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

US economists expect recession in 2020 or 2021: survey

WASHINGTON - A majority of economists expect a US recession in the next two years, but have pushed back the onset amid Federal Reserve actions, according to a survey released Monday.

The survey came out after President Donald Trump pushed back against talk of a looming recession as a raft of US data reports last week showed a mixed picture on the economy.

"I'm prepared for everything. I don't think we're having a recession. We're doing tremendously well. Our consumers are rich," Trump told reporters Sunday.

"I gave a tremendous tax cut, and they're loaded up with money. They're buying. I saw the Wal-Mart numbers, they were through the roof," he said.

"And most economists actually say that we're not going to have a recession. But the rest of the world is not doing well like we're doing."

His chief economic advisor Larry Kudlow also downplayed talk of a recession.

"I sure don't see a recession," he told NBC's Meet the Press.

"Consumers are working at higher wages. They are spending at a rapid pace. They're actually saving also while they're spending... So I think actually the second half, the economy's going to be very good in 2019," he said.

"We're doing pretty darn well in my judgment. Let's not be afraid of optimism."

The National Association for Business Economists (NABE) found far fewer experts now think the next recession will start this year compared to a survey in February.

NABE conducted its policy poll as Trump put the Fed under constant attack, demanding more stimulus, but before the central bank cut the benchmark lending rate on July 31.

However, the Fed was already sending strong signals that it intended to pull back on the rate increases made in 2018 due to concerns starting to dog the economic outlook, including the trade war with China.

TRADE WAR SKEPTICISM

"Survey respondents indicate that the expansion will be extended by the shift in monetary policy," said NABE president Constance Hunter, who is chief economist at KPMG.

Only two percent of the 226 respondents now see a recession this year, compared to 10 percent in February's survey, NABE said.

However, "the panel is split regarding whether the downturn will hit in 2020 or 2021," Hunter said in a summary of the survey, which showed 38 percent expect a contraction of growth next year, while 34 percent don't see it until the following year.

More economists shifted their recession prediction to 2021, narrowing the gap from the prior report, which had many more expecting the change next year.

The results show 46 percent expect at least one more rate cut this year from the Fed, while about a third see policy holding where it is now, with 2.25 percent as the top end of the policy range.

Economists are skeptical about a resolution to Trump's trade wars, although 64 percent said a "superficial agreement is possible," NABE said.

But that was before Trump announced another round of tariffs of 10 percent on the remaining $300 billion in goods not yet hit by US punitive duties. The new measures will take effect in two stages, on September 1 and December 15.

As Trump continues his vocal campaign criticizing the Fed, the NABE survey found economists are concerned about the impact: 55 percent said his remarks do not influence Fed decisions but do "compromise the public's trust in the central bank."

And over a quarter of respondents said the criticism will "cause the Fed to be more dovish than otherwise, thus threatening its independence."

The survey also asked about fiscal policy, and a majority of economists said Trump's tax cuts "had an overall negative impact on housing activity over the past 18 months," due to changes in deductions allowed for mortgage interest.

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Japan economy grows faster than expected on new-era holidays

TOKYO - Japan's economy grew at a faster-than-expected clip in the second quarter, official data showed on Friday, helped by celebrations to usher in a new imperial era.

Gross domestic product (GDP) in the world's third-biggest economy grew 0.4 percent from the previous quarter, the Cabinet Office said, beating analysts' median forecast of 0.1 percent.

The third straight period of expansion will also bolster Prime Minister Shinzo Abe's determination to push through a controversial sales tax hike in October despite warnings it could weigh on growth.

Shoppers are rushing to make purchases before the rate rises from eight percent to 10 percent on October 1 and this boost for consumption also helped push GDP higher, economists said.

An unprecedented 10-day holiday for the enthronement of Emperor Naruhito, which kicked off a new imperial era in Japan, also pepped up the figures, according to analysts.

However, trade frictions between the US and China weighed on exports and corporate spending in some sectors such as machinery, said Yuichiro Nagai, senior economist at Mizuho Securities.

"But investments in software, research and development, and construction were good," he told AFP.

Nagai said a rush by consumers to buy before the sales tax hike will likely become even more pronounced in the July-September quarter, helping Japan log another quarter of growth.

And while the economy would likely contract in October-December due to the higher tax, it should rebound next year and avoid slipping into a recession, Nagai said.

"There is uncertainty over where the trade war will go... With the US presidential election coming next year, however, I believe the main scenario is that they will find a compromise plan" later this year, he said.

