Day: September 17, 2018

With his popularity ratings in freefall, French President Emmanuel Macron is counting on a rebound in family purchasing power to keep voters from turning against his reforms.

Macron’s government has lined up several tax cuts taking effect in the coming months that should boost the closely tracked measure of disposable income in France.

It could hardly come at a better time for Macron, with many voters saying the former investment banker has spent his first year in office cutting taxes for the wealthy and big companies.

More purchasing power was the single biggest priority in voters’ eyes, well ahead of cutting unemployment or the tax burden, according to a Kantar Sofres poll released on Sunday.

Squeezed by tax hikes on petrol and tobacco as well as oil price-driven inflation, household spending has floundered this year whereas it is traditionally the single biggest source of growth, accounting for 52 percent of economic output.

But next month workers will see a cut in payroll tax they pay to fund jobless insurance and the health system, followed by a cut in a city tax for all but the wealthiest in November.

“We are gradually going to improve French workers’ purchasing power,” Finance Minister Bruno Le Maire told LCI television on Monday. “We are going to make work pay better. The French are going to see the fruit of these policies in the coming months.”

Consumer relief

With a solid parliamentary election behind him, Macron faced little resistance in his first year in office to a major overhaul of the labour code and the scrapping of the wealth tax.

But it earned him a reputation as a “president of the rich” that has been hard to shake off. A summer scandal over his bodyguard beating May Day protesters has further dented his image, and a popular environment minister resigned live on radio over frustration that Macron’s agenda was not green enough.

With his popularity ratings at all time lows, Macron needs to rebuild political capital before he launches what are set to be contentious reforms to unemployment insurance and the pension system next year, while also trying to cut public spending.

In addition to tax cuts this year, Macron’s government has pledged to scrap payroll tax next year on overtime work and profit participation schemes in small firms.

The central bank said in its latest economic outlook on Friday that the stars were aligned for a rebound in purchasing power starting at the end of this year and into 2019.

“We’re expecting about 200,000 [job creations] this year, that should translate into purchasing power for the French,  especially with inflation due to fall,” Bank of France governor Francois Villeroy de Galhau told Europe 1 radio.

The government is counting on the rebound to help the economy grow 1.7 percent next year. While the central bank is optimistic about the outlook for disposable income, it is only expecting GDP growth of 1.6 percent.

Meanwhile, despite the planned tax cuts, questions linger over whether households will actually feel any better off.

From January, taxes will be automatically deducted from people’s monthly pay slip, leaving those who are not already on a monthly plan – about 40 percent of taxpayers — with smaller net take-home pay.

Meanwhile, since the government’s measures to boost purchasing power mainly benefit workers, retirees are likely to be left out. Additionally, while the government has said it will raise the state pension next year it will do so by less than the rate of inflation so as to save money.
…

A top economic adviser to President Donald Trump said on Monday he expects U.S. budget deficits of about 4 to 5 percent of the country’s economic output for the next one to two years, adding that there would likely be an effort in 2019 to cut spending on entitlement programs.

“We have to be tougher on spending,” White House economic adviser Larry Kudlow said in remarks to the Economic Club of New York, adding that government spending was the reason for the wider budget deficits, not the Republican-led tax cuts activated this year.

Kudlow did not specify where future cuts would be made.

“We’re going to run deficits of about 4 to 5 percent of GDP for the next year or two, OK. I’d rather they were lower but it’s not a catastrophe,” Kudlow said. “Going down the road, of course we’d like to slim that down as much as possible and we’ll work at it.”

He stated that the biggest factor for revenue was economic growth rate. A quicker pace of growth will bring in more revenue, Kudlow said, and Trump’s economic policies were aimed at boosting the U.S. growth rate.

Kudlow also said he did not expect Congress would be able to make the Trump administration’s recent individual tax cuts permanent before the Nov. 6 midterm congressional elections.

