News round-up, Thursday, December 15, 2022.
“Germans have a disastrous view of Tesla, with company founder Elon Musk’s behavior hardly helping. Whether from a likeability or quality perspective, the Tesla brand is far behind its German competitors. ”
Seaboard’s CEO in the Dominican Republic, Armando Rodriguez, explains how the Estrella del Mar III, a floating hybrid power plant, will reduce CO2 emissions and bring stability to the national grid…
Altice delivers innovative, customer-centric products and solutions that connect and unlock the limitless potential of its over 30 million customers over fiber networks and mobile…
The Federal Reserve signals more to come even as it slows rate increases.
Central bankers made a smaller rate move, but predicted that they will weigh the economy down more aggressively than previously expected
NYT
By Jeanna Smialek and Joe Rennison
Published Dec. 14, 2022Updated Dec. 15, 2022, 2:22 a.m. ET
Federal Reserve officials on Wednesday slowed their campaign to cool the economy but indicated that interest rates would rise higher in 2023 than previously expected as inflation proves more stubborn than policymakers had hoped.
Fed officials voted unanimously at the conclusion of their two-day meeting to raise borrowing costs by half a percentage point, a pullback after four consecutive three-quarter point increases. Their policy rate is now set to a range of 4.25 to 4.5 percent, the highest it has been since 2007.
After months of moving rapidly to make money more expensive in an attempt to rein in an overheating economy, central bankers are entering a phase in which they expect to adjust policy more cautiously. That will give them time to see how the labor market and inflation are reacting to the policy changes they have already put in place.
Yet the Fed’s latest economic projections, released on Wednesday for the first time since September, sent a clear signal that slowing the pace of rate increases does not mean that officials are letting up in their battle against rapid inflation. Borrowing costs are expected to rise more drastically and inflict more economic pain than central bankers previously anticipated as policymakers attempt to wrangle stubborn price increases.
“We’ve continually expected to make faster progress on inflation than we have,” Jerome H. Powell, the Fed chair, said during his news conference after the release. He described the Fed’s new expectations as: “slower progress on inflation, tighter policy, probably higher rates, probably held for longer, just to get you to the kind of restriction that you need to get inflation down to 2 percent.”
Federal Reserve Raises Interest Rates at Slower Pace
Jerome H. Powell, the Fed chair, said officials would raise borrowing costs by half a percentage point, a pullback from previous increases, as signs show that inflation is beginning to cool.CreditCredit...Elizabeth Frantz/Reuters
Officials are now expecting to raise their policy interest rate to 5.1 percent by the end of 2023, which would mean another three-quarter-point worth of adjustments and would push it half a percentage point higher next year than officials previously anticipated. Policymakers also expect to keep borrowing costs higher for longer.
“We have more work to do,” Mr. Powell said.
The Fed’s higher rates are expected to cool the economy notably next year. Central bankers predict that unemployment will jump to 4.6 percent from 3.7 percent now, and then remain elevated for years. Growth is expected to be much weaker in 2023 than previously anticipated, pushing the economy to the brink of a recession.
“I don’t think anyone knows whether we’re going to have a recession or not, and if we do, whether it’s going to be a deep one or not,” Mr. Powell said. “It’s not knowable.”
The central bank’s aggressive stance comes as central bankers worry that inflation will remain high for years to come. Though price increases are already beginning to moderate from the four-decade highs they reached this summer, the Fed’s economic projections make clear that policymakers think it is going to take years to return inflation fully to their 2 percent goal.
Despite the tough talk from the Fed, investors on Wednesday seemed unconvinced. Stock prices in the S&P 500 fluctuated higher and lower as Mr. Powell spoke at a news conference before ending the day down 0.6 percent.
And though the Fed expects to keep rates above 5 percent through the end of 2023, investors are still betting that the central bank will stop raising rates sooner and begin cutting them earlier.
“Financial markets want black and white, and you’re working in shades of gray,” said Diane Swonk, chief economist at KPMG, explaining that investors are not internalizing the Fed’s nuanced message.
