48 Thursday November 25 2021 | the times
Business
New applications for unemployment
benefits in the United States dropped to
their lowest level since 1969 in the past
week.
There were 199,000 initial jobless
claims during the week to November
20, according to data released by the
Department of Labor. This is the first
time that applications have returned to
pre-Covid levels since the pandemic
crisis began in early 2020.
However, inflation continues to rise
sharply within the world’s largest eco-
nomy. Prices grew at their fastest rate in
three decades last month, according to
a measure monitored closely by policy-
makers. The personal consumption
expenditures index rose by 5 per cent
on an annual basis in October. Strip-
ping out volatilite food and energy
costs, it increased by 4.1 per cent.
Consumers continued to ramp up
spending, which increased 1.3 per cent,
although economists are braced for
higher prices to take their toll on
expenditure levels over the coming
months. Financial optimism among
consumers, as tracked by a fortnightly
survey by the University of Michigan,
has fallen to its lowest level in a decade
while inflation dents household budgets.
The Federal Reserve pulled the trig-
ger this month and started tapering its
vast fiscal support for the US economy.
On Monday President Biden con-
firmed that Jerome Powell, the central
bank’s chairman, would continue to
lead it for another four years.
Minutes from the Fed’s most recent
policy meeting, released last night,
First-time buyers face having to pro-
vide up to 5½ times typical annual earn-
ings to get on the property ladder, ac-
cording to a report from Britain’s big-
gest building society.
The figures, which were compiled by
Nationwide Building Society, found
that a 20 per cent deposit on a home
now equates to 110 per cent of the
pre-tax income of a typical full-time
system. If they start to move money
elsewhere, to Germany, to Austria, it’s
another story. Then we will have a con-
versation about a real currency crisis,”
said Ilan Solot, global market strategist
at Brown Brothers Harriman.
Erdogan appears reluctant to change
course, despite mounting pressure to
raise rates and defend the currency.The Turkish lira lost more than a tenth
of its value after the country’s authori-
tarian leader vowed to keep interest
rates low in the face of a sharp jump in
inflation.
President Erdogan has promised to
press on with his “economic war of in-
dependence”, which involves slashing
borrowing costs in an attempt to stimu-
late the economy.
The lira tumbled to a record low of
13.45 against the dollar overnight yes-
terday, its 11th consecutive daily fall,
before trimming some of its losses. It
was changing hands at 12.12 against the
US dollar by the close of business yes-
terday. It has tumbled by about 40 per
cent this year, with half of the fall com-
ing since the start of last week. The lira
New US jobless
claims at lowest
level for 50 years
Callum Jones
US Business Correspondent
confirmed that officials stand ready to
accelerate the unwinding of its
$120 billion monthly asset purchase
scheme should prices continue to rise.
“Various participants” said the cen-
tral bank should be prepared to “adjust
the pace” of asset purchases and raise
interest rates more quickly if inflation
remained high, the minutes said. Infla-
tionary pressures could “take longer to
subside” than previously forecast, offi-
cials acknowledged. “Many partici-
pants” pointed to potential signs that
“elevated inflation could prove more
persistent”.
The response on Wall Street, which is
closed today for Thanksgiving, was
largely muted. The S&P 500 closed up
10.76 points, or 0.2 per cent, at 4,701.46.
Concern over the prospect of sus-
tained inflation has yet to abate, with
prices still rising amid persisting supply
shortages in the face of robust demand.
There are also growing fears that rising
coronavirus cases and a tighter labour
market may well disrupt the recovery in
employment. Andrew Hunter, senior
US economist at Capital Economics,
estimates that the country’s workforce
has grown by about half a million this
month, “but the growing risk of a winter
Covid-19 wave and a dwindling supply
of available workers look set to weigh
on employment growth soon”.
On a busy day of economic releases,
the US Bureau of Economic Analysis
marginally increased its estimate for
growth during the third quarter. Gross
domestic product increased 2.1 per
cent, according to the official reading,
which economists have said was sup-
pressed by the rapid spread of the Delta
variant this summer.M
orale in
German
business fell
for a fifth
month in
November as supply
bottlenecks in
manufacturing and a
spike in coronavirus
infections clouded the
growth outlook forEurope’s largest economy.
The Ifo institute said
yesterday that its business
climate index fell to 96.5
from 97.7 in October.
Clemens Fuest, Ifo’s
president, said: “Supply
bottlenecks and the
fourth wave of the
coronavirus are
challenging German
companies.”
Company executives
were less satisfied with
their business situation
and their expectations for
the next six months were
more pessimistic.
Despite record high
orders, carmakers andother manufacturers
were forced to scale back
production due to a lack
of raw materials and
intermediate goods such
as microchips.
