2024-10-24 14:06

Economists say 2024 GDP could be lower than BoC's forecast BoC might have to cut rate by another 50 bps in Dec Bank revised Q3 GDP estimate, kept 2024, 2025 unchanged OTTAWA, Oct 24 (Reuters) - The Bank of Canada's annual economic growth forecast is overly optimistic, economists said, and another large interest rate cut this year will likely be required to boost growth. Economists widely expected the BoC to lower its annual gross domestic product (GDP) forecast when it released its quarterly monetary policy report on Wednesday, after a spate of uninspiring growth data. However, the bank only revised the third-quarter growth projection and kept its 2024 estimate unchanged, which surprised many economists and analysts. "The bank had a more positive view on the economy for this year," said Tony Stillo, the director of Canadian economics at Oxford Economics. Annual GDP is likely to come below the bank's estimate and the bank would have to cut rates by another 50 basis points in December to support the economy, he said. In its monetary policy report the bank revised down its estimate of annualized third-quarter GDP to 1.5% from 2.8% in July. Its full-year estimate, however, remained unchanged at 1.2%, along with no change to its 2025 projection. "If growth comes in a shade below the Bank of Canada's forecast, it could be one factor that supports a 50 basis-point cut in December," said Avery Shenfeld, Managing Director and Chief Economist for Capital Markets at CIBC. A bigger-than-usual cut would also bring the key policy rate to the upper end of what the BoC estimates is its neutral rate of interest, which economists say is a prudent level where the bank can start slowing rate cuts. A neutral point is when the policy rate is neither restricting nor stimulating economic growth. "We continue to expect one more 50-bps rate cut from the BoC this December," Claire Fan, economist at RBC wrote in a report, adding that real GDP growth was more likely to stay subdued for longer as interest rates remain restrictive until 2025. The bank reduced its key benchmark rate by 50 basis points to 3.75% on Wednesday, and Governor Tiff Macklem said he would like to see growth strengthen as inflation was largely tamed. He said the pace and timing of further reductions would depend on incoming data between now and Dec. 11, when it announces its next rate decision. The bank will have two sets of GDP data - for August and September, inflation numbers for October, and two jobs reports before it makes its next decision. Sign up here. https://www.reuters.com/markets/bank-canada-may-need-another-big-rate-cut-adjust-slow-growth-economists-say-2024-10-24/

2024-10-24 12:54

Oct 24 (Reuters) - International Monetary Fund Managing Director Kristalina Georgieva on Thursday warned that China's annual economic growth could drop to "way below" 4% unless it executes reforms to lift domestic consumption. A major obstacle to improving Chinese consumer confidence is its depressed property sector, and actions should be take to address that, Georgieva said at a press briefing during the IMF's annual meetings in Washington. Sign up here. https://www.reuters.com/world/china/imfs-georgieva-says-china-risks-way-below-4-growth-unless-reforms-are-made-2024-10-24/

2024-10-24 12:47

SAO PAULO, Oct 24 (Reuters) - Inflation in Brazil accelerated in the month to mid-October, as higher electricity costs pushed consumer prices up in Latin America's largest economy. Prices as measured by the IPCA-15 index (BRIPCA=ECI) , opens new tab rose 0.54% in the month to mid-October, up from 0.13% in the previous month, government statistics agency IBGE said on Thursday. Economists polled by Reuters were expecting a 0.50% rise. In the 12 months to mid-October, inflation stood at 4.47%, up from the 4.12% seen the month before and above the 4.43% forecast by economists. The main impact on inflation in the month to mid-October came from residential electricity prices, which rose 5.29%. Food prices also picked up, with a 0.87% increase on a monthly basis. Electricity costs had already pushed inflation higher in Brazil in September amid a major drought, reinforcing expectations of further interest rate hikes by the country's central bank. The monetary authority's rate-setting committee, known as Copom, kicked off an interest rate-hiking cycle last month with a 25 basis point increase and signaled more tightening ahead. "With comments from BCB (Banco Central do Brasil) policymakers warning about strong services inflation and unanchored inflation expectations, a step up in the pace of rate hikes from 25 bp to 50 bp is looking increasingly likely," said Kimberley Sperrfechter, emerging markets economist at Capital Economics. Sign up here. https://www.reuters.com/world/americas/brazil-inflation-picks-up-mid-october-with-higher-electricity-costs-2024-10-24/

2024-10-24 12:39

Oct 24 (Reuters) - Europe's biggest gas distributor Italgas (IG.MI) , opens new tab on Thursday reported 10.9% growth in third-quarter adjusted core earnings, citing higher gas distribution turnover and cost cuts, as it prepares to reap the benefits from its consolidation efforts. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were 1.01 billion euros ($1.09 billion), with gas distribution revenue up 11.5% at 1.21 billion euros. The group, which has agreed this month to buy smaller rival 2i Rete Gas in a 5.3 billion euro deal, aims to launch a rights issue of 1 billion euros to finance the acquisition. "The Strategic Plan 2024-2030, which includes the integration of 2i Rete Gas ... sets further and more ambitious goals in terms of investments, achievement of green transition targets, and value creation for all our stakeholders," CEO Paolo Gallo said in a statement. Under its latest business plan published after striking the deal, Italgas expects its turnover to reach 3.6 billion euros and its core earnings to be 2.8 billion euros by 2030. The board of directors also approved the renewal of the Euro Medium Term Notes (EMTN) Programme for a nominal amount of up to 10 billion euros, it said in a separate statement on Thursday, aiming to issue one or more bonds intended for institutional investors within one year from now. ($1 = 0.9264 euros) Sign up here. https://www.reuters.com/business/energy/gas-distributor-italgas-posts-third-quarter-core-earnings-up-109-2024-10-24/