That divergence could be a problem for central bankers. Higher stock prices and lower market-based interest rates make money cheaper and easier to borrow, helping to stimulate the economy — the opposite of the Fed’s goal as it tries to lower inflation.
“You hear the mantra, ‘Don’t fight the Fed,’ but at the moment the market is willing to fight the Fed,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “It’s an interesting dissonance that creates a risk for the market.”
Mr. Powell has repeatedly emphasized that his central bank is determined to keep fighting inflation until it is thoroughly vanquished, and on Wednesday he underlined that wrestling price pressures back under control is likely to take some time.
Macron urges Europe to act more quickly to counter US subsidies
EU leaders are meeting in Brussels on Thursday to find a way to counter Joe Biden's Inflation Reduction Act.
Le Monde with AFP
Published on December 15, 2022
French President Emmanuel Macron said Thursday, December 15, that the European Union would have to move more quickly to head off the threat to its industry from planned US subsidies.
Arriving at the EU summit in Brussels, Mr. Macron said the leaders would discuss their response to US President Joe Biden's Inflation Reduction Act.
"To maintain fair competition," Mr. Macron said, Europe must simplify its own subsidy rules faster "to respond, to be the equivalent of what the Americans have done."
EU leaders meeting in Brussels on Thursday and Friday will focus on a trade dispute with the United States, a key ally, that threatens to trigger a subsidy race between the economic superpowers.
European Commission chief Ursula von der Leyen sent a letter ahead of the summit urging leaders to back a plan to compete with billions of dollars in new US subsidies and tax cuts for car makers.
Brussels views the "Buy American" condition for purchasers of electric vehicles mainly made in the United States as discriminatory against European car manufacturers.
It is also concerned Washington's plan will drain investment from the EU to the United States and that they violate World Trade Organization (WTO) rules.
But, with US President Joe Biden refusing to change course beyond some promised "tweaks," the commission is now looking to match the US move by loosening its own state aid rules and boosting public investment in cleaner energy.
Ms. Von der Leyen said the e-vehicle subsidies contained in a broader US Inflation Reduction Act "risk un-leveling the playing field and discriminating against European companies".
The EU emphasizes its close cooperation with the United States – especially in supporting Ukraine and fighting climate change. But it is worried Washington is working up a trade advantage over it while it was going through an energy crunch, economic headwinds and was still recovering from the coronavirus pandemic.
'China must radically transition away from the development path it took in the past'
China is facing major structural challenges that require a significant shift in its economic policy. However, the party is struggling to convince people of their ability to bring about real change.
By Camille Macaire
Published on December 15, 2022
The rise of social tensions in China has highlighted the population's frustration with the harsh and inconsistent zero-Covid-19 policy. But in the background, there's also growing anxiety among the youth, faced with record unemployment (20% according to official figures, probably much more in reality) and uncertainties about long-term prospects.
Beyond the strong impact of the Covid-19 crisis, China is facing major structural challenges, in particular demographic aging, which require a radical change in the economic model. However, the authorities are struggling to convince people of their ability to bring about real change. The 20th Congress of the Communist Party, held from October 16 to 22, has illustrated the choice of subordinating the economy to politics by placing national security and strategic autonomy at the heart of its priorities.
These objectives underlie the emphasis on technological self-sufficiency. China has proven its ability to move upmarket in digital technology, and the automotive sector, but it's still far from being able to do without external innovations. For the future, in addition to an emphasis on education, one of the tools mentioned is a strategy to attract foreign talent. But Xi Jinping's ideological withdrawal, which advocates independence from the outside world and strengthens state control over the manufacturing sector, seems to contradict this strategy. At the same time, US sanctions against Chinese semiconductor producers will slow down China's capacity for innovation.
Poor outlook
The commitment to the social component, based on a better sharing of wealth according to the principle of "common prosperity," seems to be losing steam. The reinforcement of safety nets, a long-standing objective but never followed by significant action, is only now appearing in the discourse.
