrank in August.

Frankfurt’s DAX shed 0.6 percent after the German government said it now expects the economy will contract 0.4 percent next year and inflation will run at seven percent.

Investors are struggling to find some solace as they navigate a range of crises that threaten the global economy, from soaring prices and bumper interest rate hikes to the Ukraine war and China’s Covid-induced growth slowdown.

The gloom was summed up by the International Monetary Fund, which on Tuesday highlighted the risks of inflation and the conflict in Europe as it slashed its global growth forecast and warned: “For many people 2023 will feel like a recession”.

Later, US President Joe Biden admitted there was a chance the country could suffer a “slight” recession.

Investors are now nervously looking ahead to Thursday’s US inflation report, with observers warning that a strong reading could spark another rout on markets.

Even if it showed inflation cooling from a four-decade high, analysts said the Fed would not likely take the single reading as reason to slow down its pace of rate hikes.

Wall Street’s main stock indices fell at the open, with investors disappointed with the latest reading of the producer price index, which nudged down only a tenth of a percentage point to 8.5 percent in September on an annual basis.

The reading “will stoke concerns that there hasn’t been enough improvement on the inflation front to convince the Fed to take a more guarded approach with its rate hikes,” said market analyst Patrick O’Hare at Briefing.com.

Oil prices fell after OPEC trimmed its forecast for growth in oil demand this year and next by half a million barrels per day, citing “recent macroeconomic trends and oil demand developments in various regions.”

OPEC pointed to “the extension of China’s zero-Covid-19 restrictions in some regions, economic challenges in OECD Europe, and inflationary pressures in other key economies, which have weighed on oil demand.”

OPEC and its allies including Russia last week decided to cut output by 2 million barrels per day, a move analysts had warned could backfire as any increase in prices it causes will dent demand by consumers.

– Key figures around 1330 GMT –

London – FTSE 100: DOWN 1.2 percent at 6,802.26 points

Frankfurt – DAX: DOWN 0.6 percent at 12,145.17

Paris – CAC 40: DOWN 0.6 percent at 5,796.74

EURO STOXX 50: DOWN 0.6 percent at 3,320.46

New York – Dow: DOWN 0.2 percent at 29,173.60

Tokyo – Nikkei 225: FLAT at 26,396.83 (close)

Hong Kong – Hang Seng Index: DOWN 0.8 percent at 16,701.03 (close)

Shanghai – Composite: UP 1.5 percent at 3,025.51 (close)

Pound/dollar: UP at $1.1043 from $1.0972 Tuesday

Dollar/yen: UP at 146.78 yen from 145.83 yen

Euro/dollar: DOWN at $0.9702 from $0.9709

Euro/pound: DOWN at 87.90 pence from 88.46 pence

Brent North Sea crude: DOWN 1.1 percent at $93.26 per barrel

West Texas Intermediate: DOWN 1.1 percent at $88.08 per barrel

burs-rl/lcm

Germany will sink into recession next year and inflation will soar, the government forecast Wednesday, as Europe’s top economy battles skyrocketing energy prices following Russia’s gas shutdown.

The official predictions were the latest warning that Germany’s economy, which was just getting back on its feet after the pandemic, is set to shrink in 2023 due to the fallout of Moscow’s invasion of Ukraine. 

Unveiling the government’s latest forecasts of 0.4 percent economic contraction and seven percent inflation for 2023, Economy Minister Robert Habeck painted a dark picture of a “serious energy crisis”. 

It “threatens to become an economic and social crisis”, he warned — but insisted that Russian President Vladimir Putin will “fail in this attempt to destabilise the basic economic and political order”. 

Putin “will also fail on the battlefield in Ukraine”, he added. 

Moscow’s move to cut off gas supplies to Europe amid tensions over Ukraine has triggered an energy crisis across the continent, with consumers and businesses facing high prices as winter approaches.

Germany has been particularly hard hit, as 55 percent of its gas supplies came from Moscow prior to the Ukraine conflict.

The soaring energy costs are expected to send inflation to eight percent in 2022 and seven percent in 2023, the government forecast.

Nevertheless, Germany’s economy is still set to register growth of 1.4 percent in 2022, according to the government forecasts, after having enjoyed a post-pandemic rebound earlier in the year.

But it will then shrink in 2023, with the economy ministry saying the “central reason” for the downgrade from forecasts earlier this year was “the halt to Russian gas supplies”.

High energy prices are acting as “a brake on industrial production — above all in energy-intensive sectors”. The economy will return to growth with expansion of 2.3 percent in 2024, according to the forecasts. 

– Energy price cap –

The government recently unveiled a 200-billion-euro ($194-billion) fund to shield consumers and businesses from surging prices, which includes a cap on energy costs.

Without the cap, consumer prices would be much higher in 2023, the forecasts said.

Forecasts by leading economic institutes late last month showed inflation coming in at 8.4 percent for the year as a whole in 2022 — and climbing further to 8.8 percent in 2023.

Warnings are mounting that global growth will slow further next year due to myriad crises, with the IMF this week downgrading its 2023 global GDP growth forecast.

It forecast that Germany, along with Italy, will become the first advanced economies to contract in the wake of Russia’s invasion of Ukraine.

Signs are rapidly multiplying of Germany’s escalating economic crisis. 

Last week, official figures showed that industrial production — the pillar of the German economy — produced 0.8 percent less in August compared with the previous month, with energy-intensive industries badly impacted. 

Inflation meanwhile hit a 70-year high of 10 percent in September. 

The European Central Bank has started aggressively tightening monetary policy to bring inflation under control, lifting rates a historic 75 basis points last month, but some are worried the move adds to recession risks.

Berlin has been scrambling to find alternative energy sources, accelerating the construction of infrastructure to import gas from further afield, and is preparing to keep two nuclear plants running longer than initially anticipated.

Despite the crisis, Habeck sought to strike a positive note about efforts to find new partners to supply energy.

“We are making very good progress in loosening the grip of Russian energy imports,” he said.