Week in Review

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What We're Reading:

What We're Reading:

Trimming the fat: inflation finally hitting profit margins. Corporate profits have withstood raging inflation over much of the last year, but those good times may be ending. (AP)

UK government announces budget; country faces largest fall in living standards since records began. U.K. Finance Minister Jeremy Hunt delivered his Autumn Statement on Thursday, announcing a slew of tax rises and spending cuts as he attempts to plug a substantial hole in the country’s public finances. (CNBC)

China's Xi, Japan's Kishida meet amid regional tensions. This was the first face-to-face meeting between Chinese and Japanese leaders in three years. The pair discussed security issues involving North Korean missile tests and Chinese drills around Taiwan. (DW)

Fed official suggests substantial rate hikes may be needed. The Federal Reserve may have to raise its benchmark interest rate much higher than it has previously projected to get inflation under control. (AP)

US midterms: Republicans narrowly win back the House. While the party's margin in the House of Representatives is razor-thin, it is enough to stall President Joe Biden's agenda for the next two years. (BBC)

G-20 leaders end summit condemning Russia despite divisions. Members of the Group of 20 leading economies ended their summit Wednesday with a declaration of firm condemnation of the war in Ukraine and a warning that the conflict is making an already delicate world economy worse. (AP)

Russia and Ukraine renew a grain export deal to help the hungry and keep prices down. Russia and Ukraine have agreed to extend an agreement to allow grain exports from Ukrainian ports through a safe corridor in the Black Sea. (NPR)

Nancy Pelosi to step down as leader of House Democrats. The veteran politician's announcement comes in the wake of Democrats losing control of the House to Republicans. The Democrats are expected to hold leadership elections later this month. (DW)

WTO urges a reversal of G20 trade-restrictive measures as inflation soars. The World Trade Organization has called on world leaders to keep markets “open and predictable” to avoid a worsening of the global economic outlook, as new data shows G20 countries applying export restrictions at an increased pace over the last six months. (Global Trade Review)

Global pool of shipping containers to decline for the first time in 14 years. The ongoing war in Ukraine, sharp rises in global energy and food prices and spiraling rates of inflation continue to have a negative impact on the container shipping industry with the trading outlook for 2023 deteriorating further. (HSN)

Brazil's government cuts 2023 GDP growth forecast as global economy weakens. Brazil's Economy Ministry on Thursday cut its 2023 GDP growth forecast to 2.1%, from the 2.5% anticipated in September, due to a deterioration in the global economic outlook. (Reuters)

Russia's war in Ukraine is the biggest culprit pulling the global economy into a downturn, IMF chief says. Russia's invasion of Ukraine has had an outsized negative impact on the global economy this year—and will likely continue dragging down growth in 2023, the head of the International Monetary Fund has warned. (Markets Insider)

Milk and cheese drive food price inflation to 45-year high. Food price inflation hit 16.2% in the year to October, up from 14.5% in September, latest figures show. (BBC)


Pakistan’s Economy Hit Hard by Natural Disasters and Inflation

Kendall Payton, editorial associate

As Pakistan recovers from recent disastrous floods, the economic and agricultural aftermath is expected to cause slower growth, higher inflation rates and further delay of supply chains. Macroeconomic risks remain high in Pakistan as the country faces challenges among large current account deficits, high public debt and lower demand from traditional export markets, according to The World Bank.

“The Government must strike a balance in meeting extensive relief and recovery needs, while staying on track with overdue macroeconomic reforms,” said Najy Benhassine, the World Bank’s Country Director for Pakistan. Regions with higher poverty rates will be hit the hardest in lieu of the recent floods—with the national poverty rate expected to increase from 2.5 to 4 percentage points, per The World Bank.

“It will be more important than ever to carefully target relief to the poor, constrain the fiscal deficit within sustainable limits, maintain a tight monetary policy stance, ensure continued exchange rate flexibility, and make progress on critical structural reforms, especially those in the energy sector,” Benhassine added.

The amount of total damage from the floods is estimated to around $30 billion, Pakistan’s foreign minister Sharm El-Sheikh said. “I don’t expect us to be able to put together that much money for reconstruction and rehabilitation—certainly not in the fall for grants and aids,” he said. Sheikh told CNBC  about plans to provide investments into renewable energy infrastructure with the help of international financial institutions and the World Bank.

Earlier this year, the International Monetary Fund (IMF) overlooked the possibility of inflation, even with statistics pointing to a 16% rise in the broad money supply and private sector credit, and a 15.8% increase in the broad money supply in the 2021-2022 financial year, per Mises Institute.

