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N Korea’s Kim calls for improving lives amid ‘grim’ economy – Al Jazeera English

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Appeal comes with Kim facing arguably his biggest test since coming to power nearly 10 years ago.

North Korean leader Kim Jong Un has urged officials to focus on improving the lives of the country’s citizens amid a “grim” economic situation, according to state media.

Kim made the appeal as he marked the 76th anniversary of the founding of the ruling Workers’ Party of Korea on Sunday, KCNA news agency said.

Kim discussed the “unprecedented difficulties” facing the North and called for the party’s single-minded unity in developing the state economy in face of the “grim situation,” it reported.

Pyongyang marked the anniversary with art performances, galas and a fireworks show but there was no sign of any large military parade, which are sometimes held on such occasions.

Analysts say Kim is facing perhaps the toughest moment of his nearly 10 years in power. He failed to win badly needed sanctions relief in his summits with then-President Donald Trump in 2018 and 2019, then closed North Korea’s borders amid the coronavirus pandemic unleashing a further economic shock after decades of mismanagement and sanctions over its banned nuclear and weapons programmes.

Heavy rains and floods have also taken a toll on the country with the United Nations warning last week the most vulnerable are at risk of starvation.

Officials should not wish for privilege and preferential treatment, and “should always consider whether their work infringes upon the interests of the people or causes trouble to the people,” Kim said.

Kim has so far rejected US government offers to restart dialogue without conditions, saying that Washington must first abandon its “hostile policy,” a term the North mainly uses to refer to sanctions and US-South Korea military exercises.

The US State Department last week accused Kim’s government of being primarily responsible for the humanitarian situation in the country.

“The regime continues to exploit its own citizens, to violate their human rights, to divert resources from the country’s people to build up its unlawful (weapons of mass destruction) and ballistic missiles programme,” spokesperson Ned Price told a briefing in Washington, DC.

The World Health Organization said last week some of its COVID-19 medical supplies had arrived at a North Korean port, an indication the North was easing one of the world’s strictest pandemic border closures to receive outside help.

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Economy

Swiss National Bank Warns of Risks With Green Economy Push – Bloomberg

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Actively pushing for a green transformation of the economy could undermine the effectiveness of the Swiss National Bank’s monetary policy, Governing Board Member Andrea Maechler said. 

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Business

UBS logs surprise 9% rise in Q3 net profit

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UBS posted a 9% rise in third-quarter net profit on Tuesday, as continued trading helped the world’s largest wealth manager to its best quarterly profit since 2015.

Its third-quarter net profit of $2.279 billion far outpaced a median estimate of $1.596 billion from a poll of 23 analysts compiled by Switzerland’s largest bank.

“Our business momentum, our focus on fueling growth, on disciplined execution and on delivering our full ecosystem to clients – all of this led to another strong quarter across all of our business divisions and regions,” Chief Executive Ralph Hamers said in a statement.

In each of the last four quarters, UBS saw double-digit percent gains in net profit as buoyant markets helped it generate higher earnings off of managing money for the rich.

From July through September, favourable market conditions, and higher lending and trading amongst its wealthy clientele, unexpectedly helped raise earnings over the bumper levels reported in the third quarter of last year.

 

(Reporting by Oliver Hirt and Brenna Hughes Neghaiwi; Editing by Michael Shields and Edwina Gibbs)

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Economy

America Inc and the shortage economy – The Economist

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IF YOU LOOK only at the scale of the profits cranked out by American businesses, they seem to be indestructible (see chart). Despite a pandemic and a savage slump in 2020, large listed American firms’ net income for the third quarter of this year is expected to reach over $400bn, at least a third higher than in the same quarter in 2019. Yet as earnings season gets into full swing this week, bosses and investors are watching for signs that three related worries are biting: supply-chain tangles, inflation, and hints that a long era of profitable oligopolies is giving way to something more dynamic and risky. Already big firms such as Snap, Honeywell and Intel have given the jitters to investors. Could there be more to come?

