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Mexico annual inflation rate higher than expected in June at 3.33%

MEXICO CITY, July 9 (Reuters) – Mexican consumer price inflation accelerated more than expected in June, but stayed within the central bank’s target rate, official data showed on Tuesday.

National statistics agency INEGI said the annual inflation rate picked up to 3.33% from May’s 2.84%. It compares to a rate of 3.95% from the same month a year earlier.

A Reuters poll of analysts had forecast a reading of 3.20%.

The largest price increases were in the energy and agricultural sectors, INEGI said.

Compared with the previous month, consumer prices in June rose 0.55%, according to non-seasonally adjusted figures.

The core index, which strips out some volatile food and energy prices, rose 0.37% during the month.

The Bank of Mexico cut its benchmark interest rate to 5.00% on June 25, the lowest level in nearly four years, citing worries about growth and an uncertain outlook as the coronavirus pandemic ravages Latin America’s second-largest economy. (Reporting by Stefanie Eschenbacher and Abraham Gonzalez Editing by Nick Zieminski)

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Government gives ‘monumental boost’ to housing market with Stamp Duty holiday

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Andrew Southern, the chairman of property developer Southern Grove, said: “This intervention is bold enough to put a rocket under sales volumes as the UK enters the recovery phase. This is the most progressive alteration to stamp duty since it became the Treasury’s cash cow.” Money raised by stamp duty land tax has risen 1,298 percent in just over two decades – increasing from £830million in 1997-1998 to £11.6billion today.

The top rate climbed from one percent to 12 percent in just 15 years between 1997 and 2012.

Mr Southern added: “It’s a counterproductive levy that started as an experimental tax grab, which successive chancellors then got hooked on. For all the fiddling that has gone on, including switching from a “slab” to a “slice” tax in 2016 and first-time buyer relief following in late 2017, Rishi Sunak’s move will have a much bigger impact on the market.”

Marc von Grundherr, a director of estate agent Benham and Reeves, said: “Eighty four percent of transactions made in the last six months would have seen the amount owed in stamp duty eradicated as a result of today’s announcement.

“There’s no denying that this should bring about a monumental boost for homebuyers.”

Prior to yesterday’s announcement most homebuyers in England and Northern Ireland had to pay stamp duty on properties priced over £125,000.

There is now no tax due on homes valued up to £500,000.

The next portion of the property’s price – up to £925,000 – will be taxed at five percent and the £575,000 after that will be taxed at 10 percent.

Homes costing more than £1.5million attract a 12 percent rate.

Based on current house prices, 96 percent of areas across England and Northern Ireland will now see the average homebuyer pay no stamp duty at all.

Different rules apply in Scotland and Wales.

This equates to a saving of £2,465 for the average buyer in England and £312 in Northern Ireland.

Londoners are set to save the most regionally, with previous stamp duty tax owed on a typical London home (£485,794) coming in at £14,290.

The North East is home to the smallest saving at £39.

Speaking in the Commons as he gave details of his mini-Budget, Mr Sunak said: “Property transactions fell by 50 percent in May and house prices have fallen for the first time in eight years. Right now, there is no stamp duty on transactions below £125,000. Today, I am increasing the threshold to £500,000.

“This will be a temporary cut running until March 31, 2021 – and, as is always the case, these changes to stamp duty will take effect immediately.”

Mr Sunak acted after leaked reports revealed he was considering a cut in his main Budget this autumn. Property experts warned the delay could freeze the housing market, with buyers putting off purchases until the autumn to avoid a tax bill of thousands of pounds.

Paula Higgins, the chief executive of the HomeOwners Alliance, said: “Anything that helps homeowners feel more secure about making a house move after coronavirus has got to be welcome. We’ve been campaigning for years to scrap this tax altogether on residential properties.

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Politics

Rishi Sunak takes UK out for dinner! Chancellor to pick up tab for meals out next month

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Mr Sunak urged the public to “eat out to help out” businesses struggling to get back on their feet after the shutdown. The unprecedented measure comes on top of a £4billion VAT cut on food, accommodation and attractions to protect 2.4 million jobs. Business leaders said the package will kickstart the hardest hits parts of the economy and restaurant chains saw a hike in share prices.

Senior Tories said paying the public to go to pubs was a “radical” way to save the hospitality sector.

Mr Sunak said that his summer meal deal discount has never been tried in the UK before but the government has had to find innovative ways to deal with impact of coronavirus on the economy.

“We need to be creative,“ he said. “So, to get customers back into restaurants, cafes and pubs and protect the 1.8 million people who work in them, I can announce for the month of August, we will give everyone in the country an ‘eat out to help out’ discount.”

