World

Automakers saw lackluster US sales in the third quarter, as manufacturers continued to grapple with supply constraints, according to reports from the companies Monday.

The auto sector has been battling a shortage of components with supply problems that initially affected mainly semiconductors later spreading to other parts.

Japan’s Toyota suffered a seven percent drop in sales in the latest three months, to more than 526,000 units, while FCA — part of the Stellantis group which includes the Fiat and Chrysler brands — saw its sales drop by six percent compared to the same period of 2021.

Jeff Kommor, FCA’s US head of sales, said “we continue to deal with challenging industry supply constraints.”

US automaker Ford, which is expected to announce its sales figures on Tuesday, had previously warned that the company would likely end the quarter with up to 45,000 vehicles stockpiled due to the lack of parts amid the persistent problems in its supply chains.

But the situation appears to be improving at General Motors, which bucked the trend to sell over 555,000 vehicles, marking a 24 percent jump compared to a year earlier.

GM retained its spot as top seller in the US market, and said “improved semiconductor supplies, stable production and improvements in dealer inventory” helped it to regain market share.

Hyundai reported a three percent rise in sales, but other brands such as Honda and Nissan suffered large declines.

Electric car maker Tesla, which does not detail its US sales, said on Sunday that it delivered 343,830 vehicles worldwide between July and September.

While this was at the low end of analyst expectations, it marked an increase of over 42 percent increase.

The outlook for the auto sector has become more uncertain with the economic slowdown and inflation weighing on consumers.

Cox Automotive lowered its forecast for full-year auto sales in the US to 13.7 million last week.

But “recent changes in the economic outlook from rising interest rates is beginning to chip away at demand, and the waiting line for new vehicles is likely getting much shorter,” said Cox economist Charlie Chesbrough.

Oil prices jumped Monday on expectations of an OPEC output cut, while weak US data sent stocks higher amid rising hopes central banks may be able to ease off interest rate hikes.

Investors have been on edge over worries that rising interest rates, aimed at fighting sky-high inflation, could spark recessions, while the United Nations has called on central banks to slow down or risk pushing the world into grim prolonged stagnation.

A key manufacturing survey showing price pressures receding and demand slowing, helped buoy market sentiment amid hopes the Federal Reserve might soon pull back on its aggressive interest rate hikes.

The Institute for Supply Management said its manufacturing index dropped 1.9 points to 50.9 percent, just barely above the 50-percent threshold indicating expansion, as the prices index fell to the lowest in more than two years.

Fed officials have said the central bank will continue raising interest rates until inflation begins to drop, even if that means the US economy enters recession.

New York Fed President John Williams reiterated that message on Monday, saying that despite signs of easing demand and supply issues, inflation has become “broad-based … which will take longer to bring down.”

Still, investors are hoping interest rates may be close to a peak and the benchmark Dow jumped 2.7 percent, a good start to the new quarter after Wall Street’s worst month in 20 years.

Adam Sarhan of 50 Park Investments said “the market was extremely oversold,” which led some investors to come back looking for cheap shares.

“That happens during bear markets, the biggest up moves in history happened during bear markets,” he told AFP.

European stock indices moved higher following the US data, with Frankfurt’s DAX index ending the day 0.8 percent higher, the Paris CAC climbing 0.6 percent and London’s FTSE 100 adding 0.2 percent.

– Oil spikes before OPEC –

Oil prices leapt on reports that OPEC and its allies are considering a major output cut to stem a price plunge caused by demand worries.

But that stoked concerns about soaring inflation, which has been fueled this year by sky-high energy prices after key producer Russia’s invasion of Ukraine.

“Any cut will no doubt frustrate consuming countries that are on the verge of recession after spending a year dealing with soaring energy costs on the back of the post-pandemic recovery and war in Ukraine,” said OANDA analyst Craig Erlam.

Officials from the 13 members of the Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and their 10 partners, led by Moscow, are due to meet physically on Wednesday for the first time since March 2020.

– Sterling gains on U-turn –

The British pound bounded above $1.13 following the latest US data, and after the UK government scrapped plans to axe its top income tax rate which helped send sterling spiraling to a record dollar low of $1.0350 a week ago.

Shares in Credit Suisse plunged to a new low in Zurich on Monday as the scandal-plagued lender sought to ease concerns about its financial health.

Its stock tumbled 11.6 percent to 3.58 Swiss francs ($3.61) before clawing back most of the ground, ending the day with a drop of 0.9 percent at 3.94 francs.

The Financial Times reported that senior executives sought over the weekend to reassure big clients and investors about the bank’s liquidity and capital position due to concerns raised about its financial strength.

Asian equities mainly fell Monday, with Hong Kong tumbling to its lowest point in more than a decade as fears for China’s economy deepens this year’s investor rout.

– Key figures around 2030 GMT –

New York – Dow: UP 2.7 percent at 29,490.89 (close)

New York – S&P 500: UP 2.6 percent at 3,678.43 (close)

New York – Nasdaq: UP 2.3 percent at 10,815.44 (close)

EURO STOXX 50: UP 0.7 percent at 3,342.17 (close)

London – FTSE 100: UP 0.2 percent at 6,908.76 (close) 

Frankfurt – DAX: UP 0.8 percent at 12,209.48 (close)

Paris – CAC 40: UP 0.6 percent at 5,794.15 (close)

Tokyo – Nikkei 225: UP 1.1 percent at 26,215.79 (close)

Hong Kong – Hang Seng Index: DOWN 0.8 percent at 17,079.51 (close)

Shanghai – Composite: Closed for a holiday

Pound/dollar: UP at $1.1315 from $1.1170 on Friday

Euro/dollar: UP at $0.9822 from $0.9802

Euro/pound: DOWN at 86.74 pence from 87.75 pence

Dollar/yen: DOWN at 144.66 yen from 144.74 yen

Brent North Sea crude: UP 4.4 percent at $88.86 per barrel

West Texas Intermediate: UP 5.2 percent at $82.63 per barrel

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Britain’s under-fire finance minister Kwasi Kwarteng on Monday vowed to press on with his controversial economic reform plans, despite announcing a dramatic U-turn on a controversial tax cut for high earners.

