In this Aug. 27, 2019, photo, an employee works on the production line of a smart electricity meter manufacturing plant in Nantong in eastern China's Jiangsu province. Two surveys of Chinese manufacturing show demand is weak amid a mounting tariff war with Washington over trade and technology. (Chinatopix via AP)
BEIJING (AP) — Two surveys of Chinese manufacturing show demand is weak amid a mounting tariff war with Washington over trade and technology.
A monthly purchasing managers' index released by a business magazine, Caixin, rose to 50.4 from July's 49.9 on a 100-point scale on which numbers above 50 show activity increasing.
That indicates "renewed improvement" but said a gauge of new orders fell to its lowest level this year, the magazine said.
A separate survey released Saturday by an industry group, the China Federation of Logistics & Purchasing, showed activity declining to 49.5 from July's 49.7. It said market demand was "relatively weak."
Chinese exporters are struggling in the face of U.S. tariff hikes. Exports to the United States, their biggest market, fell 6.5% in July.
Washington and Beijing stepped up their fight on Sunday by imposing additional tariffs on billions of dollars of each other's goods.
Beijing has propped up economic growth by boosting government spending on construction.
Economic growth sank to 6.2% over a year earlier in the quarter ending in June, its lowest level in at least 26 years.
A loss of faith in Argentina’s reform programme had been visibly demonstrated by a two-week run on the peso in spring last year. President Mauricio Macri had few options left. A long-mooted contingency plan went into action.
“When it came to it, we had discussed it so much, for Macri it was no problem,” says one senior government official recalling the events of last May. “The decision took five minutes . . . back then, Macri was fine and he was very happy with the agreement . . . after all, we had managed to get $50bn.”
Fifteen months later, the giant bailout has become a millstone around Mr Macri’s neck. Voters angry at the continuing recession delivered a stinging rebuke on August 11, handing a big victory to his Peronist rival Alberto Fernández in a primary vote. The contest is regarded as a reliable barometer for the election in October and its result panicked investors because it spelt disaster for Mr Macri’s chances.
Following days of market chaos in the wake of the vote, Mr Macri’s government bowed to the inevitable last week and asked creditors for more time to pay back Argentina’s $101bn of foreign debt, including the IMF money, as Buenos Aires struggled to avoid the country’s ninth sovereign default — and the third this century.
With the record-breaking bailout veering off track, questions are being asked about why the IMF, which has overseen 21 bailouts to Argentina, including one that ended in a historic default, lent so much money to support a programme that is crumbling after little more than a year.
“It’s another black eye for the IMF in Argentina,” says Benjamin Gedan, who leads the Argentina project at the Wilson Center in Washington. “They were caught up in the same euphoria as investors . . . They thought the number two economy in South America was embracing the Washington consensus.”
Having already disbursed $44bn of the bailout to Buenos Aires, the fund now faces a difficult choice: whether to stick with the programme and hand over another $5.4bn later this month to Mr Macri’s government or cut its losses and wait to deal with the next president. The IMF said in a statement issued after officials visited Argentina last week that it was assessing the impact of the proposed debt measures but would “continue to stand with Argentina during these challenging times”.
Its decision on the bailout’s future will be taken without the person who was instrumental in winning approval for the rescue: Christine Lagarde, who has stepped down from the IMF’s top job to lead the European Central Bank.
Ms Lagarde is unapologetic about her leading role in lending to Argentina. “We were the only game in town,” she told the Financial Times in July. “There was nobody else at the time to invest in the recovery process through which the government had decided to engage, and given the size of the challenge, we had to go big.”
The last 70 years of Argentina’s history have been punctuated with regular economic crises and Mr Macri’s inauguration in December 2015 was no different. His Peronist predecessor, Cristina Fernández de Kirchner, had emptied the government coffers, signing decrees to increase spending by an extra $27bn in her final days in power. Inflation was running close to 25 per cent, foreign exchange reserves were dangerously low and generous subsidies for utilities and transport were draining the budget.
The new president seemed well equipped for the challenge. The multimillionaire scion of an Italian immigrant who made his fortune through lucrative government contracts, he projected an image of cool competence, business savvy and sober realism which came as a relief to investors after the chaotic populism of Ms Fernández.
