Month: September 2018

If you already subscribe to digital services like Netflix to binge on TV shows and Spotify to groove to an endless mix of music, the auto industry might have a deal for you: Subscribe to your next car as well.

Make that cars, plural. Some of these packages — which charge a monthly fee for the bundled use of a car, insurance and maintenance — let you trade in your vehicle on a regular basis, sometimes almost as readily as you can skip to a new tune on Spotify.

These still-developing car subscription programs are gaining traction among motorists who don’t want to be locked into the hassles of car ownership or even multiyear leasing commitments. All they want is a vehicle available whenever they want or need it.

“It feels like Christmas morning every time they bring me a new car,” said Steve Barnes, a video producer who subscribes to a high-end vehicle subscription program offered through Clutch Technologies, a startup operating in the Atlanta area.

Although they’re still in their infancy, car subscriptions are hooking more motorists as both long-established automakers and startups roll out plans.

How it works

Ford, a 115-year-old automaker with a network of more than 3,000 dealers, expanded into car subscriptions about 16 months ago through Canvas, a subsidiary in San Francisco.

Canvas offers a variety of used, once-leased Ford and Lincoln models as subscriptions that cost anywhere from $379 per month (for a Ford Fiesta subcompact) to $1,125 per month (for a Lincoln Navigator luxury SUV).

Those plans, however, impose driving limits of 500 miles a month. Subscribers can pay extra for higher limits — $35 per month for an additional 350 miles, for instance, or $100 per month for unlimited travel. Unused miles in any given month can be rolled over to the next one. If Canvas customers exceed the monthly mileage limits under their plan, they are charged an additional 15 cents per mile for a Ford car and slightly more for a Lincoln vehicle.

So far, Canvas has limited subscriptions to the San Francisco and Los Angeles area. In its first 16 months in California, thousands of subscribers have signed up for its subscription service while collectively driving about 8.5 million miles, according to the company.

“People are generally changing the way they are working, they are changing the way they are living and they are generally changing the way they are consuming things,” Canvas CEO Ned Ryan said. “Subscriptions are going to be a very large and growing share of how people consume automobiles.”

About a third of Canvas customers decided to subscribe to cars after moving or some other major event that left them reluctant to make a bigger commitment to leasing or owning, Ryan said. Others just like the simplicity and convenience offered by a car subscription, he said.

Temporary arrangement

Liz Dreskin of San Rafael, California, signed up for Canvas earlier this year to help her college-age kids get around at home during their summer break. Both are under the company’s 21-year-old age limit, so Dreskin got a vehicle for herself while allowing her children to drive the BMW she already owned.

After starting off with a sports utility vehicle from Canvas, she decided to pay $99 to switch to a 2015 Mustang. Although she plans to suspend her $500 monthly subscription at the end of September, she intends to start it up again when her kids return for the holidays. She’s also recommending the service to a friend whose current car is breaking down.

“I could totally see myself doing this in the future so I don’t have to deal with car insurance and car payments,” said Dreskin, 52.

Luxury automakers such as BMW, Mercedes-Benz, Porsche and General Motors’ Cadillac brand also are offering subscription programs, but those are primarily catering to affluent drivers who want to try out a variety of expensive vehicles.

Barnes, the video producer, signed up with Clutch in 2016 for access to luxury vehicles. The divorced father will get a sports utility vehicle when he has custody of his daughters or a Tesla sports car or something else fun to drive when he’s headed out on the town with his current wife.

He pays about $1,400 per month for his Clutch subscription, substantially more than the roughly $900 per month he used to pay for a lease on a Tahoe and his insurance policy. But he says he can’t imagine ever owning or leasing a car again now that he’s driven dozens of different vehicles that he estimates would have cost him more than $1 million to own.

“I am definitely a ‘tech head’ who had always fantasized about being able to get whatever car you want,” Barnes said. 
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U.S. manufacturing activity accelerated to more than a 14-year high in August, boosted by a surge in new orders, but increasing bottlenecks in the supply chain because of a robust economy and import tariffs could restrain further growth.

The Institute for Supply Management (ISM) survey was at odds with another survey published on Tuesday that suggested a peak in manufacturing and pointed to a slowdown in the months ahead against the backdrop of a strong dollar. Recent surveys have also signaled a cooling in regional factory activity.