In the short term, the outlook for China's economy is cloudy. New cases of Covid-19 are now occurring on a daily basis at more than double the average level observed during the outbreak that paralyzed the country between mid-March and the end of April, and are widely scattered across the country. The announcement on Wednesday, December 7 that the zero-Covid-19 policy, which had become unbearable, would be eased could lead to a rebound in activity, but will also cause major disruptions in the face of a lack of hospital capacity. The ongoing speeding up of vaccination among the elderly could lead to a gradual exit from the crisis, but it will take time: Only about 40% of people over the age of 80 are fully vaccinated in the country. However, household trust will remain permanently impacted, which will continue to weigh on domestic consumption.
Moreover, massive government support through debt or monetary easing isn't on the agenda. Since 2017, Beijing has made fiscal clean-up, primarily by reducing debts, an official goal to strengthen the resilience of the economic model. Despite the Covid-19-related crisis, the authorities have proven their strong will to stay the course: The BPC hasn't conducted asset buyback programs, unlike its foreign counterparts, and has maintained strong pressure on property developers to deflate their debt levels.
More meaningful energy commitments are urgently needed to give credibility to the promise of zero net CO2 emissions by 2060. China must radically transition away from the development path it took in the past. The target for reducing the carbon intensity of growth presented in the 2021-2025 five-year plan (-18% emissions per unit of GDP created) has only slowed the acceleration of emissions, in fact creating an increase of nearly 40% over the period.
Major reforms
One of the levers of action is to increase more rapidly the share of low energy-intensive sectors, such as services, in growth. But this requires far-reaching structural reforms (strengthening safety nets, making the labor market more flexible, or restructuring state-owned enterprises), which are lagging behind.
In addition to reducing emissions at home, China has positioned itself as a supplier of eco-friendly equipment to the rest of the world. For example, it enjoys a dominant position in the manufacturing of batteries and solar panels. The country could turn the global climate challenge into an opportunity, as a springboard for its long-term growth.
China is also deploying a strategy of strengthening economic and financial ties with developing countries, particularly in Asia, which represent a large pool of demographic and economic growth. It's now the largest trading partner of most emerging countries and the largest international donor, with outstanding bilateral loans estimated at nearly twice those of the Paris Club (which includes 22 lending countries).
It has established a network of agreements with some 40 countries, the vast majority of them emerging countries, to provide liquidity in the event of a crisis (swap lines). These links, which are based on the "New Silk Roads" project, could serve as a growth springboard for the Chinese economy by reorganizing production chains, guaranteeing access to raw materials and creating new outlets. But to preserve and strengthen those links in the long term, China must prove to its partners that they all have a shared interest. And it remains to be seen whether the country's ideological hardening won't undermine the foundations of this project.
Camille Macaire is the Banque de France's representative for the Asia-Pacific region and an associate researcher at the Centre d’Etudes Prospectives et d’Informations Internationales (CEPII). This article reflects the personal views of the author and does not reflect the stance of the Banque de France on the subject.
Source Spiegel
Musk Destroys Tesla Image in Germany
Germans have a disastrous view of Tesla, with company founder Elon Musk's behavior hardly helping. Whether from a likeability or quality perspective, the Tesla brand is far behind its German competitors.
14.12.2022
Elon Musk, it would seem, is eager to drag his followers into the abyss of conspiracy theory credulity – but is anyone taking the bait? The top dog of Tesla and Twitter has never been shy when it comes to polarizing statements, of course, but even by his standards, the last several days have been disturbing for his willingness to make right-wing positions his own. He went after the U.S. virologist Anthony Fauci, he has made light of people who want to determine their own sexual identity and he has generally declared war on "woke." During an appearance in San Francisco, Musk was booed for several minutes, and actor Billy Baldwin launched a trend with the hashtag #BoycottTesla.
