U.S. Borrowing Needs Exceed Prior Forecasts as Budget Gap Widens
The U.S. Treasury Department indicated that the government’s borrowing needs are rising faster than previous estimates as the Trump administration finances a widening budget deficit. The department expects to issue $365 billion in net marketable debt from January through March, up $8 billion from its estimate in October, according to a statement released Monday in Washington. The Treasury sees an end-of-March cash balance of $320 billion, unchanged from its forecast three months ago. In its first estimate of the April-June period this year, the department estimated borrowing of $83 billion, $11 billion more than in the same period last year and the most for that quarter since 2012. From October through December, the Treasury said it issued $426 billion in net marketable debt, almost in line with its earlier prediction of $425 billion in borrowing. The cash balance was $402 billion at the end of December. The Treasury is boosting sales of bills, notes and bonds to help finance a budget gap that’s widening after $1.5 trillion in tax cuts started taking effect last year, and the then-Republican-controlled Congress approved a roughly $300 billion spending increase. At the same time, an aging population is boosting costs of federal programs such as Medicare. Earlier on Monday, the Congressional Budget Office said the deficit is forecast to widen to $897 billion over the 12 months through September, from $779 billion last year. The CBO sees the shortfall topping $1 trillion in fiscal 2022, two years later than its forecast in April.
Hungary Starts Tightening Countdown as Price Pressures Intensify
Hungary’s central bank is on the verge of abandoning ultra-loose monetary policy just as its peers are putting the brakes on tightening. While central banks from London to Prague raised borrowing costs last year to combat inflation, policy makers in Budapest stuck to unconventional tools and record-low interest rates to help boost lending and stimulate economic growth. They’ll probably keep that mix unchanged at a meeting on Tuesday, with analysts betting on a gradual unwinding of easing measures starting in March. “Hungary’s economy has reached a point where policy makers are willing to start to gradually withdraw monetary stimulus,” said Marcin Kujawski, an economist at Nomura International Plc in London. The shift toward a hawkish message may be at odds with a continent that’s facing slower growth and inflation. The European Central Bank said last week that risks to the economic outlook had moved to the downside. Czech rate setters, who hiked borrowing costs five times in 2018, have also shifted to a more cautious approach, while Poland sees its benchmark staying at a record low possibly until 2020. But in Hungary, the tight labor market is pushing up wages, which in turn is leading to consumers spending more and helping drive price growth. Earlier this month, Deputy Governor Marton Nagy said core inflation excluding the effect of indirect taxes, policy makers’ favored measure for long-term inflation, could exceed 3 percent sometime in the first three months of the year, which would be a strong signal that tightening was needed.
China Slowed for an Eighth Month in January, Early Indicators Show
China’s economy slowed for an eighth straight month in January, as weaker global demand and decelerating factory inflation combined to undercut growth. That’s the signal from a Bloomberg Economics gauge aggregating the earliest-available indicators on business conditions and market sentiment. The data suggest the government’s stimulus efforts have yet to translate into more business activity so far in the first quarter, after the economy notched its slowest expansion since 2009. “The economy is still decelerating, but at a slower pace,” said David Qu at Bloomberg Economics in Hong Kong. “Concerns over global trade and fragile confidence continue to weigh on the economy.” China’s loss of momentum is reverberating around the global economy: Caterpillar Inc., a maker of earth-moving equipment, posted its biggest quarterly profit shortfall in a decade Monday, and provided a 2019 forecast that trailed some of Wall Street’s estimates. Sales of excavators will be flat year-over-year in China, the Deerfield, Illinois-based company said. The government unveiled more support for the economy in January, with the central bank cutting the amount of money banks must hold to secure liquidity and the Ministry of Finance aiming to allow provincial governments to sell more special bonds.
In all, the tax cuts and bond issuance could add up to stimulus worth 4.9 trillion yuan this year, or about 5 percent of gross domestic product, according to Bloomberg Economics’ estimates.
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