“I really believe that finally we have learnt from our mistakes,” Mr Macri told the Financial Times in September 2016, when asked about his economic programme. “There is no other country in the world with as much upside as Argentina.”
Something Mr Macri was keen to avoid if at all possible was being forced to seek help from the IMF, a perennial bugbear for Argentine leaders.
Buenos Aires’ troubled history with the fund stretches back six decades. Most notorious was the 2001 economic collapse, which ended with what was then the biggest debt default in history, bank runs, widespread civil unrest and the president fleeing by helicopter from the roof of the presidential palace.
Nearly a generation later, the bitterness remains. A poll last year by the Wilson Center found that 56 per cent of Argentines dislike the IMF, the worst ranking of any international organisation surveyed. The centre’s Mr Gedan compares the organisation to Superman’s arch enemy: “In Argentina, the IMF is like Lex Luthor,” he says. “Historically whenever the IMF swoops into Argentina, it leaves brutal budget cuts and economic chaos in its wake.”
So Mr Macri opted for a gradual approach to fixing the economic mess left to him by Ms Fernández, hoping to avoid another cycle of IMF-imposed austerity and political crisis.
“Macri’s political team told him he couldn’t start his term with a big [austerity plan],” says one source close to the administration. “That would be a typical rightwing government, which would end up with him leaving the presidential palace by helicopter when it failed.”
Mr Macri, who was also handicapped by his lack of a majority in congress, avoided big cuts to public spending and hoped that steady growth and restoring access to international borrowing would dig the economy out of its hole.
For a couple of years, the plan seemed to work. But the big deficits needed a constant stream of foreign money to fund them. High interest rates pushed up the value of the peso, meaning more dollars needed to be borrowed to fund the deficit. When a loss of market confidence triggered last year’s run on the peso, Mr Macri had to turn to the IMF.
Claudio Loser, who ran the IMF’s western hemisphere division at the time of Argentina’s 2001 crisis, says the main problem was excessive borrowing. “They were overconfident about their ability to continue borrowing significant amounts while adjusting [the economy] slowly,” he says. “That was the mistake.”
Kenneth Rogoff, a former chief economist at the IMF and now professor of economics at Harvard University, agrees. “Argentina made a lot of mistakes,” he says. “The general principle their programme violated was that when markets overshoot, policy has to overshoot. They didn’t do that — they tried a policy of gradualism.”
Yet despite the early mis-steps, Mr Macri secured a big IMF loan relatively quickly. Helping to smooth the way was his warm personal relationship with Donald Trump, president of the country with the biggest share of the votes on the IMF board.
“I’ve been friends with Mauricio for a long time, many years . . . we knew each other very well,” Mr Trump told reporters when he visited Argentina in 2018. “I actually did business with his family.” Mr Trump was referring to his purchase of a prime New York site for $95m in 1984 from Mr Macri’s father, Franco.
“Macri caught the ear of Trump,” says Hector Torres, a former senior IMF official now at the Centre for International Governance Innovation, a Canadian think-tank. “He got Trump to believe he needed a hand and he started [lobbying] via the [US] Treasury before going to the IMF.”
“Sure we spoke to the Treasury,” says the former senior Argentine official. “The situation was so delicate that it required a rapid response and the fund is so bureaucratic that it can’t act quickly enough.”
The fund’s initial bailout for Argentina, announced in June 2018, pledged $50bn, much more than expected. Christine Lagarde, then IMF managing director, said the money would “bolster market confidence”.
But only two months later, markets had lost confidence in the peso and Argentina went back to the Fund again.
A key flaw in the first deal, say former Macri officials and economists, was the IMF’s insistence that the peso float freely, which led to a fresh bout of selling as markets tested the currency.
“It was the chronicle of a death foretold,” says the former senior Argentina official. “The first agreement with the fund was inflationary and therefore bound to cause a recession. A depreciating currency forces you to raise interest rates and that cools down the economy.”