The discount can be used as many times as customers want on any eat-in meal but alcoholic drinks will not be covered.

Businesses will need to register online from next Monday and will have the money paid into their accounts within five working days of making a claim.

Around 129,000 businesses are expected to benefit and it is hoped it will help protect 1.8 million jobs, many of which are held by young people struggling to make ends meet.

An average family spends £19.40 a week on eating in cafes and restaurants, according to Treasury research.

Shares in Wagamama-owner The Restaurant Group rose by 2.6 percent shortly after the Chancellor’s statement.

Chief executive officer Andy Hornby said: “We warmly welcome many of the initiatives announced today including cutting VAT, support for team members returning from furlough and the August discount scheme. This will be a genuine help as we welcome back our customers in what  will continue to be a very challenging market”.

Former business secretary Andrea Leadsom, below, said: “Never done before – government paying us all to go back to restaurants, cafes and pubs via a discount for food. Interesting and radical way to get the hospitality sector going and save jobs.”

Mr Sunak’s mini-budget was focused on saving jobs after months of hardship for businesses and workers.

To help revive the ailing hospitality and tourism sectors, he announced VAT will be cut from 20 percent to five percent for the next six months.

It will apply to eat-in and hot takeaway food from restaurants, cafes and pubs.

The move will benefit accommodation in hotels, B&Bs, campsites and caravan sites, along with attractions such as cinemas, theme parks and zoos.

Businesses can pocket the cash but the Treasury hopes they will pass on the benefit to customers.

It estimates the change will save households around £160 per year on average.

The VAT cut will start on July 15 and run until January 12.

Mr Sunak said: “This is a £4billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere – all helping to protect 2.4 million jobs.”

Suren Thiru, the head of economics at the British Chambers of Commerce, said: “The Chancellor has listened to our call for a temporary cut in VAT which will kickstart consumer spending in some parts of the economy. This is a welcome step and will help to stimulate a more rapid pickup in activity in those sectors and supply chains hardest hit as the economy gradually reopens.”

Kate Nicholls, the chief executive of UK Hospitality which represents the pub and restaurant trade, said the VAT cut and Eat Out scheme would have a significant impact on the sector as it tries to bounce back.

She said: “This significant VAT cut, heightened ability to retain staff and incentives for consumers to eat out together amount to a huge bonus.

“We hope that the UK public rightly sees it as a sign that we are ready to welcome them back safely. The future of many businesses and jobs depends on it.”

David Weston, the chairman of the Bed & Breakfast Association, said: “We are delighted by the VAT cut on behalf of our larger members, guesthouses and small hotels who are VAT registered.

“It will help stimulate demand and, once our borders open to incoming tourism, will also help UK tourism overall as Britain’s VAT rate has been amongst the highest of our international competitors.”

Joss Croft, the chief executive of tourism trade association UKinbound, said the measures will “deliver immediate positive impacts”.

But he warned that many firms involved in inbound tourism are “on the brink” and will not benefit from those measures.

“Longer-term support will still be required for these businesses,” he added.

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UPDATE 1-German exports rebound less than expected in May

(Adds details, economist comments, context)

BERLIN, July 9 (Reuters) – German exports rebounded less than expected in May as demand remained subdued despite the lifting of lockdown measures introduced to contain the spread of the coronavirus, data published on Thursday showed.

Seasonally adjusted exports surged by 9% on the month after diving by 24% in April, remaining almost 27% lower than their pre-crisis level in February, the Federal Statistics office said.

Imports rose by 3.5% after a slump of 16.6% the previous month, suggesting that consumption in Europe’s largest economy remained weak. The trade surplus increased to 7.6 billion euros.

Economists polled by Reuters had expected exports and imports to rise by 13.8% and 12% respectively. The trade surplus was predicted to come in at 5.2 billion euros.

“All beginnings are difficult: The rise in exports is no reason to celebrate,” Alexander Krueger of Bankhaus Lampe KG wrote in a note. “The road to past capacity levels is long and depends strongly on the revival of international demand.”

The Statistics Office said exports to China were 12.3% lower than in May last year, while exports to the United States were down 36.5% year-on-year in May.

As Germany’s export-dependent manufacturers languish in recession, the government wants to revive the economy by boosting consumption through lower rates of value-added tax for the second half of the year and a one-off stipend for parents.

“In past recoveries, the German economy could always count on exports to kick-start the recovery,” said ING economist Carsten Brzeski, adding that exports to Asia had helped Germany recover from the 2008 financial crisis.

“This time around, the economy will have to look to something other than exports to stimulate growth,” he said and pointed to government stimulus.

“If it succeeds, Covid-19 could have been an important driver in finally getting a more balanced growth model of the German economy.”

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China's producer prices extend declines amid sluggish demand

BEIJING (Reuters) – China’s factory gate prices fell for the fifth consecutive month in June but at a slower-than-expected pace, with persistent deflation in the industrial sector highlighting the lasting economic impact of the coronavirus pandemic.

The producer price index (PPI) in June fell 3.0% from a year earlier, China’s National Bureau of Statistics (NBS) said in a statement on Thursday, compared with a 3.2% fall tipped by a Reuters poll of analysts and a 3.7% decline in May.

But in a sign of modest improvement in the manufacturing sector, PPI rose 0.4% from the previous month, turning around from a 0.4% decline in May.

Chinese officials have said the economy is recovering from the sharp contraction in the January-March quarter when the coronavirus outbreak in the mainland reached its peak and crippled large parts of the economy.

The pandemic, which has infected more than 12 million and killed about 546,000 globally, has sunk world demand and sent many economies into deflation as factories and retailers shut their doors. [nL8N2EF5NQ]

An official survey on the manufacturing sector last week showed that activity expanded at a quicker clip, as Beijing’s success in drastically reducing the number of new coronavirus infections has allowed it to reopen the economy in a welcome boost to business and domestic consumption.

But export orders have continued to contract, reflecting the widespread global impact of the COVID-19 pandemic. Many Chinese manufacturers are grappling with falling profits and have been forced to let workers go to cut costs.

NBS data also showed on Thursday that the consumer prices rose 2.5% from a year earlier, in line with forecasts in a Reuters poll and slightly faster from 2.4% growth in May.

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Japan's machinery orders tick up but factory demand patchy

TOKYO (Reuters) – Japan’s machinery orders unexpectedly rose in May, offering policymakers some comfort capital expenditure has held up despite the hit to corporate profits from the coronavirus pandemic.

But the increase in headline orders was due to demand from the services sector, masking a plunge in external and manufacturing orders, clouding the outlook for Japan’s export-reliant economy.

“The gain is likely to be one-off given weak demand from sectors like automobile, capital goods and general-purpose machinery, which hold the key to capital spending,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Japan’s economy may have hit the bottom in May. But capital expenditure likely won’t turn for the better as weak demand and the risk of a second wave of infection discourage manufacturers from boosting non-urgent spending.”

Core orders, a highly volatile data series regarded as a leading indicator of capital spending, rose 1.7% in May after a 12.0% slump in April, the fastest drop since 2018.

The increase confounded a 5.4% drop projected by analysts.

A 15.5% drop in manufacturers’ orders was offset by a 17.7% increase in orders by non-manufacturers, the Cabinet Office data showed on Thursday.

Overseas orders sank 18.5% from May to the lowest level since 2010, a sign the pandemic was hurting global demand.

“Machinery orders are hovering on a weak note,” the Cabinet Office said, maintaining its assessment from May.

Japan slipped into recession in the first quarter as the hit from the pandemic added to woes for firms and households already reeling from last year’s tax hike and soft global demand.

But capital expenditure has been underpinned by investment demand for automation and technology to offset a chronic labour shortage in the fast-ageing population.

Big firms expect to increase capital expenditure by 3.2% in the current fiscal year to March 2021, the Bank of Japan’s quarterly survey showed last week.

The outlook for capital expenditure will be among key factors the BOJ will scrutinise in guiding monetary policy. It is widely expected to hold off on expanding stimulus at next week’s rate review, after easing policy in March and April.

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BOJ's Kuroda says economy to improve as pandemic impact subsides

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Thursday the economy will remain in a severe state but improve ahead as the impact from the coronavirus pandemic subsides.

“Japan’s economy is expected to improve as the impact of the pandemic subsides, supported by pent-up demand … an accommodative monetary environment and the government’s stimulus package,” Kuroda said in a speech at a quarterly meeting of the central bank’s regional branch managers.

Kuroda also said Japan’s core consumer prices will likely fall for the time being due to sliding oil costs and the impact from the pandemic.

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Canada eyes longer-term debt as servicing costs fall on lower rates: source

OTTAWA (Reuters) – Canada is eyeing issuing longer-term debt to take advantage of low interest rates, and expects servicing costs to be lower this fiscal year than was forecast last year despite the billions in emergency spending due to COVID-19, a government source said.

Canadian Finance Minister Bill Morneau will deliver a “fiscal snapshot” on Wednesday that will outline the current balance sheet and growth expectations.

Before the release of the snapshot, Prime Minister Justin Trudeau remarked that low interest rates make future spending more sustainable.

“This is not and has not been a time for tightening belts and austerity,” Trudeau told reporters. “Historically low interest rates mean manageable borrowing costs as we continue to invest in Canadians and the economy.”

In December, Canada said it expected public debt charges to be C$23.7 billion ($17.4 billion) in the 2020-21 fiscal year starting on April 1. But a government source said the new estimate would be lower despite a much higher deficit than had been expected.

Canada’s independent Parliamentary Budget Officer said the federal deficit was likely to balloon to C$256 billion ($188 billion) in 2020-21, mainly because of the spending meant to soften the blow of pandemic shutdowns, compared with a 2019-20 deficit of C$21.8 billion reported in May.

The Globe and Mail, citing two senior government officials, reported that Morneau on Wednesday would forecast a deficit of more than C$300 billion.

“We took on debt so Canadians wouldn’t have to,” Trudeau said at a news conference.

The Bank of Canada slashed its benchmark rate in March by a total of 1.5 percentage points to 0.25%. It has said it does not intend to reduce rates any further.

Canada lost one of its coveted triple-A ratings in June when Fitch downgraded it for the first time, citing the billions of dollars in emergency aid Ottawa has spent to help bridge the downturn caused by COVID-19 shutdowns.

Standard & Poor’s, Moody’s and DBRS still give Canadian debt the highest rating.

Issuing longer-tenure debt “makes a whole lot of sense,” said Brett House, deputy chief economist at Scotiabank.

“It’s an excellent idea to tilt more of the issuance towards longer-term borrowing and … I do think there’s still appetite,” said Doug Porter, chief economist at BMO Capital Markets. “So I would heavily encourage them to take advantage of these exceptionally low long-term yields.”

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Canada eyes longer-term debt as servicing costs fall on lower rates: source

OTTAWA (Reuters) – Canada is eyeing issuing longer-term debt to take advantage of low interest rates, and expects servicing costs to be lower this fiscal year than was forecast last year despite the billions in emergency spending due to COVID-19, a government source said.

Canadian Finance Minister Bill Morneau will deliver a “fiscal snapshot” on Wednesday that will outline the current balance sheet and growth expectations.

Before the release of the snapshot, Prime Minister Justin Trudeau remarked that low interest rates make future spending more sustainable.

“This is not and has not been a time for tightening belts and austerity,” Trudeau told reporters. “Historically low interest rates mean manageable borrowing costs as we continue to invest in Canadians and the economy.”

In December, Canada said it expected public debt charges to be C$23.7 billion ($17.4 billion) in the 2020-21 fiscal year starting on April 1. But a government source said the new estimate would be lower despite a much higher deficit than had been expected.

Canada’s independent Parliamentary Budget Officer said the federal deficit was likely to balloon to C$256 billion ($188 billion) in 2020-21, mainly because of the spending meant to soften the blow of pandemic shutdowns, compared with a 2019-20 deficit of C$21.8 billion reported in May.

The Globe and Mail, citing two senior government officials, reported that Morneau on Wednesday would forecast a deficit of more than C$300 billion.

“We took on debt so Canadians wouldn’t have to,” Trudeau said at a news conference.

The Bank of Canada slashed its benchmark rate in March by a total of 1.5 percentage points to 0.25%. It has said it does not intend to reduce rates any further.

Canada lost one of its coveted triple-A ratings in June when Fitch downgraded it for the first time, citing the billions of dollars in emergency aid Ottawa has spent to help bridge the downturn caused by COVID-19 shutdowns.

Standard & Poor’s, Moody’s and DBRS still give Canadian debt the highest rating.

Issuing longer-tenure debt “makes a whole lot of sense,” said Brett House, deputy chief economist at Scotiabank.

“It’s an excellent idea to tilt more of the issuance towards longer-term borrowing and … I do think there’s still appetite,” said Doug Porter, chief economist at BMO Capital Markets. “So I would heavily encourage them to take advantage of these exceptionally low long-term yields.”

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Ireland may cut tax on business in stimulus plan: minister

DUBLIN (Reuters) – Ireland is considering reductions in business tax as part of a “radical and far reaching” multi-billion euro stimulus plan set to be announced in the week of July 21, Business Minister Leo Varadkar said on Wednesday.

Ireland’s tourism and hospitality sector has called for a cut in the rate of Value Added Tax (VAT). The government temporarily reduced the rate to 9% from 13.5% in 2011 to help the industry recover from the last economic crisis.

“The kind of things that we are considering are restart grants to help businesses that are reopening or have reopened, reductions in business tax and commercial rates, access to low-cost loans,” Varadkar told a news conference.

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