'ADDITIONAL MONETARY EASING'

The last time Japan hiked its sales tax, in 2014, the result was a slump in consumption and the wider economy and some economists have warned that now is not the time to raise the rate amid uncertainty over global trade and Brexit.

But Tokyo has vowed to go through with the plan unless there is a crisis on the level of the 2008 financial meltdown and Abe has promised countermeasures to cushion the blow on the economy.

SMBC Nikko Securities chief market economist Yoshimasa Maruyama said the Japanese economy would likely expand further in the July-September period but warned it could slide into a mild recession in October-December as the global economy slows.

"By the time autumn comes, debates for a supplementary budget will start and calls for additional monetary easing will get louder," he said in a report released ahead of the GDP announcement.

But Naoya Oshikubo, senior economist at Sumitomo Mitsui Trust Asset Management, was not so gloomy.

"Going forward, central banks are expected to continue easing, and the Chinese government will likely announce fiscal measures, resulting in a global economic recovery, which should help Japan maintain its momentum," Oshikubo said in a report.

Besides the planned tax hike, the impact from trade frictions between Japan and South Korea could be a headwind, he said.

"But both should be limited in their effects," he said as the affected goods make up only a fraction of Japanese exports.

source: news.abs-cbn.com

Mexican economy shrinks in new president's first quarter

Mexican President Andres Manuel Lopez Obrador got 2 troubling pieces of news Tuesday as the economy registered a surprise contraction in his first quarter in office and state oil company Pemex posted a steep loss.

The anti-establishment leftist won a landslide victory in Mexico's 2018 elections, and is promising to deliver "radical transformation" -- plus economic growth of four percent per year during his six-year term.

But his policies have unsettled the business world, and although polls indicate he remains popular, the health of Latin America's second-largest economy has emerged as a potential Achilles' heel.

Mexico registered a surprise 0.2-percent drop in GDP in the quarter from January to March, according to preliminary data.

It was the first full quarter under Lopez Obrador, who took office on December 1, and who got off to a rocky start on the economic front.

His year began with a series of strikes that affected railroads and factories, plus gasoline shortages caused by his government's decision to shut down fuel pipelines in response to rampant theft.

More broadly, the politician known as AMLO has alarmed investors by vowing to overhaul Mexico's "neoliberal" economic model and cancelling a new $13-billion airport for Mexico City that was already one-third complete.

The airport's top backer was Mexican telecoms billionaire Carlos Slim, the world's fifth-richest person, who warned that canceling the project would amount to "canceling the economic growth of the country."

'DIRE DATA' 

Economic analysts had predicted Mexico would post weak growth for the first quarter, but not a contraction.

The economy grew 1.7 percent last year, and 0.2 percent in the fourth quarter.

It was dragged down by the industrial sector, which registered a 0.6-percent contraction in the first quarter, and the services sector, which shrank by 0.2 percent, said national statistics institute INEGI.

Together, the two sectors represent around 90 percent of the Mexican economy.

The report "made for ugly reading," said London-based consultancy Capital Economics, calling the data "dire."

The services sector was previously "the one bright spot in an otherwise moribund economy over the past 12 to 18 months," it said in a note.

PEMEX BACK IN RED 

Lopez Obrador's beloved Pemex meanwhile added to his headaches by posting a loss of 35.7 billion pesos ($1.88 billion) for the quarter.

The troubled oil company -- Mexico's biggest -- said the loss was mainly due to financial costs caused by the depreciation of the peso against the dollar.

It was the latest bad news for both Pemex, whose $106.5-billion debt makes it one of the world's most indebted companies, and for Lopez Obrador, an energy nationalist who wants to restore the firm to its glory days.

With such massive debts, Pemex is struggling to make the investments it needs to reverse plummeting production, which has fallen from a peak of 3.4 million barrels per day in 2004 to less than half that today.

Lopez Obrador is trying to help the firm regain its footing with a series of cash injections, tax benefits and other rescue measures worth $5.5 billion.

But ratings agency Fitch, which downgraded Pemex in January, says the firm needs far more than that: $9 billion to $14 billion annually.

Lopez Obrador did have one piece of good economic news to celebrate: the Senate passed labor reforms Monday night that are seen as crucial to getting Mexico's new trade deal with the United States and Canada ratified in all three countries' legislatures.

The reforms aim to boost Mexican workers' collective-bargaining power and increase their wages -- something the US and Canada demanded in updating the countries' 1994 trade deal, NAFTA, a cornerstone of the Mexican economy.

source: news.abs-cbn.com

US economy to see another strong year, recession unlikely: White House

WASHINGTON -- The US economy should continue growing this year at the same pace seen in 2018, and there is only a very slim chance of recession, the chief White House economist said Tuesday.