Following weeks of negotiations Ms Lagarde announced last September that the IMF would stump up an extra $7bn, bringing the Argentina bailout to a record $57bn, and allow the money to be spent faster. She was confident the revised plan would be “instrumental” in restoring market confidence.
This time, the IMF allowed Argentine authorities a limited amount of scope to intervene to defend the peso. But the restrictions on when and by how much it could step inwere too much for the central bank chief Luis Caputo, who resigned.
“The fund got it incredibly wrong, both the first and the second time,” says a second former Macri administration official, referring to the exchange rate decision. “It’s forgivable for the fund — they have to cover their bases and it’s what they do elsewhere — but not for the government. The government rushed and took whatever it was offered. That was a colossal mistake.”
The IMF declined to comment on Argentina beyond its published statements, saying it is reviewing the programme. Officials are understood to believe that the bailout went mostly according to plan apart from the inflation element. Buenos Aires’s inflation targeting failed, sources close to the fund say, because it was not co-ordinated with a wider government strategy to keep prices under control and because the inflationary effects of the devaluation were worse than expected. Mr Macri’s gradual approach to reining in spending was a key problem. Argentina’s statistics agency Indec says annual inflation was 54.3% in July.
Although the modified September bailout calmed markets, it did not revive the economy. As the election approached this year, interest rates of more than 70 per cent were choking businesses, unemployment was rising and inflation remained stubbornly high.
The gloomy economic picture made an easy target for the opposition Peronists as Argentina’s presidential election campaign got under way. They painted the market-friendly Mr Macri as the candidate of a privileged few who had imposed misery on the masses.
Poll predictions prior to the August 11 primary that Mr Macri was running close to his challenger Mr Fernández proved disastrously wrong. In the event, Mr Fernández trounced the president by a 15-point margin. The following day, the Buenos Aires stock market plunged 37 per cent and the peso hit a record low as investors woke up to the likelihood of a Peronist return to power.
The panic further undermined Mr Macri by reviving the instability he had promised to banish. It helped to trigger last week’s debt “reprofiling” announcement by new finance minister Hernán Lacunza under which foreign investors will be asked to agree voluntarily to delays in repayments. Standard & Poor’s labelled the move a “selective default” last Thursday, a classification it withdrew hours later.
“An Argentine sovereign debt default is now more likely than not,” said Capital Economics before the announcement. It predicted that bondholders were likely to lose about half their money in a restructuring.
Mr Fernández, the likely next president, has sent contradictory signals about his intentions towards the bailout, saying he will pay back the IMF loan but also harshly criticising the fund. “Those that have generated this crisis, the government and the IMF, are responsible for putting an end to and reversing the social catastrophe that an ever greater portion of Argentine society is suffering,” he said in a statement.
Daniel Marx, a former finance secretary, saw a political motive in the remarks. “[Fernández] is setting the stage for the next negotiation.”
Investors and business people would like to see Mr Fernández and Mr Macri work together to calm markets, stabilise the economy and minimise uncertainty during the painfully long transition until the next president is inaugurated in December. But there has been little sign that either of the two presidential candidates is prepared to do so.
Ironically, experts agree that if Mr Macri had sought IMF help from the outset, he would have fared better.
“Had Macri gone to the IMF at the start, it would probably have worked,” says Victor Bulmer-Thomas, an associate fellow at Chatham House in London. “The problem is that the history is so awful that governments delay going to the IMF until it’s almost too late. As a result, the fund is faced with an impossible situation. It then prescribes the usual remedies and they don’t work.”
Additional reporting by James Politi in Washington
Hong Kong's Hang Seng Index(HSI) lost 0.8%, while Japan's Nikkei(N225) fell 0.2%.
But China's Shanghai Composite Index(SHCOMP) advanced 0.7% and South Korea's Kospi(KOSPI) ticked up by 0.1%.
The latest round of tariffs that the United States and China imposed on each other went into effect Sunday — a round that came as concerns about slowing global growth are building and fear of recession stalks several major economies. Investors and executives around the world are also waiting to see when the two economic superpowers will come back to the negotiating table.