The proposed cut was part of a debt-driven economic package that has bombed with the markets, the electorate and much of the ruling Conservative party.

The abrupt reversal raised questions about his and Prime Minister Liz Truss’s right-wing policy agenda, less than a month after taking power and a day after both vowed to stay the course.

“What a day. It has been tough,” Kwarteng said in a speech to the Tories’ annual conference in Birmingham, central England.

But he told delegates that “we need to focus on the task in hand”, implicitly criticising his Tory predecessors by saying there was a need to boost the economy out of its “slow, managed decline”.

“To grow the economy we really do need to do things differently,” he said.

Kwarteng pointedly avoided any specific mention of his about-face on the proposed scrapping of the 45 percent top rate of income tax.

But he insisted his and Truss’s contentious plans, which include axing a cap on bankers’ bonuses and reversing a planned rise in corporation tax, as well as a recent hike in national insurance contributions, were “sound” and “credible”.

“It will increase growth,” he added in the speech, which was delayed by an unspecified security alert at the venue. Police lifted the alert about an hour later.

– Political storm –

Earlier, Kwarteng said he had never considered resigning over the furore caused by the proposals, saying only that the decision to drop the tax cut was because it had become a “distraction”.

On the markets, the intention to pay for the cuts with billions more in extra borrowing had sent the pound tumbling to a record low against the dollar and UK government bond yields soaring.

The pound rebounded Monday as the government partially reversed course. 

Nevertheless, Kwarteng and Truss remain in the eye of a political storm, given the perceived unfairness of the package, which could yet see cuts to spending and benefits amid Britain’s worst cost-of-living crisis in generations.

As late as Sunday, the finance chief had been due to tell the conference that “we must stay the course”, according to a preview of his speech released by the Conservatives.

Truss on Sunday admitted communication errors in how the September 23 economic package had been presented, but agreed she was “absolutely committed” to abolishing the top tax rate. 

Within 24 hours, though, the 47-year-old prime minister — only in the role since September 6 — had performed one of most striking government U-turns in recent memory.

Truss told the BBC she had not discussed axing the high-earners’ tax band with her cabinet, who only seemed to learn of the reversal along with the public on Monday.

She also appeared to distance herself from the move by claiming “it was a decision that the chancellor made”, but her spokesman downplayed the comments.

“The prime minister was clear that… fiscal events are the responsibility of the chancellor — that’s all she was setting clear,” he told reporters Monday.

Out of a total tax package worth £45 billion ($50 billion), the top rate cut would have cost some £2 billion — relatively small, but outsized for its political impact.

Tory MPs who backed former finance minister Rishi Sunak — Truss’s rival in the recent Tory leadership race — had threatened to vote it down, raising the prospect of a major battle in the House of Commons.

Grant Shapps, who was refused a cabinet job by Truss, welcomed her scrapping the tax cut, which he told BBC radio had been planned with “grossly insensitive timing”.

– Credibility ‘destroyed’ –

With the U-turn, the stakes have soared for Truss as she prepares to close the party conference with a speech Wednesday.

A raft of polls have found Truss and her economic package deeply unpopular, alongside plummeting ratings for the Tories.

Some surveys showed Labour with mammoth leads of up to 33 points — its biggest since the heyday of its former prime minister Tony Blair in the late 1990s.

Labour’s finance spokeswoman Rachel Reeves said the climbdown “comes too late for the families who will pay higher mortgages and higher prices for years to come” following the recent market turmoil.

“The Tories have destroyed their economic credibility and damaged trust in the British economy,” she said.

While there are some signs that global and domestic inflation pressures are easing, high prices have spread, making it harder to quell quickly, a top US central banker said Monday.

Continued strong demand for goods and for workers will keep pressure on inflation — which has hit the highest in 40 years — New York Federal Reserve Bank President John Williams said.

“This is resulting in broad-based inflation, which will take longer to bring down,” he said.

Prices soared over the past year in part due to worldwide supply chain snags, creating shortages of key components like computer chips needed for cars and electronics.

Those issues have been exacerbated by zero-Covid policies in China and the Russian invasion of Ukraine that sent food and energy prices surging.

Those supply constraints are easing, while rising interest rates are cooling demand, helping to bring down prices of many commodities like lumber, which should lower inflation, Williams said in a speech to the US Hispanic Chamber of Commerce National Conference in Phoenix, Arizona.

“Unfortunately, that’s it for the good news on inflation,” he said, warning that those factors “will not be enough by themselves to bring inflation back to our two percent objective.”

The Fed has moved aggressively this year to tamp down demand to help drive prices lower, hiking interest rates five times, for a total of three percentage points. And the central bank has said more increases are coming this year.

“From Main Street to Wall Street … inflation is the No. 1 concern,” Williams said, adding, “our job is not yet done.”

Even as supply issues improve, “demand for durable goods remains very high  — beyond what can be produced and brought to market,” while “demand for labor and services is far outstripping available supply.”

Still, he said he expects the aggressive Fed moves, along with similar steps by other major central banks, will help to restore balance globally.

Williams said “the combination of cooling global demand and steady improvements in supply … should contribute to inflation declining to about three percent next year.”

The Fed’s preferred index showed annual inflation slowed to 6.2 percent in August, from the 7.0 percent peak in June.

Williams said he expects US economic growth to be close to flat this year and post modest growth in 2023, with a slight uptick in unemployment.