“The surge in the ISM manufacturing index is difficult to square with other evidence, which indicate that growth in the factory sector has started to slow,” said Michael Pearce, a senior U.S. economist at Capital Economics in New York.

“With export orders now waning as a result of the dollar’s rapid appreciation over the past few months, we still think that growth in the factory sector will slow in the coming quarters.”

The ISM said its index of national factory activity jumped to 61.3 last month, the best reading since May 2004, from 58.1 in July. A reading above 50 indicates growth in manufacturing, which accounts for about 12 percent of the U.S. economy.

The ISM described demand as remaining “robust,” but cautioned that “the nation’s employment resources and supply chains continue to struggle.”

According to the ISM, survey respondents were “again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will

impact company revenue and current manufacturing locations.”

President Donald Trump’s “America First” trade policy has led to an escalating trade war with China and tit-for-tat import tariffs with other trading partners, including the European Union, Canada and Mexico.

Trump has defended the duties on steel and aluminum imports and a range of Chinese goods as necessary to protect American industries from what he says is unfair foreign competition.

Economists have warned that the tariffs could disrupt supply chains, undercut business investment and slow the economy’s momentum. The economy grew at a 4.2 percent annualized rate in the second quarter, almost double the 2.2 percent in the January-March period.

The dollar rose against a basket of currencies, while prices of U.S. Treasuries fell. Stocks on Wall Street were trading lower.

​Impact of tariffs

The ISM’s new-orders sub-index increased to a reading of 65.1 last month from 60.2 in July. A measure of export orders, however, fell in August, most likely reflecting the dollar’s more than 5.0 percent rise this year against the currencies of the United States’ main trade partners.

The survey’s supplier deliveries index jumped to a reading of 64.5 last month, highlighting the rising bottlenecks in the supply chain, from 62.1 in July. It hit a 14-year high of 68.2 in June. Economists said the strong economy, marked by a labor market that is near or at full employment, as well as the import duties were behind the delays in deliveries.

“Bottlenecks in production will support inflation, but the constraints have yet to become overly binding,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Factories reported hiring more workers last month, with production increasing sharply. That bodes well for August’s employment report, which is scheduled to be released Friday.

Manufacturing payrolls have increased solidly this year.

In the computer and electronic products industry, manufacturers said most suppliers were “waiting to re-evaluate potential price increases until September.”

Machinery manufacturers said while raw material costs appeared to be “leveling off,” and most suppliers “are willing and able to suppress cost increases,” the impact of tariffs remained a concern.

In a separate survey Tuesday, data firm Markit said its U.S. Manufacturing Purchasing Managers’ Index fell to a nine-month low of 54.7 in August from a reading of 55.3 in July.

Manufacturers reported a decline in new orders, with exports the main source of weakness. 

Markit said some of the slowdown in factory activity reflected widespread shortages of inputs, hauliers and labor, leading to a further buildup of backlogs of work.

It said tariffs were exacerbating supply shortages and also driving prices higher. Almost two-thirds of companies surveyed reporting higher input prices explicitly blamed tariffs for the increased costs, Markit said.

“When we look across the recent survey data, it appears that activity has cooled somewhat lately, but remains at a solid level,” said Daniel Silver, an economist at J.P. Morgan in New York.

A third report from the Commerce Department showed construction spending barely rose in July as increases in homebuilding and investment in public projects were overshadowed by a sharp drop in private nonresidential outlays.
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Qatar amended its residency laws on Tuesday to allow foreign workers to leave the country without exit permits from their employers, a provision which labour rights groups have long said should be abolished.

Doha is keen to show it is tackling allegations of worker exploitation as it prepares to host the 2022 soccer World Cup, which it has presented as a showcase of its progress and development.

Most migrant workers would be able to leave the country without having to obtain permits from their employers under the law, said the International Labour Organization in a statement via its Doha office.

The ILO hailed the move as a “significant step” for gas-rich Qatar, which committed last year to introducing sweeping labour reforms, including changes to the exit visa system.

“The ILO welcomes the enactment of Law No. 13, which will have a direct and positive impact on the lives of migrant workers in Qatar,” said Houtan Homayounpour, the head of the ILO office in Doha, which was set up in April.

The official Qatar News Agency confirmed the adoption of Law No. 13, saying it amended “certain provisions” of previous laws regulating the entry, exit and residency of expatriates. It did not specify which provisions or offer details on the changes.