In Germany, the calls for boycott were hardly necessary. That is the clear message of a survey conducted on behalf of DER SPIEGEL by the public opinion research institute Civey. Some 47 percent of the auto enthusiasts surveyed responded that Musk’s current behavior has had a "clearly negative" influence on their opinion of Tesla. An additional 16 percent said their reaction has been "rather negative." Only 3 percent said they have a "rather positive" impression of Musk’s recent behavior, and an additional 6 percent rated their impression as "clearly positive." The survey was carried out between Dec. 1 to 9, prior to Musk’s most recent outbursts.
In late October, after Musk took over control of Twitter, a number of public reactions already began indicating that the image of Tesla, the world’s leading electric car brand, was taking a beating. Alena Buyx, chair of the German Ethics Council, said at the time that she was no longer interested in buying a Tesla. "It’s something you can’t do anymore,” she said.
In the U.S., the public opinion research company Morning Consult reported that Tesla’s popularity has suffered a nosedive primarily among supporters of the Democratic Party, which have traditionally dominated the e-car market. Since the beginning of the year, trust in the Tesla brand had been trending downward only slightly, says Morning Consult, but that Musk’s acquisition of Twitter "acted as a break in the dam." Elon Musk’s polarizing personality, the consulting company found, is negatively impacting Tesla.
The new survey commissioned by DER SPIEGEL has now revealed the same impact on the company’s image in Germany as that seen in the U.S. – just nine months after the carmaker opened up a new gigafactory outside of Berlin. And in contrast to the U.S., where Tesla seems poised to replace at least some of its disaffected supporters with new fans among pro-Trump Republicans, the same dynamic is nowhere to be seen in Germany. The broad rejection of Musk’s persona is apparent across all age, professional and educational groups in the country and it is independent of gender, region, family status, degree, religion and political affiliation.
The only exception is among those who proclaim to be supporters of the far-right party Alternative for Germany (AfD), with only 35 percent of such respondents saying they had a negative reaction to Musk’s behavior. But even within this group, the negative reactions outweighed the positive (23 percent).
Even without explicit mention of Musk, only 9 percent of Germans said they find Tesla to be "very" or "rather likeable." Fully 69 percent, by contrast, said they found the manufacturer to be "less" or "not at all likeable." That makes Tesla by far the least popular company among large carmakers with production sites in Germany, a finding once again independent of political party preference.
The survey revealed more polarization when it comes to Germany’s tradition-rich luxury brands like Mercedes, Porsche, BMW and Audi, which are generally viewed negatively on the left side of the political spectrum, but more positively on the right, with center-left Social Democrats also showing a weakness for Audi. Mass producers like Volkswagen, Opel and Ford, by contrast, tend to be more balanced, or they trigger very little reaction at all. Only Tesla is viewed negatively across all political parties. Musk’s company generates the highest likeability ratings among university students (27 percent), those under the age of 30 (22 percent), voters for the far-left Left Party (21 percent) and civil servants (17 percent). In all cases, though, Tesla supporters make up a clear minority.
Tesla also isn’t able to rely on its aura of being a technological leader. In response to the Civey question as to whether respondents view the vehicles produced by the different brands as high-quality products, only 21 percent answered positively when it came to Tesla.
That value puts Tesla at the very back of the pack, behind even Ford and Opel, both of which are also produced in Germany but which belong to foreign companies. Traditional German producers received top marks on the quality question. But Tesla has also been the focus of numerous negative reports in the U.S. when it comes to quality and safety, in part because of the disastrous press its driver assistance system has received.
The survey does not allow for conclusions to be drawn on general attitudes in favor of or against electric vehicles. Tesla is the only manufacturer on the list to specialize entirely in e-autos and leads the segment both in Germany and elsewhere in the world when it comes to the number of vehicles registered. But other brands are offering more and more battery-powered vehicles. From January to November, 52,000 new Teslas were registered in Germany, according to the KBA, the German agency responsible for motorized vehicle registration. That represents around one-seventh of all fully electric vehicles in the country, with VW hot on its heels.