Thomas Gitzel, an
analyst at VP Bank, said:
“Industrial production is
suffering from the
shortage of materials,
and with the brutal
fourth coronavirus wave,
a well-known stress
factor for the service
sector is being added.”
Gitzel said signs were
pointing to a decline in
overall economic output
in the final quarter.The Ifo figures
contrasted with a
purchasing manager
survey that suggested on
Tuesday that growth in
the private sector picked
up slightly in November.
Ralf Umlauf, economist
with Helaba bank, said
Germany seemed to be
hit harder by the supply
bottlenecks than France
where morale improved.
The European Central
Bank would view the
outlook as a confirmation
of its decision to leave as
many policy options as
possible on the table,
Umlauf added.Germany
fears worst
as shortages
take toll
Despite record high
orders, German
manufacturers were
forced to scale back
production due to a
lack of raw materialsPresident’s battle cry sends Turkish lira into nosedive
has been worst-performing currency
globally this year, with investors taking
fright at Erdogan’s plan to stir up
growth rates.
The president, who has ruled Turkey
for nearly two decades, has been push-
ing the central bank to loosen mone-
tary policy aggressively. He wants to
boost exports, encourage investment
and create jobs. However, the strategy
has stoked inflation, which climbed to
nearly 20 per cent last month, reducing
citizens’ buying power.
Analysts said the lira was at risk of
falling into a self-perpetuating sell-off.
Turks are increasingly opting to keep
their spare capital in euros or dollars to
protect themselves from the high local
inflation rate, which has heaped further
pressure on the lira. “Locals seem con-
tent to keep their dollars in the localAfter a meeting between Erdogan
and Sahap Kavcioglu, the central bank
governor, the bank issued a statement
saying the sell-off was “unrealistic and
completely detached” from economic
fundamentals.
The central bank said it could inter-
vene only in conditions of “excessive
volatility”.
Semih Tumen, the former bank dep-
uty governor, who was dismissed last
month as part of a clear-out of the
senior ranks, called for an immediate
return to policies that would protect the
value of the lira.
“This irrational experiment, which
has no chance of success, must be aban-
doned immediately and we must return
to quality policies which protect the
Turkish lira’s value and the prosperity
of the Turkish people,” Tumen tweeted.The lira’s slide yesterday was its
steepest since 2018, when a currency
crisis tipped Turkey into a deep reces-
sion and brought on three years of sub-
par growth and double-digit inflation.
The central bank has slashed rates by
four percentage points to 15 per cent
since September, leaving real yields
deep in negative territory. The policy
contrasts with many central banks,
which have either begun tightening or
are preparing to do so.
Earlier this week, Erdogan defended
the policy. He argued that higher inter-
est rates would not reduce the inflation
rate — a long-held view that is at odds
with economic orthodoxy. “I reject pol-
icies that will contract our country,
weaken it, condemn our people to
unemployment, hunger and poverty,”
he said.Simon Duke Lira to pound
1990 00 10 20010
51520LiraFRIEDEMANN VOGEL/EPAemployee, which is also a record high
and up from 102 per cent a year ago.
Andrew Harvey, senior economist at
Nationwide, said: “In the third quarter
of this year, the UK first-time buyer
house price to earnings ratio stood at
5.5, above the previous high of 5.4 in
2007 and well above the long-run aver-
age of 3.8.
“London continues to have the high-
est house price to earnings ratio at 9.0,
although this is still below its recordhigh of 10.2 in 2016. Scotland has the
lowest in the country at 3.4, closely fol-
lowed by the north [of England] region
at 3.5.”
Harvey added: “In 2019-20, about a
third of first-time buyers had some help
raising a deposit, either in the form of a
gift or loan from family or a friend, or
through inheritance — up from 27 per
cent 25 years ago.”
Nationwide began life in 1884 as the
Co-operative Permanent BuildingSociety and, over many decades,
merged with about 250 other building
societies, changing its name to Nation-
wide in 1970.
Last week the Swindon-based mort-
gage lender, the UK’s second largest
after Lloyds Banking Group, reported
that pre-tax profit for the six months to
the end of September rose to £853 mil-
lion from £361 million a year ago. Gross
mortgage lending grew to £18.2 billion
from £12.7 billion previously.Times Business Reporter Silvana Tenreyro, a Bank of England
policymaker, said yesterday she was
thinking “more in the medium term”
about a raise in interest rates from
their pandemic low. Tenreyro was
one of seven members of the nine-
strong Monetary Policy Committee
who voted to keep borrowing costs
on hold this month. New Zealand’s
central bank raised rates for the
second straight month yesterday.House prices surge to 5½ times annual pay for first-time buyers