Labour and rights groups have attacked Qatar for its “kafala” sponsorship system, which is common in Gulf states where large portions of the population is foreign.

Qatar’s system still requires the country’s 1.6 million mainly Asian foreign workers to obtain their employers’ consent before changing jobs, which the groups say leaves workers open to abuse.

The government’s other pledged reforms include introduction of a minimum wage and a grievance procedure for workers.
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Yemen’s tanking economy threatens to kill more people than bombs and guns, an aid agency warned on Tuesday as the currency hit its lowest level ever, compounding the world’s biggest hunger crisis.

The Norwegian Refugee Council (NRC) said soaring food prices were pushing many people closer to the brink in a country where millions are already close to famine.

“This economic collapse could kill even more Yemenis than the violence underlying it,” NRC’s Yemen country director Mohamed Abdi said, adding that food prices in some places had doubled in recent days.

“The situation is terrible. If something is not done it is only going to get worse,” he told Reuters by phone.

The Yemeni rial was exchanging at 630 to the dollar in the port city of Aden on Monday, according to the NRC, up from less than 250 at the beginning of the conflict in 2015.

Protests over the economy, which erupted in Aden on Sunday, were continuing Tuesday, Abdi said.

Three-quarters of Yemen’s population — 22 million people — are in need of humanitarian assistance.

More than 28,000 people have been killed or wounded during the war and 3 million have been uprooted, according to United Nations officials. Thousands more have died from malnutrition, disease and poor health.

The war pits the government of President Abd-Rabbu Mansour Hadi, based in the south and backed by Saudi Arabia, against the Iran-aligned Houthi movement that controls the north including the capital Sanaa.

“Even buying an egg is very expensive now,” the NRC quoted one woman in the port city of Hodeida as saying.

“Before we would spare what we could to help beggars in the streets, but now we have nothing left to offer.”

Abdi said it was “heartbreaking” to see civil servants who have not been paid for two years reduced to begging in order to feed their families.

The World Food Program (WFP) says 8.4 million people are “precariously close to famine.”

WFP’s Yemen representative Stephen Anderson said there had been a dramatic increase in severe hunger in the last year as food prices rose and jobs dried up.

“Yemen is in free fall. We are extremely worried about the worsening economic conditions,” he told Reuters.

He said the WFP and aid agencies were targeting the people closest to famine, but there were another 10 million people who were going hungry and not getting help.

“Our concern is that if prices continue to rise, it will tip more people into severe hunger,” Anderson said.
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Turkey saw the inflation rate rise to nearly 18 percent in August, a 15-year high fueled by a collapse in the Turkish lira, which fell more than 20 percent over the past few weeks.

The rising inflation and a falling currency are stoking fears Turkey is on the verge of financial and economic crisis.

“It’s the beginning of the slippery slope. It’s going to get worse unless there is a miraculous improvement in the exchange rate,” political analyst Atilla Yesilada of Global Source Partners said. “We’ve reached the stage where there is nothing to anchor price expectations. People simply can’t gauge what prices or wages or costs will be next month.”

“It’s a very dismal set of numbers. The likelihood is headline inflation will reach 20 percent in (the) coming months,” economist Inan Demir of Nomura Securities said. “This is clearly a set of numbers that warrant a monetary response from inflation targeting the central bank.”

The Turkish Central Bank, in a statement on its website, vowed to act, promising to use all tools at its disposal and reshape its monetary policy stance at a Sept. 13 meeting where they will discuss interest rates.

The lira recouped much of its initial heavy losses following the release of the latest inflation figures.

“This (the central bank statement) is seen as a signal for a rate hike in that meeting,” Demir said. “Even though the wording of the statement is very uncertain, the expectation of tightening are curbing lira weakness after bad inflation numbers.”

International criticism

International investors sharply criticized the central bank for failing to aggressively raise interest rates to rein in inflation and defend the currency. Turkish President Recep Tayyip Erdogan’s influence is widely seen as responsible for the failure of the bank to act. Erdogan has repeatedly voiced opposition to raising interest rates.

“There will be a massive sell-off to the point of panic if they don’t raise rates,” Yesilada said. “This time, they have no option, even if they meant something else (in their statement), as everyone interpreted it as rates will be hiked. But there are two questions: by how much, and will it help at all?” he added.