Only a quarter or so of firms in the S&P index have reported results so far. Those that have done so have pleased investors with better than expected figures. Superficially the picture is of “back to business as usual”. Bad-debt provisions taken by banks in the depths of the panic over the economy, which proved unnecessary, have been unwound. JPMorgan Chase got a $2bn benefit to its bottom line from this reversal in the third quarter. Goldman Sachs has shelled out $14bn in pay and bonuses so far this year, up by 34% year on year. American Express reported a leap in revenues as small firms and consumers spent on their cards more freely. United Airlines confirmed it was on track to hit its performance targets for 2022.

Yet look again and the three worries loom. Start with supply chains. The number of ships waiting off California’s big ports remains unusually high at about 80, according to Bloomberg. On 22nd October, Jerome Powell, the chair of the Federal Reserve, said that supply-chain problems may last “well into next year”. The knock-on effects are feeding through industry. Union Pacific, a railway firm, lowered its forecast for traffic volumes because semiconductor shortages (often in Asia) have hit car production, in turn reducing the number of vehicles and components transported by rail. Honeywell, an industrial firm, cut its full year sales target by 1-2% complaining of a shortage of parts. VF Corp, which makes shoes (including white ones that fans of Squid Game, a hit TV show, hanker after) complained of supply-chain problems in Asia. So far the problem is not disastrous but it is inflating costs and forcing firms to adapt.

This supply chain headache is one element of a second, broader worry, about inflation and its impact on profits. Commodity prices are a source of pressure, with crude oil reaching $86 a barrel this week. Wages are too: although there are still 5m fewer people employed across the economy than before the pandemic hit, average hourly pay rose by 4.6% year on year in September. The immediate effect tends to be felt by low-margin firms that employ a lot of people: Domino’s Pizza has complained of a “very challenging staffing environment” and falling sales.

Elsewhere a mild inflationary mindset is slowly infiltrating boardrooms. Procter & Gamble predicted that commodity and freight inflation would raise its operating costs this financial year by about 4% and that sales would rise by up to 4%, owing to a mixture of price rises, and volume and mix effects. Honeywell warned there would be a “continued inflationary environment” in 2022. All firms are weighing how much they can raise prices to compensate for higher costs. So are fund managers who are busy running screens for companies that they judge to exhibit the all-important quality of “pricing power”. The shifting psychology of bosses and investors towards expecting more inflation should concern Mr Powell at the Fed.

The final big issue is whether an economy with shortages that is running hot ultimately forces an end to the managerial consensus of the past decade, which has favoured keeping margins high and being stingy with investment in order to maximise short-run cashflow. Already there are signs that attitudes are shifting in response to shortages and pent-up demand: economy-wide investment, excluding residential investment, rose by 13% in the second quarter of 2021 compared with the preceding year. United Airlines has said it will increase its capacity on international routes by 10%. FreePort McMoRan, a huge miner of copper (used in electric vehicles among a wide array of industrial applications), has said that it is “prepared to make value enhancing investments in our business” in response to red-hot prices. Hertz has announced an order of 100,000 cars from Tesla. And on Wall Street a fund-raising bonanza for speculative start-ups continues, including last week the merger of a special-purpose acquisition company with the social-media ambitions of a certain Donald Trump.

Rising investment is exactly what economists want because it increases capacity today and boosts the economy’s long-run potential. Yet whether investors are prepared to take the plunge remains to be seen. Habituated by years of high margins, they tend to run shy of rising investment and competition. Snap’s share price dropped by over 20% on October 21st as signs that the war over privacy settings on the iPhone between Apple and social-media firms, and the intensifying competition in advertising between a wide array of tech firms, is hurting its results. And Intel, which earlier this year boldly announced plans for a huge rise in investment in order to return to the frontier of the semiconductor industry, alongside TSMC and Samsung, presented Wall Street with the bill in the form of much lower than expected short-term earnings: its shares dropped by 12%. If you run a company or invest in one this is the new calculation: demand is recovering and costs are rising. Can you raise prices? And should you expand capacity? By the end of this earnings season the answer may be clearer.

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