“I don’t think it will get through the whole Congress” before the election, he said, but added that making the personal tax cuts permanent “is a good message” and disagreed with forecasts that they would further increase budget deficits.
…

More than half of all workplace tasks will be carried out by machines by 2025, organizers of the Davos economic forum said in a report released Monday that highlights the speed with which the labor market will change in coming years.

The World Economic Forum estimates that machines will be responsible for 52 percent of the division of labor as share of hours within seven years, up from just 29 percent today. By 2022, the report says, roughly 75 million jobs worldwide will be lost, but that could be more than offset by the creation of 133 million new jobs.

A major challenge, however, will be training and re-training employees for that new world of work.

“By 2025, the majority of workplace tasks in existence today will be performed by machines or algorithms. At the same time a greater number of new jobs will be created,” said Saadia Zahidi, a WEF board member. “Our research suggests that neither businesses nor governments have fully grasped the size of this key challenge of the Fourth Industrial Revolution.”

The “Future of Jobs 2018” report, the second of its kind, is based on a survey of executives representing 15 million employees in 20 economies. Its authors say the outlook for job creation has become more positive since the last report in 2016 because businesses have a better sense of the opportunities made possible by technology.

The WEF said challenges for employers include enabling remote work, building safety nets to protect workers, and providing reskilling for employees. However, the report found that only one in three respondents planned to reskill at-risk workers.

Despite net positive job growth, the WEF anticipates a “significant shift in the quality, location, format and permanency of new roles. Businesses are to expand use of contractors for task-specialized work, engage workers in more flexible arrangements, utilize remote staffing, and change up locations to get access to the right talent.

The report said nearly half of all companies expect their full-time workforces to shrink by 2022, while nearly two in five expect to extend their workforce generally, and over one-quarter expect automation to create new roles in their enterprises.

Germany’s powerful DGB trade union association warned against too rapid change in the world of work.

“People, whether they’re workers or consumers, will only accept and tolerate the consequences if technology serves them — and not they it,” Reiner Hoffmann told daily Welt in reaction to the WEF report.
…

Saudi Arabia’s sovereign wealth fund invested $1 billion Monday in an American electric car manufacturer just weeks after Tesla CEO Elon Musk earlier claimed the kingdom would help his own firm go private.

Tesla stock dropped Monday on reaction to the news, the same day that the Saudi fund announced it had taken its first loan, an $11 billion borrowing from global banks as it tries to expand its investments.

The Saudi Public Investment Fund said it would invest the $1 billion in Newark, California-based Lucid Motors.

The investment “will provide the necessary funding to commercially launch Lucid’s first electric vehicle, the Lucid Air, in 2020,” the sovereign wealth fund said in a statement. “The company plans to use the funding to complete engineering development and testing of the Lucid Air, construct its factory in Arizona, enter production for the Lucid Air to begin the global rollout of the company’s retail strategy starting in North America.”

Lucid issued a statement quoting Peter Rawlinson, its chief technology officer, welcoming the investment.

“At Lucid, we will demonstrate the full potential of the electric-connected vehicle in order to push the industry forward,” he said.

The decision comes after Musk on Aug. 7 tweeted that he had “funding secured” to take Tesla private. Investors pushed Tesla’s shares up 11 percent in a day, boosting its valuation by $6 billion.

There are multiple reports that the U.S. Securities and Exchange Commission is investigating the disclosure, including asking board members what they knew about Musk’s plans. Experts say regulators likely are investigating if Musk was truthful in the tweet about having the financing set for the deal. Musk later said the Saudi Public Investment Fund would be investing in the firm, something Saudi officials never comment on.

Meanwhile Monday, the sovereign wealth fund known by the acronym PIF said it had taken its first loan, an $11 billion borrowing. It did not say how it would use the money, only describing it as going toward “general corporate purposes.”

The Las Vegas-based Sovereign Wealth Fund Institute estimates the Saudi fund has holdings of $250 billion. Those include a $3.5 billion stake in the ride-sharing app Uber.

Saudi Arabia’s 33-year-old Crown Prince Mohammed bin Salman has talked about using the PIF to help diversify the economy of the kingdom, which relies almost entirely on money made from its oil sales.
…