Investors and analyst claim the central bank needs to raise rates by at least 4 percent, while some suggest a 10 percent raise is needed to avoid further drops in the currency, which analysts warned would open the lira to further pressure.

“In such a scenario, Turkish residents would want to hold more FX (foreign exchange) rather than Turkish lira … to protect their savings. That is a big risk to the currency,” Demir said.

Already, 40 percent of individual accounts in banks are in foreign currency.

However, an aggressive increase in rates may not be enough to rein in inflation or defend the lira, analysts warned.

“The concerns are on multiple fronts,” Demir said. 

“What Turkish policy needs to do is straightforward,” he added. “They need to hike rates, tighten fiscal policy (cut government spending) and ease tensions with the United States, removing the threat of further sanctions by releasing (American) pastor (Andrew) Brunson.

“There is a way out of this, but it’s not obvious that the policymakers will take that way,” Demir said.

US trade tariffs 

Last month’s imposition of trade tariffs by U.S. President Donald Trump over the ongoing detention of Brunson was the trigger for the latest rout in the Turkish currency. Brunson is on trial on terrorism charges, a case dismissed by Washington as politically motivated.

Ignoring U.S. pressure, Turkey’s top appeals court judge, Rustu Cirit, on Monday supported Erdogan’s refusal to release Brunson, saying the pastor’s release is a matter only for the courts.

“To use brute force to reverse this fact, which is a basic principle of contemporary democracies and law of nations, would mean weakening human rights, rather than strengthening them,” Cirit said.

Trump is warning of further sanctions against Turkey if Brunson is not released. American regulatory authorities are considering reportedly a multibillion-dollar fine against Turkish state-controlled Halkbank for violations of Iranian sanctions.

Analysts warn the financial implications of an escalation of U.S.-Turkish tensions will continue to undermine confidence in the lira. However, Erdogan continues to take a robust stance against Washington, insisting the Turkish economy remains strong.

“The list of concerns is long, definitely, but the chief concern I have right now is the policymakers. They need to accept first that there is a significant problem that needs to be addressed,” Demir said. “But we heard this morning from finance minister (Berat) Albayrak that short-term fluctuations in inflation are normal. ”

Turkey already seems set to face a severe recession. Similar depreciations of the currency in past decades was accompanied by a double-digit contraction of the economy. 

Analysts warn the stress on the economy will only grow.

“Each day, Ankara lingers or prevaricates the likelihood of a disaster event increases. Right now, the threat is very low, it’s manageable. But as winter approaches, the likelihood increases exponentially,” Yesilada said.
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Yemen’s government says it is giving civil servants and pensioners pay raises, after protests against the country’s woeful economy nearly paralyzed a major port city Sunday.

Officials have not said when the raises would take effect or how much they will be.

Demonstrations against the economy in the port of Aden continued Monday. Many shops were closed, and some people burned tires in the streets.

Some of the marchers demanded to be paid in dollars, accusing senior officials of taking their salaries in the U.S.-based currency while paying the rank-and-file in the increasingly weak Yemeni rial.

The rial has lost more than half its value against the dollar since Iranian-backed Houthi rebels seized the capital of Sanaa in 2014, sending the Western-recognized government into exile in Saudi Arabia.

It has since returned to set up shop in Aden.

Airstrikes

Meanwhile, the Houthis are demanding a war crimes investigation against the Saudi-led coalition after an airstrike last month that killed 40 children.

In an appeal Monday to the International Criminal Court, the Houthis asked the court to look into its “humanitarian conscience.”

A coalition missile struck a market in a Yemeni town near the Saudi border last month, killing 51 people. Among the dead were 40 children on a school bus coming back from a summer camp outing.

The coalition called the airstrike a “mistake.” It promised to hold those behind the attack legally responsible and to compensate the victims.

But the Houithis accuse the Saudis of being both the “judge and the jury” and “making light” of the civilian deaths.

U.N. human rights officials have said they believe both sides in Yemen may be responsible for war crimes.

The Saudi-led airstrikes have compounded the misery in Yemen, which is not only one of the world’s poorest nations, but is also on the edge of famine.

The U.N. has said about 80 percent of Yemeni civilians lack enough food and medical care.

The coalition airstrikes have obliterated entire neighborhoods, including hospitals and schools.
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