BBC News - Nigerian economy slips into recession

Nigeria has slipped into recession, with the latest growth figures showing the economy contracted 2.06% between April and June.

The country has now seen two consecutive quarters of declining growth, the usual definition of recession.

Its vital oil industry has been hit by weaker global prices, according to the Nigerian Bureau of Statistics (NBS).

But the government says there has been strong growth in other sectors.

Crude oil sales account for 70% of government income.

The price of oil has fallen from highs of about $112 a barrel in 2014 to below $50 at the moment.

Outside the oil industry, the figures show the fall in the Nigerian currency, the naira, has hurt the economy. It was allowed to float freely in June to help kick-start the economy, but critics argued it should have been done earlier.

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Nigeria is facing high import prices following the devaluation of the currency, the naira

The government, however, has found some positive news in the figures.

"There was growth in the agricultural and solid minerals sectors... the areas in which the federal government has placed particular priority," said presidential economic adviser Adeyemi Dipeolu.

Nigeria, which vies with South Africa for the mantle of Africa's biggest economy, is also battling an inflation rate at an 11-year high of 17.1% in July.

"A lot of Nigeria's current predicament could have been avoided," said Kevin Daly from Aberdeen Asset Management.

"The country is so reliant on oil precisely because its leaders haven't diversified the economy.

"More recently, they have tried, and failed, to prop up the naira, which has had a ruinous effect on the country's foreign exchange reserves and any reputation it might have had of being fiscally responsible."

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Analysis: Martin Patience, BBC Nigeria correspondent

This economic recession comes as no surprise to millions of Nigerians. Many say they've never known it so tough.

The slump in global oil prices has hit Nigeria hard. The government depends on oil sales for about 70% of its revenues.

But critics say government policies made a bad situation even worse. The decision to delay devaluing Nigeria's currency meant many businesses struggled to get foreign currency to pay for imports, which had a cooling effect on the entire economy.

Following enormous pressure, the government changed tack this summer, allowing the naira to float.

That's led to a spike in inflation, but the hope is that it will attract foreign investors. The government also says the country needs to import less: it wants to see more products made in Nigeria.

Bloomberg News - Poland Aims to Snag London’s Back-Office Bank Jobs After Brexit

Poland is joining the queue of countries aiming to lure financial-services jobs from London as banks look to ensure unfettered access to the European Union’s single market after Britain leaves the bloc.

Deputy Prime Minister Mateusz Morawiecki is traveling to London this week and says he’ll meet “dozens” of banks, hedge funds and investment managers to present Poland as an attractive place to set up middle-, back-office and IT operations.

“It will be certainly a difficult task but we want to show how attractive Warsaw and Poland are,” Morawiecki told TVN24.

Europe’s established financial hubs like Paris, Dublin and Frankfurt are already eyeing the spoils of the U.K.’s referendum result. Poland isn’t bidding to attract the most lucrative front-line jobs because it’s outside the euro area. Instead, Morawiecki is pushing the benefits of Poland as a location for support staff.

The country has a “fantastic pool of skilled labor,” he said.

Still, the government must alleviate concerns that the crisis over a spat with the EU sparked by changes to its constitutional court. The escalating dispute over government interference with the judiciary threatens to impair investment spending and economic development, Moody’s Investors Service said Aug. 26, two weeks ahead of its scheduled review of the sovereign rating for the eastern European nation.

“Investors are currently less concerned about the conflict than they were three or six months ago,” Morawiecki said. “I hope that the analysts will consider our stable financial standing and the improving quality of Poland’s growth.”

BBC News - Fed's Janet Yellen says case for rate rise has strengthened

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The case for raising US interest rates has "strengthened", the head of the Federal Reserve has said.

Speaking at an annual meeting of central bankers, Janet Yellen was cautiously upbeat about the US economy.

She said economic growth and a stronger jobs market meant "the case for an increase in the federal funds rate has strengthened in recent months".