US companies last year used the tax cuts passed at the end of 2017 to boost investment, which should translate in higher output in 2019, Kevin Hassett, chairman of the White House Council of Economic Advisers, told CNBC.

"We're sticking with our guns and we're going to say we're going to have another three percent year," he said of expectations for growth in the world's largest economy.

That upbeat assessment contrasts with widespread expectations the US economy will cool as the bump from tax cuts and fiscal stimulus last year dissipates.

The non-partisan Congressional Budget Office last month forecast growth of 2.3 percent this year, down from 3.1 percent in 2018, while the International Monetary Fund expects a slightly stronger 2.5 percent growth in 2019, slowing to 1.8 percent next year.

As of last month, the New York Federal Reserve Bank put the odds of a recession with a year at nearly 24 percent -- the highest since the Great Recession more than 10 years ago.

But Hassett said given the likely boost to factory output as a result of higher capital investments, the odds of a sustained decline in the economy in 2019 are very low "maybe like one percent or two percent or something like that."

Companies "built factories last year. They're going to flip the factories on this year and we're going to get growth from that," he said.

Capital expenditures outside the defense and aviation sectors, seen as a proxy for business investment, softened in the latter part of 2018, government data show, which occurred in tandem with a slowdown in the broader economy.

Critics of 2017's corporate tax cuts have said that rather than just boosting investment, the windfall encouraged record spending on share buybacks, transferring wealth from taxpayers to shareholders.

source: news.abs-cbn.com

UK posts slowest growth in six years as Brexit looms

LONDON - The British economy grew at its slowest pace in 6 years in 2018, data showed Monday, as Brexit uncertainty grips the country and fears grow that Britain could crash out of the EU without a deal.

The bleak official figures came as the British government seeks to win more time to secure EU concessions on Brexit that could pass the UK parliament and avert a chaotic split from the bloc on March 29.

Businesses are on edge with Britain just weeks away from its scheduled departure from the European project after 46 years and still with no firm arrangements in place.

The parliament in London last month roundly rejected a Brexit deal Prime Minister Theresa May had sealed with the remaining 27 EU leaders.

Monday's figures followed data last week that showed Britain's dominant service sector almost ground to a halt in January.

"The economy is clearly struggling in the first quarter of 2019 amid serious business and consumer caution resulting from heightened Brexit uncertainties while weaker global growth is also impacting" the figures, noted Howard Archer, chief economic adviser at the EY ITEM Club. 

Last year gross domestic product growth stood at 1.4 percent, down from 1.8 percent in 2017, the Office for National Statistics said Monday.

Growth was only 0.2 percent in the last 3 months of 2018, the ONS said in a statement. 

"Construction, production and services output fell in the month (of December), the first time that there has been such a broad-based fall in monthly output since September 2012," the ONS said.

Britain has been in a state of political turmoil for two months since the Brexit deal was agreed in December.

In an incident heavy with symbolism, parts of parliament were cordoned off Monday after a large piece of masonry fell onto a parked vehicle over the weekend.

600,000 JOBS UNDER THREAT 

The EU's chief Brexit negotiator Michel Barnier has called for "clarity and movement" from Britain.

In an effort to break the impasse, Brexit Secretary Stephen Barclay hosted Barnier for a working dinner at the British ambassador's residence in Brussels on Monday, with concern growing on both sides of the Channel.

Speaking after the dinner, Barnier said the talks had been "constructive".

"We are clear from our side that we are not going to reopen the withdrawal agreement, but we will continue our discussion in the coming days," he told journalists.

Earlier, Barnier said that British opposition leader Jeremy Corbyn's proposal for a permanent customs union with the EU was an "interesting" one.

Researchers at the IWH Institute in Halle, eastern Germany on Monday said a no-deal Brexit could put 600,000 jobs around the world at risk, with Germany the hardest hit.

The institute examined what would happen if UK imports from the remaining EU fell 25 percent after Brexit.

They reckoned some 103,000 jobs would be under threat in Germany, Europe's largest economy, with the car industry the worst affected sector.

GLOBAL GROWTH SLOWDOWN 

Monday's economic data came after the Bank of England last week slashed its forecast for UK growth this year to 1.2 percent from 1.7 percent, blaming the downgrade on a global economic slowdown and "the fog of Brexit".

The Bank of England warned that Britain's economic output was being dragged down with growth dampening in China, the United States and the eurozone.

The point was echoed by analysts reacting to Monday's data.

"Brexit uncertainty is certainly not helping matters on the economic front, but it is probably only a secondary factor in this slowdown, with the primary cause being a drop in overall global activity," said David Cheetham, chief market analyst at XTB trading group.

The pound fell against the euro and dollar in reaction to Monday's growth data.

"We must caution against blaming all on Brexit -- global cooling is having the biggest dampening effect on all major economies at present -- although we must note that (UK) business investment is collapsing," said Neil Wilson, chief market analyst at Markets.com.

London's benchmark FTSE 100 stocks index, which features many multinationals, was however higher on hopes of a breakthrough in US-China trade talks.

source: news.abs-cbn.com

India to become fifth largest economy in 2018: report

NEW DELHI - India is set to overtake the United Kingdom and France to become the world's fifth largest economy next year, a report said Tuesday.

Currently ranked seventh, India will move up to fifth place in 2018 and vault to third spot by 2032, the Centre for Economics and Business Research, a London-based consultancy, said in its annual rankings.

The Indian economy hit a three-year low in the first quarter of the current financial year, after Prime Minister Narendra Modi's snap decision in November 2016 to scrap high-value banknotes and following a tax overhaul.

Growth slumped to 5.7 percent for the three months ending June but recovered slightly to 6.3 percent for the quarter ending September.

"Despite temporary setbacks... India's economy has still caught up with that of France and the UK and in 2018 will have overtaken them both to become the world's fifth largest economy in dollar terms," said CEBR deputy chairman Douglas McWilliams.

Cheap energy and a digital revolution will drive economic growth globally, the report said. The world's growth will be dominated by Asian economies, including India, China and Japan.

The United States, the world's largest economy, will be overtaken by China in 2030, the report forecast, adding India would take that spot "at some time in the second half of this century".

source: news.abs-cbn.com

The green vision of Pope Francis

VATICAN CITY - Main points of Pope Francis's Encyclical on the environment, released on Thursday:

- Main Challenge -

Climate change represents one of the principal challenges facing humanity in our time. Its worst impact will probably be felt by developing countries in coming decades.

"The urgent challenge to protect our common home includes a concern to bring the whole human family together to seek sustainable and integral development."

- A man-made problem -

Scientific studies indicate that most global warming in recent decades is mainly as a result of human activity.

Humanity must recognise the need for changes of lifestyle, production and consumption.

- Conflict and war -

"It is foreseeable that, once certain resources have been depleted, the scene will be set for new wars."

- Throwaway culture -

"The earth, our home, is beginning to look more and more like an immense pile of filth...

"These problems are closely linked to a throwaway culture."

- Carbon emissions -

"We know that technology based on the use of highly polluting fossil fuels – especially coal, but also oil and, to a lesser degree, gas – needs to be progressively replaced without delay."

- Consequences -

"If present trends continue, this century may well witness extraordinary climate change and an unprecedented destruction of ecosystems, with serious consequences for all of us."

A quarter of the world's population lives on, or near, the coast so sea level rises would be extremely dangerous.

- Drastic reductions -

Polluting gases must be "drastically reduced" with the reduction of fossil fuels and development of renewable energy.

- Rich to blame -
Developed countries ought to significantly limit their consumption of non-renewable energy and assist poorer countries to support policies and programmes of sustainable development.

"Many of those who possess more resources and economic or political power seem mostly to be concerned with masking the problems or concealing their symptoms."

- Drinking water -

"Access to safe drinkable water is a basic and universal human right.... Some studies warn that an acute water shortage may occur within a few decades unless urgent action is taken."

- Biodiversity -

"The earth’s resources are also being plundered because of short-sighted approaches to the economy, commerce and production. The loss of forests and woodlands entails the loss of species which may constitute extremely important resources in the future, not only for food but also for curing disease and other uses."

- Binding agreements -

Enforceable international agreements are urgently needed, since local authorities are not always capable of effective intervention.

- Carbon credits -

The strategy of buying and selling carbon credits "can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide".

It may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.

- Religion -
"Most people profess to be believers. This should spur religions to dialogue among themselves for the sake of protecting nature, defending the poor, and building networks of respect and fraternity."

- Economy and growth -

"We need also to think of containing growth by setting some reasonable limits and even retracing our steps before it is too late...

"That is why the time has come to accept decreased growth in some parts of the world."

- Consumerism -

"Obsession with a consumerist lifestyle, above all when few people are capable of maintaining it, can only lead to violence and mutual destruction."

- Technology and profit -

"The economy accepts every advance in technology with a view to profit, without concern for its potentially negative impact on human beings."

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