US economists more pessimistic, citing trade as major risk: survey

WASHINGTON - Economists have become more concerned about US growth prospects, citing trade friction as the major worry, but recession risks have receded slightly, according to a survey released Monday.

Nearly half of the panel surveyed by the National Association for Business Economics expect a recession before the end of next year, down from 60 percent in the prior survey.

The panel expects the world's largest economy to slow, with growth falling below 2 percent for the first time since 2016, the survey showed.

Recent data have shown the US labor market remains strong, but manufacturing is in recession while the larger services sector is slowing, giving rise to fears about the health of the US economy, especially amid President Donald Trump's grinding trade war with China and increasing tensions with Europe.

The NABE panel "turned decidedly more pessimistic about the outlook over the summer, with 80 percent of participants viewing risks to the outlook as tilted to the downside," said Gregory Daco, the group's survey chair and chief US economist at Oxford Economics.

"The rise in protectionism, pervasive trade policy uncertainty, and slower global growth are considered key downside risks to US economic activity," he said in a statement on the findings in the quarterly survey.

Looking further out, 69 percent of the panel expects a recession by mid-2021.

The Federal Reserve has cut interest rates twice this year and many market analysts expect more stimulus to be announced later this month, but the NABE panel was less convinced.

Daco said over 40 percent anticipate at least one more rate cut this year, while three-quarters of respondents expect at least one rate cut by the end of 2020.

The median forecast by the panel is for growth of 2.3 percent this year, slowing to 1.8 percent next year after 85 percent of the panel cut their real GDP projections.

source: news.abs-cbn.com

For Europe, no-deal Brexit threat comes at a bad time

LONDON — For a major economy, the best time to descend into befuddling uncertainty over the rules that govern trade is never. As the European Union now confronts the prospect that Britain may bolt its ranks without a deal, likely triggering mayhem, this is an especially unfortunate moment.

Germany, Europe’s largest economy, is teetering toward recession as factory orders diminish. Italy is weakening in the face of tumultuous politics that have discouraged investment. The rest of Europe is still growing at a healthy clip, but Germany and Italy alone comprise 40 percent of the annual economic output of the eurozone — the 19 countries that share the euro currency.

This is the backdrop as British Prime Minister Boris Johnson intensifies preparations to yank his country from the European Union at the end of October absent a deal governing future relations.

The implications have been a source of anxiety for months on both sides of the English Channel — predictions of crippling traffic jams at ports, confusion over customs procedures, and a general state of business-disrupting bewilderment. Now, absent an emergency intervention this week in the British Parliament, things are about to get real.

For Europe, heading toward the Brexit cliffs in a diminished state was not supposed to be part of the plan.

Only two years ago, Europe’s economy was expanding more rapidly than at any time since the global financial crisis a decade before. European leaders assumed they could drive a hard bargain with Britain in negotiating the terms of their breakup. If Britain followed through on threats to walk away without a deal, trade would surely suffer, but Europe calculated it was strong enough to weather the resulting chaos.

“There was an idea that the European Union could withstand a hard Brexit, that it would be bad but manageable,” said Angel Talavera, senior eurozone economist at Oxford Economics, a research institution in London. “Now, there is an increasing concern that the eurozone is really weakening significantly, and that a hard Brexit could be the thing that would send it into recession.”

Not that Europe’s deepening economic troubles are likely to alter the political calculus in its standoff with Britain. Ever since the June 2016 referendum that set Brexit in motion, Europe has shown unwavering unity in its negotiations with its interlocutors across the channel. After three years of fierce politicking in London without any semblance of clarity on a national Brexit position, a recession will not prompt the Europeans to go soft and submit to British demands, analysts said.

“It’s actually the opposite,” said Christian Odendahl, Berlin-based chief economist at the Center for European Reform, a research institution. “There has been a slight hardening, a tendency among Germans to say, ‘Let’s at least end this uncertainty and let the Brits go their own way.’”

European leaders have refused to gratify demands from London to make changes to a deal struck last November with former Prime Minister Theresa May. That arrangement would have ended Britain’s participation in Europe’s single marketplace while still making the country subject to key European laws.

In Britain, the deal came with something for everyone to detest. Those against Brexit portrayed it as historically retrogressive, taking the country out of the collective European project while imperiling access to the European marketplace — the destination for nearly half of the nation’s exports. Those in favor of Brexit assailed the deal as a humiliating affront on British sovereignty.

Johnson took office promising to force the Europeans to reopen negotiations, especially on his biggest bone of contention, the so-called Irish backstop, which could keep Britain in a customs union with Europe to prevent turmoil between the two Irelands. That provision was crafted to avoid the reimposition of a hard border separating Northern Ireland — part of the United Kingdom — from the independent country to the south, the Republic of Ireland, a member of the European Union.

European leaders have steadfastly refused to reopen the deal. They insist that the backstop is needed to ensure that Ireland is not physically divided anew, a step that could reinvigorate the lethal divisions that prevailed before the signing of a peace agreement two decades ago.

But Johnson has warned that if he cannot wrest some change, he will allow the Oct. 31 deadline to pass with his country crashing out of the European Union.

Last week, that deadline came into sharper focus as Johnson, in a surprise move, secured an order from Queen Elizabeth II that effectively puts Parliament out of commission for five weeks, limiting opportunities for his opponents to use legislation to thwart his designs.

Troubles in the global economy have rendered Europe increasingly vulnerable to the consequences of a no-deal outcome.

The slowdown in Germany is in part the result of factors challenging the auto industry, which lies at the center of its economy. Around the world, automakers face pressure to invest vast sums of money in pursuit of new technologies that limit emissions, even as demand for electric and autonomous-driving vehicles remains uncertain.

Germany’s declining prospects also stem from President Donald Trump’s trade war against China. Germany has shipped enormous volumes of factory machinery to China in recent decades, contributing to its breakneck development. American tariffs have added to a slowdown in China, shrinking its appetite for German wares.

Italy has suffered an increase in borrowing costs as its political leaders have squabbled, bringing in a new government — a potentially fragile amalgam of the center-left Democratic Party and the unorthodox populists of the 5-Star Movement.

In the run-up to the Brexit referendum, those who campaigned to leave Europe swore that economic concerns would eventually force European leaders to assent to British demands for a favorable deal. After the requisite statements about principles and rules, the theory went, the German auto industry would grow worried about risks to its lucrative sales in Britain and pressure European leaders to compromise.

But that never happened. For the 27 jilted members of the European Union, Brexit presented existential worries that other countries might be inspired to head for the exits. Since then, Brexit has become a rallying force, the one issue on which Europe’s members can summon agreement.

“Brexit is something of a team-building exercise for the EU,” said Mujtaba Rahman, managing director for the Eurasia Group, a risk consultancy based in London. “There’s so much division in so many other areas — what to do about China, how to deal with Trump, the provisions underpinning the euro area. They need Brexit as an exercise in keeping them united. It’s something that makes the union feel better about itself.”

Not least, say European leaders, their union has made its members wealthier and less likely to wind up in a war. In their telling, Britain has used Brexit to try to freeload, threatening the virtues of the bloc for all. It has sought to keep the perks of being in the union — unimpeded access to a marketplace of 500 million consumers — without the attendant responsibilities.

For the market to maintain its value, the rules must be defended. This is the logic that appears to carry the day in European capitals and European boardrooms alike.

This is why a fear of recession does not appear to be generating pressure on European leaders in this Brexit battle. If the cost of fending off a no-deal Brexit is undermining the rules in the European marketplace, that is not a cost the members are willing to pay.

“In the EU position, there is a tremendous amount of economic self interest,” Rahman said. “It’s about protecting the functionality and integrity of the single market. The EU is willing to accept a short-term economic shock in order to protect its long-term economic interest.”


2019 The New York Times Company

source: news.abs-cbn.com

China economic growth hits lowest since financial crisis

China's economy logged its worst performance since the global financial crisis, official figures showed Monday, with analysts warning it is likely to worsen and the government must do more to avert a sharp slowdown.

Gross domestic product (GDP) in the world's second-largest economy grew at just 6.9 percent in the third quarter, its slowest rate in six years.

The figures added to fears over the health of the global economy, and some analysts expressed concern they had been manipulated to understate the gravity of the situation.

"China's economic growth is still sluggish with many risks remaining unresolved," ANZ Banking Group chief economist for Greater China Liu Ligang told AFP.

"We should not be over-optimistic. China's economic growth will continue to slow down," he said, adding he estimated GDP would expand 6.4 percent next year.

China's decades-long boom, fuelled by infrastructure investment, exports and debt, made it a key driver of the global economy.

Even though growth has eased in recent years its GDP more than doubled in real terms between 2006 and 2014, according to World Bank figures.

Now it is looking to transition to a "new normal" of slower and more sustainable expansion driven by domestic consumer demand, but the change is proving bumpy and stock exchanges around the world have been pummelled in recent weeks by concerns over its future.

Monday's figure from the National Bureau of Statistics (NBS) was the worst since the first quarter of 2009, although it was marginally above the median forecast in a poll of analysts by AFP.

It was also the first official confirmation of investors' fears over GDP since a Chinese stock market slump over the summer followed by a surprise currency devaluation in August.

Analysts now widely expect Beijing to further boost fiscal spending and ease monetary policy to prevent a sharper slowdown.

China has already cut interest rates five times in a year and reduced the amount of cash banks must hold in a bid to boost lending.

In a research note, Louis Kuijs of Oxford Economics anticipated Beijing would take "additional incremental measures... but without going for major stimulus".



- Figures questioned -
Many China watchers query the accuracy of official numbers, with some suggesting they are manipulated for political reasons.

"Unfortunately, these figures need to be taken with a grain of salt as official GDP growth appears to have become a poor gauge of the performance of China’s economy," Capital Economics China economist Julian Evans-Pritchard said in a research report.

The firm's own measures pointed to growth of only "around 4.5 percent" in the third quarter, it said.

JP Morgan economist Zhu Haibin said strong service-sector growth figures were "somewhat puzzling" as China's stock market correction "should have led to service sector deceleration".

GDP expanded 7.3 percent last year, the slowest pace since 1990, and at 7.0 percent in each of the first two quarters of this year.

The government targets "around seven percent" for 2015.

The NBS in a statement described third-quarter growth as a "slight slowdown" and said the economy was still running within a "proper range".

But it added: "We must be aware that internal and external conditions are complicated, and downward pressure for economic development still exists."

NBS spokesman Sheng Laiyun blamed a weak recovery in the world economy and expectations of a US interest rate rise for China's woes, as well as domestic overcapacity in industries ranging from steel to concrete.

China's growth slowdown has sent prices of commodities ranging from oil to copper to multi-year lows, and led the US Federal Reserve to delay a widely expected increase in borrowing costs.

Analysts attributed the July-September decline to the floundering property market and flagging exports, although retail sales offered some consolation.

They increased 10.9 percent in September, marginally ahead of the previous month.

Fixed-asset investment expanded 10.3 percent on-year in the January-September period -- lower than a median projection for a 10.8 percent increase, according to a survey by Bloomberg News.

And industrial production rose just 5.7 percent year-on-year in September, the NBS said, well down on August's figure.

China's stock market took the figures in its stride on expectations of more stimulus. The benchmark Shanghai stock index closed down 0.14 percent.

source: www.abs-cbnnews.com