There has been a growing expectation that US interest rates will rise this year.

Some economists are saying that the next hike could even come next month.

The central bank raised interest rates at the end of last year for the first time in nearly a decade, but has held them steady amid concerns over persistently low inflation.

'Gradual' rises

Ms Yellen, speaking at a three-day symposium in Jackson Hole, Wyoming, did not comment on when rates would rise. But she said "the US economy was nearing the Federal Reserve's statutory goals of maximum employment and price stability".

She added: "In light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months."

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Image captionConsumer spending grew faster than initially estimated in the second quarter of the year

However, Ms Yellen emphasised that future rate increases should be "gradual".

She noted that inflation is still running below the Fed's 2% target, but said this is being depressed mainly by temporary factors.

Growth data

Subadra Rajappa, head of rates strategy at Societe Generale, in Washington, said: "We weren't really expecting her to signal a hike at the September meeting, but she's just kept the door open for a hike sooner rather than later.

"I think that the Fed wants to get the market to start pricing in a hike for this year, which they weren't doing earlier, and now I'm seeing the probability of a hike by December has gone up slightly over a coin toss."

John Canally, economist at Boston-based LPL Financial, added: "It looks like she is warming a little more to a hike this year, probably not September but probably December."

Signs of slow improvements in the US economy came in data published on Friday. Although the growth rate of second quarter GDP was revised down slightly, from an annual rate of 1.2% to 1.1%, consumer spending - which makes up more than two-thirds of US economic activity - was revised up from 4.2% to 4.4%.

Separately, US Labor Department figures showed that claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 261,000 for the week ended 20 August. It was the third straight weekly decline in claims.

On Tuesday, Commerce Department data showed that US new homes sales jumped in July to their fastest rate in nearly nine years.

Ms Yellen's remarks helped lift US share markets in early trading, but stocks began to drift slightly lower in afternoon trading. On the currency markets, the dollar was flat against the euro at $1.1286 and slightly lower against the yen at 100.28 yen.

Bloomberg News - Consumers and Businesses Spurred U.K. Economy Before Brexit

U.K. consumers stepped up their spending in the second quarter and businesses increased investment as the economy showed few signs of reticence before the June Brexit referendum.

Household spending rose 0.9 percent, the fastest pace in almost two years, the Office for National Statistics said on Friday. Business investment gained 0.5 percent. Overall economic growth quickened to 0.6 percent from 0.4 percent, unrevised from an initial estimate, though net trade was a drag on growth again.

“Our survey returns, which include the period leading up to and immediately following the referendum, show no sign so far of uncertainty having significantly affected investment or GDP,” ONS Chief Economist Joe Grice said in a statement.

The decision to leave the European Union cast an abrupt shadow over the economy, prompting the Bank of England to cut interest rates this month for the first time since 2009 and piling pressure on new Prime Minister Theresa May to deliver a tax and spending boost.

While surveys suggest the June 23 referendum has done little to dampen the spirits of consumers -- an index of confidence rebounded this month as the initial Brexit shock subsided -- tougher times may lie ahead as quickening inflation threatens to erodealmost two years of real-wage growth.

“While we still have serious concerns over the U.K. growth outlook, we are a little less pessimistic than we were in the immediate aftermath of the Brexit vote,” said Howard Archer, an economist at IHS Markit in London. Still, he said the decision will “significantly weigh” on activity for a prolonged period.

Business Spending

The rise in business investment last quarter was driven by spending on transport equipment including cars and planes, the ONS said. The level of investment was 0.8 percent lower than a year earlier, and surveys suggest companies are planning to scale back spending plans.

Net trade once again dragged on the economy, knocking 0.3 percentage point off growth in the second quarter as exports barely rose.

The 10 percent fall in the trade-weighted value of the pound since the Brexit vote may aid exports, but not by enough to prevent a sharp slowdown. The economy will contract by 0.1 percent in the third quarter, according to economists polled by Bloomberg between Aug. 5 and Aug. 12.