The average number of days beyond terms is 27 in Pakistan—the highest amongst all surveyed countries (Mexico, Italy and Vietnam), according to the FCIB Credit and Collections Survey. 60% of respondents say payment delays have increased among their customers. The survey also showed supply chain and shipping issues as the most common cause of payment delays (60%).

What Credit and Collections Survey respondents are saying:

  • “I would avoid Pakistan if possible. If dealing with large multi-national corporations, get a guarantee from the parent. USD is hard to get out of the country at the moment.”
  • “Obtain updated credit information. Look for owner and addresses verification, as changes are often not communicated by the customer.”
  • “Know all you can about the customer. Pull a credit report for payment history and legal status and name verification.”
  • “Do due diligence for all prospect customers especially to those small/medium privately held companies with no financials, credit report, etc.”
  • “It is important to know customer’s payment process to avoid misunderstandings or delays due to administrative issues.”

The next survey opens Monday, Nov. 28th and covers Chile, Finland, Norway and the United Kingdom. Want to take the survey early? Click here. Be sure to share the link with your credit and collections network.


Slowing Global Economic Growth Is Increasingly Evident, High-Frequency Data Shows

Tryggvi Gudmundsson, IMF

Global economic growth prospects are confronting a unique mix of headwinds, including from Russia’s invasion of Ukraine, interest rate increases to contain inflation and lingering pandemic effects such as China’s lockdowns and disruptions in supply chains.

In turn, our latest World Economic Outlook, released last month, lowered our global growth forecast for next year to 2.7%, and we expect countries accounting for more than one third of global output to contract during part of this year or next. Moreover, as we discuss in our latest report prepared for the G20, recent high-frequency indicators confirm that the outlook is gloomier.

There has been a steady worsening in recent months for purchasing manager indices that are tracking a range of G20 economies. These survey-based measures gauge the momentum of manufacturing and services activity.

Readings for a growing share of G20 countries have fallen from expansionary territory earlier this year to levels that signal contraction. That is true for both advanced and emerging market economies, underscoring the slowdown’s global nature.

While gross domestic product releases for the third quarter surprised on the upside in some major economies, October PMI releases point to weakness in the fourth quarter, particularly in Europe. In China, intermittent pandemic lockdowns and the struggling real estate sector are contributing to a slowdown that can be seen not only in PMI data but also in investment, industrial production and retail sales. This will inevitably have a significant impact on other economies due to China’s large role in trade.

Despite growing evidence of a global slowdown, policymakers should continue to prioritize containing inflation, which is contributing to a cost-of-living crisis, hurting low-income and vulnerable groups the most. As our G20 report emphasizes, the macroeconomic policy environment is unusually uncertain.

However, continued fiscal and monetary tightening is likely needed in many countries to bring down inflation and address debt vulnerabilities—and we do expect further tightening in many G20 economies in the months ahead. Nonetheless, these actions will continue to weigh on economic activity, especially in interest-sensitive sectors such as housing.

The challenges that the global economy is facing are immense and weakening economic indicators point to further challenges ahead. However, with careful policy action and joint multilateral efforts, the world can move toward stronger and more inclusive growth.

Reprinted with permission; IMF Blog.

In Memory of Russell L. Peach

RussNACM and FCIB mourn the loss of Russ Peach, who died on Oct. 23, 2022 at the age of 82. Russ brought more than 25 years of experience in managing worldwide credit and collections, customer negotiations and establishing policies and procedures when he stepped into the role of President of FCIB from 1992 until 2000.

Prior to joining FCIB, Russ worked for the General Instrument Corporation in Lyndhurst, New Jersey from 1973 until 1991, serving as Assistant Corporate Credit Manager, then Corporate Credit Manager, Director of Credit and then Assistant Treasurer. Prior to that, Russ worked for U.S. Steel Corporation, joining the company as a Treasury Trainee, and being promoted to Credit Representative, then Senior Credit Representative and then District Credit Manager.

He graduated from Western Michigan University with a Bachelor’s Degree and Master’s Degree in Business. He moved to New York City for his business career where he met his wife, Gail Larkin, of Staten Island. He was a devoted husband and loving father to their two daughters, Heather and Elizabeth. He dearly loved his beagle named Brandy. Upon retirement, Russ and Gail moved to Cape Cod, Massachusetts. He found a new sense of purpose volunteering at Cape Abilities and Helping Hands.

Russ loved the credit profession and the many topics that touched the profession. He enjoyed traveling and being among the FCIB membership. His passion to support and improve the global credit profession was unparalleled and the global credit community grew stronger because of his many contributions.


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Week in Review Editorial Team:

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate