Saturday, February 27, 2016

US growth revised upwards; Tesco considering 39,000 job cuts; The more connected, the more you prosper

1 US growth revised upwards (BBC) The US economy grew at a faster pace than previously thought in the fourth quarter of 2015, according to the latest official figures. The US economy grew at an annualised pace of 1% in the quarter, compared with an initial estimate of 0.7%.

Most economists had taken a more pessimistic view, expecting the figure would be revised downwards. But businesses bought more stock than previously estimated, which meant inventory levels were $13bn higher. The downside is that next month's growth figures may be lower than expected if businesses do get round to cutting back on inventory spending.

Chris Williamson, chief economist at research firm Markit, said: "Unfortunately, the cause of the upward revision bodes ill for the first quarter. The GDP number was revised higher in part due to a bigger than previously thought contribution from inventories, something which often happens due to weaker than expected demand, meaning inventories could act as a drag in the first quarter as excess stocks levels are wound down again."

Cheap oil and lower heating bills from a mild winter has helped consumer confidence. But some economists fear that the slowdown in consumer spending could get worse. The chair of the US central bank, the Federal Reserve, Janet Yellen has indicated that rates could rise gradually through the year if the economy grows strongly enough.

However, many economists believe US growth will be held back by slowing economies round the world from China to Brazil, pushing down the prices of raw materials and leading to deflation. A Reuters survey this month estimated that the top 30 global oil companies had cut their budgets by an average of 40%.

2 Tesco considering 39,000 staff cut (Graham Ruddick in The Guardian) Tesco is considering cutting store staff by 39,000 over the next three years as Britain’s biggest supermarket group attempts to reverse a slump in profits.

The potential job losses, revealed in a leaked document, are the equivalent of Tesco shedding one in six employees, either by cutting jobs or reducing hours. Tesco confirmed the validity of the document but said it had modelled various scenarios and had no plans to announce further job losses.

The group, which employs more than 300,000 people in the UK, cut thousands of jobs last year as its new boss, Dave Lewis, tried to turn around the company’s financial performance. The retailer reported a £6.4bn pre-tax loss last year, one of the biggest in British corporate history.

Tesco’s large out-of-town supermarkets have suffered as British households have changed shopping habits, moving away from buying food in one weekly shop and turning increasingly to convenience stores, online and the discounters Aldi and Lidl. Tesco is also being investigated by the Serious Fraud Office after a £326m black hole was discovered in its accounts.

Roughly 45,000 people leave Tesco every year through natural wastage, meaning the cuts could be achieved without redundancies if the company chooses to not replace departing employees. Britain’s big four supermarkets have already cut thousands of jobs in the last year as they adapt to falling sales in their supermarkets. Last year Tesco, Sainsbury’s and Morrisons closed dozens of shops.

In contrast, Aldi and Lidl, the German discounters, are hiring thousands of workers. Earlier this month Aldi announced it would create 5,000 jobs in the UK this year for the opening of 80 new shops.

3 The more connected, the more you prosper (Khaleej Times) It's a lesson everyone from a Mafia member to an Ivy-League applicant knows only too well: It pays to be connected.

And it's something that countries striving to improve the lot of their citizens should pay heed to as well. Global consultants McKinsey found that the more tied-in a country is to the rest of the world, the better its economy fares. Being connected doesn't stop at trade and finances. It's also about people - primarily the number of immigrants a nation has - and the amount of data streaming across a country's borders.

Putting it all together, the McKinsey Global Institute ranked 139 countries by how linked they are to the rest of the world. At the top is the tiny island state of Singapore, which has successfully made itself into a regional centre in Asia, and the Netherlands, one of Europe's main digital hubs.

The US comes in third, followed by Germany. China ranks seventh. At the bottom is another island nation, Seychelles, and Sierra Leone. Japan, the world's third-largest economy with a host of global brands, comes in surprisingly low, at No. 24, mainly due to its limits on immigration.

The report reckons that the world economy as a whole benefited to the tune of about $7.8 trillion in 2014 from the flow of goods, services, finance and data across borders. "Countries that are open to global flows increase their GDP," said Susan Lund, a partner at the institute who is located in Washington.

World trade growth has slowed markedly. And global capital flows have collapsed, after peaking at close to $12 trillion in 2007 before the onset of the financial crisis. Yet the baton has been taken up by an explosion in the transmission of data around the world. Half of Facebook's users had at least one international friend in 2015, up from just 16 per cent in 2012.

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