Growth in the second quarter was heavily centered on April. In June alone, manufacturing and construction shrank, while new figures Friday show the dominant services sector grew just 0.2 percent. Services growth in the second quarter was unrevised at 0.5 percent.

The figures come hours before the U.S. publishes estimates for the second quarter, with economists predicting annualized growth of 1.1 percent. Annualized growth in the U.K. was 2.4 percent.

The compensation of employees, the widest measure of remuneration, rose 1.6 percent in the second quarter as employment hit record levels. GDP per capita -- a measure of living standards -- climbed 0.4 percent.

Reuters News - As central bankers gather, some at Fed make rate-hike case

U.S. Federal Reserve Chair Janet Yellen holds a press conference following the Fed’s two-day Federal Open Market Committee (FOMC) policy meeting in Washington June 15, 2016. REUTERS/Kevin Lamarque

As central bankers converge on this mountain resort Thursday for an annual conference on monetary policy, a couple of top Federal Reserve officials took the chance to renew a push for interest-rate hikes, citing improvement in employment and inflation.

"The case is strengthening" for a rate hike, Dallas Fed President Robert Kaplan told CNBC, whose open-air studio here overlooks the craggy peaks of the Grand Teton National Park. "And you should conclude from that in the not-too-distant future ... I think we're moving toward being able to take another step."

Kansas City Fed President Esther George, whose bank has hosted the conference here since 1978, had an even stronger message.

"I think it's time to move," she told Bloomberg TV.

The Fed raised interest rates for the first time in nearly a decade in December, but has kept them on hold since then on concern that headwinds from abroad and financial market volatility at home could hurt growth.

Recent strong readings on the labor market, and signs that inflation is finally beginning to pick up, have begun to encourage some policymakers that rates should rise, if not as soon as next month's meeting then at least before the end of the year.

Investors are awaiting a speech on Friday by Fed Chair Janet Yellen for more definitive clues about the timing of a rate hike.

Not all Fed policymakers are on board for a rate hike soon; Chicago Fed President Charles Evans, who is at Jackson Hole for the conference but is not doing TV interviews, has long called for patience in raising rates so as to give inflation a better chance of reaching the Fed's 2-percent target sooner.

Traders currently put chances of a December rate hike at about 42 percent.

The call to raise rates stands in stark contrast to the likely next moves from many other global central banks whose representatives are meeting here, including policymakers at the central banks for Europe and Japan, where prolonged economic weakness has all but ruled out any near-term contemplation of tighter monetary policy.

It also is anathema to the dozens of activists planning to protest outside of the lodge where the three-day conference begins later on Thursday. Fed Up, a network of community organizations and labor unions, will meet with George and half a dozen other policymakers later in the day to air their concern about the impact higher rates will have on America's poor.

(Reporting by Ann Saphir in Jackson Hole and Jonathan Spicer in New York; Additional reporting by Sam Forgione; Editing by Andrea Ricci)

BBC News - Federal Reserve 'close to meeting targets' for US economy

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The Federal Reserve is close to hitting its targets for US employment and 2% inflation, according to the central bank's vice chairman, Stanley Fischer.

In a speech in Colorado, the Fed's number two policymaker was upbeat about the economy's recovery and prospects.

"We are close to our targets," he said on Sunday, adding that jobs growth had been "remarkably resilient".

He did not mention interest rates, but the remarks are likely to fuel debate about when they may rise.

Mr Fischer said this year's pace of jobs growth, although slower than in 2015, was "more than enough" for the labour market to continue to improve.

He told a conference in Aspen that inflation outside of food and energy prices was "within hailing distance" of 2%, the Fed's target rate.

In recent years, he said, the US economy had had to confront the Greek debt crisis, a rise in the strength of the dollar, and sporadic financial turbulence.

'Remarkable'

"Yet, even amid these shocks, the labour market continued to improve: employment has continued to increase, and the unemployment rate is currently close to most estimates of the natural rate," Mr Fischer said.

"I believe it is a remarkable, and perhaps under-appreciated, achievement that the economy has returned to near-full employment in a relatively short time after the great recession, given the historical experience following a financial crisis," he said.

One major concern, however, was the slowdown over the past few years in US productivity growth. If it persisted, Mr Fischer said, it would curtail jobs and wage growth.

He would not comment on the path for interest rates. There has been growing expectation that the Fed will raise rates this year - as long as the economy continues to strengthen.

Mr Fischer said he expected US growth "to pick up in coming quarters".

The comments come ahead of a speech that Fed chairwoman Janet Yellen is due to deliver on Friday, when she is expected to give guidance on interest rate policy.

Ms Yellen is also expected to sound a positive note. Economists said it was unlikely that Mr Fischer would want to say anything that could be contradicted on Friday.

"It would be quite an event if Fischer went out so close to Yellen's speech" and said something she disagreed with, former Fed board economist Roberto Perli told the Bloomberg news agency.

BBC News - UK public finances see smaller surplus

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The UK government had a smaller budget surplus than expected in July, the first calendar month since the Brexit vote.

Public sector net borrowing was in surplus by £1bn for the month, less than the £1.2bn seen a year earlier.

July is typically a month of surplus for the public finances, because of revenues from corporation tax.

For the financial year to date, public borrowing was 11.3% lower than a year earlier.

For the April-to-July period, the total was £23.7bn, £3bn less than the same period in 2015.

Total public sector net debt at the end of July was £1,604.2bn, equivalent to 82.9% of GDP. That was £35.3bn more than in July 2015.

UK 'well-placed'

The Office for National Statistics (ONS) said July was the second month in a row in which the debt had fallen as a percentage of GDP. In June, it was 84% of GDP.

That indicated that GDP was currently increasing year-on-year faster than net debt, although the ONS stressed that care should be taken when inferring trends from only two months' data.

The ONS said its bulletin presented the latest fiscal position of the public sector as at 31 July 2016 and so included the first post-EU referendum data.

However, it added that estimates for the latest period always contained a substantial forecast element and so any post-referendum impact might not become clear for some time.

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Image captionChancellor Philip Hammond has indicated he will take a more gradual approach to deficit reduction

The UK's new Chancellor, Philip Hammond, has indicated that he will take a more gradual approach to deficit reduction and will not be bound by the targets of his predecessor, George Osborne.

His own policies should become clearer when he presents his Autumn Statement, due before the end of the year.

The Chief Secretary to the Treasury, David Gauke, said: "With the public finances in surplus in July, our economy starts from a position of strength to face any economic turbulence following the vote to leave the EU.

"As we keep working to cut the deficit, we are well-placed to handle any challenges and seize the opportunities as our economy adjusts."

Shadow chancellor John McDonnell said: "The UK economy needs immediate investment from the government, rather than sticking to the failed policies of George Osborne which have helped create the problem.

"Britain is on hold waiting for Philip Hammond to tell us whether he will stick to his predecessor's planned cuts to investment, and firms and households can't wait until the autumn to find out."

Brexit 'hit' fears

Howard Archer, chief UK and European Economist at IHS Global Insight, said: "The UK's vote to leave the European Union clearly put the fiscal targets for 2016-17 and beyond out of reach.

"Even before the Brexit vote, the plan to get [public sector net borrowing] down to £55.5bn in 2016-17 from £74.9bn in 2015-16 had looked challenging, while ex-Chancellor George Osborne's target of a budget surplus in 2019-20 was widely seen as hugely optimistic."

Mr Archer added: "The public finances look poised to take a serious hit from probable significantly weakened economic activity after the Brexit vote, taking a toll on tax receipts in particular. It also seems probable that unemployment will rise, while any slowdown in the housing market will hit Stamp Duty receipts."

Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said: "Fixing the public finances remains a major challenge, and is likely to be an increasingly uphill task if economic growth slows in the coming months.

"If the economy does weaken, the UK will struggle to generate sufficient tax receipts needed to make meaningful progress in reducing the deficit.

"More needs to be done to strengthen the UK's tax base. The government should use the extra fiscal headroom from abandoning the 2020 target to support firms looking to invest, and deliver on major infrastructure projects that will boost jobs and growth."

Bloomberg News - (VIEW) A Physics Lesson for Central Bankers

The world is braced for the discovery of a fifth fundamental force of nature -- the four known ones being electromagnetism, gravity, and strong and weak nuclear forces -- that subverts the so-called standard model of particle physics. Given the lackluster outlook for global growth, maybe economics needs a similar revolution.

Quantitative easing's failure to quash the threat of deflation is finance's equivalent of the bump in the data that alerted physicists to the possibility of a new boson. The mismatch between economic theory and the real-world outcome of zero interest rates poses a direct challenge to the current orthodoxy that puts a 2 percent inflation target at the heart of monetary policy in most of the developed world.

Figures earlier this week showed inflation running at an annual pace of just 0.8 percent in the U.S. and 0.6 percent in the U.K. Consumer prices in the euro zone are rising by about 0.2 percent a year; in Japan, prices dropped by 0.4 percent in June. The consensus forecast among economists surveyed by Bloomberg News is for none of the four central banks in those regions to meet their targets in 2016, and for the European Central Bank and the Bank of Japan to continue falling short for at least the next year:

Years of pumping trillions of dollars, euros, yen and pounds into the economy by buying government debt and other securities hasn't produced the rebound in inflation that economics textbooks predicted. Record low borrowing costs haven't led to a surge in investment and spending that would lead to higher prices.

That’s the kind of empirical evidence that should produce a reconsideration of what Rothschild Investment Trust Chairman Jacob Rothschild this week called "the greatest experiment in monetary policy in the history of the world." Neil Grossman, director of Florida-based bank C1 Financial and former chief investment officer at TKNG Capital Partners, likens the need to abandon the current economic orthodoxy with the impact of quantum physics on science in the last century.

Before Mark Carney became governor of the Bank of England, the U.K. Treasury considered whether it made sense to change the central bank's mandate, which aims for a 2 percent inflation rate for consumer prices. "We did a lot of work on this in 2012," Rupert Harrison, the chief macro strategist at Blackrock and former chief of staff to ex-Chancellor of the Exchequer George Osborne, told me earlier this week.

The investigation concluded that raising the inflation target was politically unpalatable, Harrison said. Another potential approach, a switch to targeting nominal gross domestic product growth -- in other words, inflation plus growth -- rather than consumer prices, is harder to explain to businesses and consumers than a straight inflation yardstick, he said.

Yet change may be in the air, starting at the world's most powerful central bank. John Williams, president of the Federal Reserve Bank of San Francisco, published an essay earlier this week arguing that the current environment may require a different approach. There's been a structural decline in the so-called natural rate of interest -- the level of borrowing costs that neither stimulate nor hinder growth. Williams included the chart below:

SOURCE: FEDERAL RESERVE BANK OF SAN FRANCISCO

That decline leaves central banks dangerously short of firepower to influence the economy, he wrote:

There is simply not enough room for central banks to cut interest rates in response to an economic downturn when both natural rates and inflation are very low. The underlying determinants for these declines are related to the global supply and demand for funds, including shifting demographics, slower trend productivity and economic growth, emerging markets seeking large reserves of safe assets, and a more general global savings glut.

Williams concluded that central banks should consider either higher inflation objectives or switching to GDP targeting: "Now is the time for experts and policy makers around the world to carefully investigate the pros and cons of these proposals," he wrote.