2024-10-24 12:32

Oct 24 (Reuters) - Electric and gas utility DTE Energy (DTE.N) , opens new tab beat Wall Street estimates for third-quarter profit on Thursday, as higher supply rates and warmer weather helped performance of its electricity unit. Shares of the company gained 1% in premarket trading. On an adjusted basis, the Michigan-based company reported operating profit of $2.22 per share for the three months ended September 30, compared with analysts' average estimate of $1.88 per share, according to data compiled by LSEG. WHY IT'S IMPORTANT U.S. electric companies have been requesting higher customer electricity rates from regulators to fund infrastructure upgrades amid extreme weather events, growing demand from industry electrification and tech sector data center expansion. Last year, the U.S. saw record rate increases, according to data from Energy Information Administration. The S&P index tracking utilities (.SPLRCU) , opens new tab jumped 18.4% in the third quarter, compared with a 5.5% rise in the S&P 500 (.SPX) , opens new tab. CONTEXT The Detroit, Michigan-based company provides electricity to 2.3 million customers in Southeast Michigan and natural gas to 1.3 million customers in Michigan. The company has invested over $3 billion so far this year to upgrade its electric and gas grids and plans to invest over $4 billion in 2024. BY THE NUMBERS Total net income attributable to DTE rose to $460 million in the quarter from $298 million last year. The company's electric segment, the largest unit by net income, reported adjusted earnings of $437 million in the quarter compared with $268 million a year ago. However, the gas segment posted an adjusted loss of $13 million in the third-quarter compared to a loss of $5 million a year ago, partly due to higher operating costs. The firm reaffirmed its 2024 adjusted profit forecast of $6.54 to $6.83 per share, while analysts expect a profit of $6.70 per share. Sign up here. https://www.reuters.com/business/energy/dte-energy-beats-quarterly-profit-estimates-boosted-by-higher-rates-2024-10-24/

2024-10-24 12:15

Weaker Germany, domestic demand factors for potential easing Services prices may be new inflation hotbed Inflation likely to breach 3% in December before drop in 2025 PRAGUE, Oct 24 (Reuters) - The Czech National Bank can continue easing monetary policy amid weaker growth abroad and a slow domestic demand recovery, but must be mindful of inflation hotspots, especially in the services sector, rate-setter Jan Prochazka said. The central bank has cut its main rate (CZCBIR=ECI) , opens new tab by 275 basis points since December, taking it to 4.25%. It opted for 25 basis-point reductions at its past two meetings, smaller than previous ones. Markets expect another cut at its next meeting on Nov. 7, when the bank will also assess an updated economic outlook. Weaker growth in Germany and lower euro zone market rates were likely to push some forecasts lower, Prochazka said. "For 2025, we have a GDP forecast of 2.8% growth, which is above potential, and I simply don't think growth will be that high," he said in an interview on Wednesday. He said a "bad mood" remained among consumers, which was seen in the retail sector, but that "people should not be concerned that a recession is coming". With consumer demand still sluggish after the inflation surge of recent years, the Czech economy grew 0.6% year-on-year in the second quarter and the central bank forecasts a 1.2% rise in 2024 as a whole. On the inflationary side, service sector prices continue to rise at around a 5% pace, keeping overall inflation above the 2% target, albeit within the bank's 1 percentage point tolerance band. "The economy is weak, and it will get worse on the external front - that is a reason why we could potentially ease (policy) even more," Prochazka said. "On the other hand... (rising) services prices are not just the tail end of an inflation wave, they can also be new hotbeds. Therefore, we need to be careful." Prochazka said decisions would be made on a meeting-by-meeting basis, assessing foreign developments and the impact on the crown currency, which is down 2% against the euro from the start of the year. "We intend to continue easing, but I am not going to release the brake all the way," Prochazka said, adding inflation would likely break 3% in December before easing back within the bank's tolerance range. TAKING STOCK Rate-setters will also discuss the impact of their decision to double the size of banks' minimum reserves deposited interest-free at the central bank to 4%. Prochazka said the decision was at this point a one-off, and the bank did not expect it to affect its interest rate path. He said he also expected modifications in the way the bank makes policy from three external reviews underway. Recommendations could include improving how forecasts and policy decisions are made and communicated, which should lead to "more consistency in the economic story and less sensitivity to new pieces of information", Prochazka said. The reviews came after the board opted in late 2022 and early 2023 not to follow the bank's model for some previous decisions. "I expect a change," Prochazka said. "It will be evolutionary." Sign up here. https://www.reuters.com/markets/europe/czech-central-bank-can-keep-easing-with-eye-inflation-spots-rate-setter-says-2024-10-24/