Newly released economic data also suggested that long-term concerns remain an issue. China's manufacturing industry expanded in August to a five-month high, according to a survey released Monday by the media group Caixin. That was stronger than what analysts expected, though government figures released over the weekend showed a contraction in activity.
The Caixin data suggests that strong infrastructure spending is propping up factory activity in China, according to Julian Evans-Pritchard, senior China economist at Capital Economics. But exports continue to struggle.
The manufacturing indexes are consistent with a slowdown in year-on-year economic growth, he wrote in a research note, adding that the outlook for global demand is still cloudy.
Evans-Pritchard wrote that Chinese authorities will have "little choice" but to ease policy in the coming months to deal with those issues.
Here are the other big moves at 10:30 a.m. Hong Kong time:
Newly releasedfactory activity from Japan pointed to a continued downturn in the country's manufacturing sector. "The sector was plagued by production cutbacks and flagging demand, which have been the trends so far in 2019," said Joe Hayes, an economist at IHS Markit, in a note. "Softer growth across Asia, particularly in China, was reported to have dented export opportunities."
In China, defense stocks pulled higher. A military parade is scheduled October 1 to celebrate the 70th anniversary of the founding of the People's Republic of China.
The yuan weakened slightly in both onshore and offshore trading. The Chinese central bank fixed the yuan at 7.0883 per oneUS dollar on Monday, slightly weaker from Friday's 7.0879.
A worker pushes Amazon.com Inc. packages in front of a FedEx Corp. delivery truck in New York.
Christopher Lee | Bloomberg | Getty Images
The years-long battle between Amazon and retail companies has spilled over into the shipping industry, with FedEx and UPS adjusting their strategies as the tech giant, once simply a customer, is now a major competitor.
The moves come as Amazon is building up its delivery fleet, renting planes and offering $10,000 to its employees to leave the company and start their own local delivery business.
"I think they have stated that they are now a competitor to the transport industry," said Ken Hoexter, a research analyst at Bank of America Merrill Lynch. "And FedEx has clearly viewed them now in their recent moves as an increasing competitor."
Just as some retail companies are uneasy about working with Amazon, which can be both a partner and a competitor, transportation companies are facing a similar dilemma. And with their customers facing off against Amazon in other industries, shipping companies may need to take sides.
Dan Neiweem, co-founder and principal of digital services and solutions provider Avionos, said that by ditching Amazon, FedEx may make itself more attractive to Amazon's competitors in the retail space.
He compared it to reports that WalMart is pressuring some of its partners to use Microsoft's Azure for cloud computing instead of Amazon Web Services. WalMart said "there are a small number of cases involving our most sensitive sales data that we'd prefer not sit on a competitor's platform" but its vendors can choose the cloud service they prefer.
"I think that what you'll see is that a lot of the shipments that Amazon was going into the USPS and FedEx with are now going to be transitioned from other retailers who are saying 'hey I don't anybody in my space who works with Amazon,'" Neiweem said. "And you see that parallel very, very tightly with AWS and Azure."
FedEx never relied on Amazon for a huge portion of its business. In a June statement announcing that Amazon would no longer be served by FedEx Express, the shipping company said Amazon accounted for 1.3% of its total revenues in 2018, or roughly $900 million.
From that perspective, FedEx's decision to cut ties with Amazon makes sense, Hoexter said.
"When you go to their sort centers, you can see that Walmart and Jet are a major customer of FedEx's, so certainly that relationship is as important if not more important than Amazon," Hoexter said.
"So if you have to choose one, if UPS is larger with Amazon and you're larger with Walmart, you're going to kind of work closer with that candidate."
Growing demand
Throughout its rise, Amazon has relied on UPS for a large portion of its shipping needs. UPS is still more exposed to Amazon than FedEx was. David Ross, transportation research analyst at Stifel, said he estimates that UPS gets between 7% and 9% of its total revenue from Amazon.
"If you go back 10, 15 years UPS was the chosen parcel carrier by Amazon, and when they started their prime two-day offering it was a lot of UPS," Ross said.
Online shopping has continued to grow since then. According to the U.S. Census Bureau, e-commerce has grown from roughly 4% of total retails sales in 2010 to more than 10% earlier this year. FedEx said it expects e-commerce to grow to 100 million packages per day in the U.S. by 2026.
As e-commerce has boomed, Amazon has struck out more on its own and built a sizable delivery network. The tech giant may not be delivering many third-party packages right now, but Neiweem said that's "sort of the last stand or threshold that they haven't crossed yet."
UPS and FedEx are also investing in their businesses, with both companies expanding delivery to 7 days per week.
FedEx, which said it has "a strong relationship with retailers of all sizes," has started offering retailers extended hours for package pickup, partners with stores such as Dollar General to create customer pick up areas and is experimenting with a delivery robot.
The growing demand for fast shipping has weighed on the financial results for large shipping companies. More home deliveries means shipping companies make less per stop than if they delivered a lot of packages to one spot, like a convenience store.
Hoexter said that domestic margins at UPS have been under pressure for the past several years, and that is where analysts will look to see if its new investments and increased leverage with Amazon are working.
"As we get into peak season, have they found a way to stabilize those margins despite the growth of e-commerce? That's going to be the key for the stock. When you ask what do we look for its the margin side and pricing if we start to see that improving or stabilizing. That's the first step," Hoexter said.
With FedEx now out of the picture, UPS may also be able to gain some short-term leverage on pricing, Hoexter said. That opportunity may not last for long, as Amazon continues to expand its own delivery network and expects to have 70 planes in its fleet by 2021.
For FedEx, the separation means the company can show that its e-commerce success is not tied to Amazon.
"FedEx is just showing people that they don't need Amazon to be a good business, and they feel that they can continue to grow without Amazon. I think they wanted to just distance themselves from Amazon in a way that made their own growth story a little more clear to people," Ross said.
Many seniors wind up retiring in the same place they lived during their working years. And if the city or town you lived in throughout your career is filled with amenities, family members, and friends, then you may want to stay put during your golden years. At the same time, relocating in retirement could make for a more relaxed, stress-free lifestyle. Here are a few reasons to consider making a move.
1. You live somewhere with a high cost of living
Some cities are more expensive than others across the board. Often, living in a pricey city gives you access to better jobs and a higher paycheck, but once you stop working, that's no longer a motivating factor to stay. Therefore, if you live someplace where the overall cost of living is high, moving could allow you to better stretch your limited income.
IMAGE SOURCE: GETTY IMAGES.
2. You live in an area with high income or property taxes
High taxes can be a source of financial stress in retirement, even if you live someplace that isn't all that expensive. Though you won't be collecting a paycheck from a full-time job, you'll still have income from Social Security, retirement savings (hopefully), or maybe a part-time job or business. The less tax you pay on that income, the more money you'll have left over to spend.
The same holds true for property taxes. Many seniors enter retirement with their mortgages already paid off, but even if you own your home outright, high property taxes can be brutal when you're on a fixed income. Moving someplace where it's cheaper to own a home could therefore help you better manage your limited income.
3. You live in a state that taxes Social Security
Most states do not impose a tax on Social Security benefits, but there are 13 that do:
Colorado
Connecticut
Kansas
Minnesota
Missouri
Montana
Nebraska
New Mexico
North Dakota
Rhode Island
Utah
Vermont
West Virginia
The good news is that most of these states also offer exemptions for low-income to middle-income households, so if your retirement income isn't particularly high, you may avoid taxes on your Social Security benefits. The only states that don't offer an exemption at all are Minnesota, North Dakota, Vermont, and West Virginia. Still, it pays to consider moving someplace where you won't have to worry about state taxes on your benefits.
That said, some of the above states may offer a lower cost of living on a whole, so don't let taxes on Social Security benefits be the sole factor that informs your decision. Also, keep in mind that even if you manage to avoid Social Security taxes at the state level, you may be taxed on those benefits at the federal level, especially if they're not your only source of retirement income.
4. You live someplace where you absolutely need a car
Living in a walkable city, or one with public transportation, could save you a significant amount of money during retirement by allowing you to get by without a car. It costs $8,849 a year, on average, to own a vehicle, according to AAA.