"There's an accumulation of evidence that monetary policy is pretty ineffective," Nobel prize-winning economist Paul Krugman told Bloomberg Television this week. The comments from Williams are significant because raising inflation targets above 2 percent is "something they have been really, really reluctant to rethink,'' he said. "It's news that anybody at the Fed is even willing to entertain the notion."

I've written before about a theory dubbed Neo-Fisherism that argues for raising rates as a better solution to the current economic backdrop than driving them below zero. Maybe that's too radical to gain traction. But just as scientists are forced to review their assumptions when the experimental evidence undermines existing theories, central bank economists should acknowledge that the world isn't responding to their guidance in either the way they expected or how they would want it to. In short, a new approach to monetary policy is needed.

by Mark Gilbert

BBC News - Bank of England bond buying plan back on track

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The Bank of England has successfully bought £1.17bn worth of government bonds as part of its £60bn buy-back programme to stimulate the economy.

Last week, the Bank failed to find enough sellers when it offered to buy the bonds, known as gilts.

But it found no shortage of sellers on Tuesday. The "reverse auction" was oversubscribed by almost 2.7 times.

By creating money to buy gilts the Bank hopes to push cash out into the economy for investment and lending.

Pension funds in particular have been reluctant to sell gilts, especially those with long maturities, because they bought them when they were cheap and offered a high rate of return.

The Bank's quantitative easing programme began in 2009, and last month it announced a new £60bn round of government bond buying to try to stimulate growth after signs of a slowdown followed the referendum vote in June.

The bond purchases will take place three times a week until October.

Part of the bond-buying programme will also involve buying up a limited amount of corporate bonds, fixed interest debt issued by companies.

Bloomberg News - Biggest Offshore Wind Farm Allowed With Protection for Porpoises

The U.K. government approved construction of the world’s largest offshore wind farm, providing the developer Dong Energy A/S doesn’t disturb porpoises off the Yorkshire Coast.

The leading builder of offshore wind farms, Dong won approval from Business and Energy Secretary Greg Clark to build the 1.8 gigawatt Hornsea Project Two, which will require investment of about 6 billion pounds ($7.8 billion).

“Britain is a global leader in offshore wind, and we’re determined to be one of the leading destinations for investment in renewable energy, which means jobs and economic growth right across the country,” said Clark in a statement posted on the department’s website on Tuesday.

The project is expected to be the largest of its kind once it’s built, surpassing Dong’s 1.2 gigawatt Hornsea Project One, which reached financial close earlier this year.

The government delayed its decision on Hornsea Project Two from June, giving extra time to examine the impact the project may have on harbor porpoise populations. Earlier this year, the Department for Environment Food and Rural Affairs proposed a large area of the southern North Sea for protection from development. The zone overlaps with several large-scale offshore wind projects in planning or development, including Hornsea Project Two.

Harbor porpoises are particularly sensitive to underwater noise from offshore wind construction, according to Rebecca Williams, climate and energy specialist for the WWF. She said she was satisfied that the impact on porpoises at Hornsea Two had been thoroughly examined before the decision was made. Clark said the license should only be granted if construction and piling is done in seasons with the least impact.

“We welcome that additional conditions were placed on the developer to ensure that there are no adverse effects on the site integrity for harbor porpoises,” Williams said. “This shows that effectively managed Marine Protection Areas are good for renewables and nature.”

Subsidy question

In order to reach financial close on the project, Dong Energy must now secure a contract for difference from the government through an auction process. The company may have to split the project in bidding given its vast size and the government’s limited budget, said Tom Harries, an analyst at Bloomberg New Energy Finance in London.

“By obtaining a permit Dong has jumped the lowest hurdle in building Hornsea 2, but the bigger hurdle will be securing a subsidy,” Harries said. “The lack of transparency and details on future CfD rounds means Dong will have to sit and wait to see if there is room for this huge offshore wind farm in future CfD budgets.”

by Jessica Shankleman