Meanwhile, walking is free, and public transportation can be relatively cheap compared to automobile ownership, especially since many cities offer discounts to seniors. Living someplace walkable can also help keep you in shape, thereby saving you some money on healthcare.
Relocating in retirement isn't an easy thing to do. It costs money to pack up your life and move, but if you make that investment, it could make your golden years easier from a financial perspective. And who knows? You may find that your new city offers more activities and social opportunities than you had access to previously.
Whether you're already retired or plan to retire at some point in the future, the data doesn't lie: Social Security has a good chance of helping you to make ends meet.
According to data from the Social Security Administration, more than 3 out of 5 retirees lean on the program to account for at least half of their monthly income. Meanwhile, two separate polls from Gallup found that 90% of current retirees, and 83% of future retirees, will rely on Social Security as either a "major" or "minor" source of income. This means that deciding when to take Social Security just might be the most important decision seniors make.
Image source: Getty Images.
Your claiming age has a big impact on how much you'll receive from Social Security
Although there are a number of factors that can affect how much seniors are paid by Social Security, including your work history, earnings history, and birth year, it's your claiming age that can have the biggest impact on your monthly and lifetime payout.
As you may already be aware, Social Security allows eligible retirees to begin taking their benefit at age 62, or any point thereafter. The catch is that the program incents patience. For each year an individual holds off on taking their payout, it'll grow by approximately 8%, up until age 70.
All things being equal -- work history, earnings history, and birth year (which determines your full retirement age) -- a person claiming at age 70 could receive a monthly payout that's up to 76% higher than someone claiming as early as possible at age 62. The trade-off being that the person claiming at 62 could receive a (reduced) payout for up to eight years before the individual at age 70 receives their first payout.
Trying to figure out which claiming strategy works best for your situation isn't easy, especially given that we don't know our expiration date, and there's no concrete guide that works for everyone.
Image source: Getty Images.
The three best ages to take your Social Security benefit
However, there is a new study from United Income that took a hard look at Social Security claiming data from the University of Michigan's Health and Retirement Study (HRS) to determine the ages where taking Social Security benefits was optimal. The results showed an almost perfect inversion of when people are taking benefits versus when they should be taking them.
According to the analysis from United Income, just 6.5% of the senior households that were included via the HRS would have made an optimal claiming choice by taking their payout at ages 62, 63, or 64. Yet, close to 4 out of 5 senior households that were analyzed had taken their payouts prior to reaching age 65. In layman's terms, these early claimants wound up leaving a lot of money on the table, at least in hindsight.
On the other end of spectrum, United Income was able to identify a handful of ages that maximized what claimants received over their lifetime. The data showed that 57% of seniors would have been better off waiting until age 70 to take their payout, with around 10% benefiting from an age 67 claim, and just shy of 10% from an age 69 claim. And yes, if you're curious, age 68 was the fourth-most optimal claiming age. In effect, more than 4 out of 5 seniors would be best off waiting until age 67 or later to begin taking their benefit. And, as a reminder, age 67 is the full retirement age for anyone born in 1960 or later.
Image source: Getty Images.
Your claiming strategy is a bit of science and luck
While the data is pretty clear that seniors would overwhelmingly be better off waiting to take their Social Security benefit, the fact remains that this suggestion won't work for everyone. That's because none of us knows (thankfully) our expiration date in advance, which is an important piece of information if we're going to maximize our lifetime payout from the program.
In order for seniors to have the best chance at maximizing their lifetime benefit, they'll need to really think about the variables that matter most to them. This involves taking into consideration your health history, financial situation (i.e., need for immediate income), and marital status, to name a few factors.
For example, if you're in excellent health; have no chronic health conditions; and have immediate family members, such as parents, who have lived well into their 80s, if not longer, science would suggest that you have longevity on your side. That would mean a later Social Security claim should give you the best chance to maximize your monthly and long-term payout.
However, some luck is involved, too. Without knowing our expiration date, we simply won't know if we made an optimal claiming decision until well after the fact. All we can say with certainty, at least from United Income's analysis via the HRS, is that far too many seniors claim Social Security benefits early, and it's resulted in a lot of money being left on the table.
