Denies job losses related to union vote in favour of strike
Britain’s economy has lost momentum and might have shrunk in the second quarter of 2019, according to data that showed the double impact of Brexit and the slowdown in the global economy.
Manufacturers had their worst month in more than six years and consumers increased their borrowing at the slowest pace since 2014.
The value of sterling fell against the dollar and the euro after the data was published.
Howard Archer, an economist with EY Item Club, a forecasting group, estimated that Britain’s economy contracted by 0.2% in the April-June period.
The Bank of England last month cut its forecast for economic growth in the second quarter to zero.
That largely reflected an unwinding of the rush by many factories to get ready for the original Brexit deadline which has now been delayed until Oct. 31.
But economists said Monday’s manufacturing purchasing managers’ index showed how hard Britain’s factories were also being hit by the slowdown in the world economy caused by the trade skirmishes between the United States and China.
The overall PMI slumped to 48.0 in June from May’s 49.4, well below the average forecast in a Reuters poll of economists and its lowest reading since February 2013.
Export demand fell for a third month as manufacturers around the world lost confidence.
Allan Monks, an economist at JP Morgan, said the weak PMI survey challenged his view that manufacturing growth would rebound at the start of the third quarter.
Separate data from the Bank of England published on Monday showed lending to British consumers – whose spending has helped the economy cope with the Brexit crisis – rose by its weakest annual pace in more than five years in May.
The BoE data also showed the weakest increase since April 2017 in net mortgage lending.
Archer at EY Item Club said May’s mortgage data chimed with other figures which suggested the relief from the delay of Brexit had been limited.
“Improved consumer purchasing power and robust employment growth has also recently been helpful for the housing market, but this has recently shown some signs of leveling off,” he said.
Economists said they were waiting for Wednesday’s PMI of Britain’s dominant services industry to gauge the extent of the slowdown in the overall economy.
Chris Hare, an economist with HSBC, said he expected only a slight pick-up which would point to anemic underlying growth.
“So, considerations about Brexit deadlines notwithstanding, we do not think that now is the time for the Bank of England to be raising rates,” he said.
The BoE has stuck to its message that it expects to raise borrowing costs, assuming Britain can avoid a no-deal Brexit.
Lebanon economy skids, jobs in firing line
By Ellen Francis
BEIRUT (Reuters) – Karim Daya was one of the last of his friends and family still in Lebanon. Now that his job is gone, he’s packing his bags.
“That’s it. It’s just getting worse and worse, and where are we headed? Nobody knows,” said Daya, 27, a graphic design graduate. “I’ll be very sad. But there’s no future for me here.”
His feelings reflect the frustration of many young Lebanese caught in the worst economic crisis since the 1975-90 civil war.
The coffee shop chain Daya worked at had struggled even before huge protests, driven by anger at corruption and cronyism, toppled the government last month. The latest turmoil dealt the fatal blow.
He plans to go to Bulgaria, where his sisters live, to look for work – a decision he had tried to put off. But with 37% of Lebanon’s youth already unemployed, the prospects are bleak.
Across Lebanon, banks are closed and business is grinding to a halt.
Beirut’s streets are lined with empty restaurants and shuttered shops. More and more companies have either gone bust or suspended work, firing workers en masse to try to survive.
Employees at 15 companies told Reuters they had been laid off or taken a pay cut in the past month, along with dozens of colleagues.
“This economic choking reached a point where it erupted,” said Pierre Boutros, an engineer who runs a contracting company and a furniture factory. “It’s a miracle that we’ve made it this far.”
He had to cut salaries and lay off dozens of workers in recent weeks. He will likely let more people go. The firm is down to 70 staff, from a peak of 425 people before 2016.
“Credit facilities stopped, there’s no cash…Traders who used to give you time now only deliver if you pay upfront. People don’t have the money to buy. At the end of the day, money is not coming in. We shrank.”
If the crisis drags on, Boutros may freeze work “for a month or two or three until it is solved,” he said. “Then dust ourselves off and get to work again.”
The losses for companies come after years of low growth, government paralysis, regional conflict, and capital inflows from abroad drying up.
Banks, which closed for half of October, have blocked most dollar withdrawals and transfers abroad to avoid capital flight. They shut again this week after a staff strike over safety fears as people demand access to their money.
The hard currency squeeze in turn has stymied trade, pushed people to stash cash at home, and pressured the Lebanese pound’s 22-year-old peg to the dollar.
Business owners say they must make most transactions in cash on the black market, where the pound has weakened to about 20% below the pegged rate. Suppliers now demand payments in dollars or in local currency based on an unofficial rate that changes by the trader and the day.
“We can’t take it anymore. I can’t spend on my children,” said Ali, a sales worker and father of two whose salary was cut in half. “There will be much more chaos if things keep going this way.”
Some families have stocked up on supplies like canned food, rice, and flour. Several people said their bank told them they must repay loans in U.S. dollars.
With a tiny industrial sector and few natural resources, the economy relies on imports and cash injections from Lebanese abroad, which have fallen in recent years, pressuring central bank foreign currency reserves.
Lebanon creates six times fewer jobs than its labor market needs and exports more graduates than any country in the Arab world, a 2019 government study said.
Amale’s three children all work abroad. A 60-year-old nurse, she lost her job at a hospital that laid off 40 people. “They might close down entire floors,” she said. “I cried a bit.”
Majd Chidiac, 23, a copywriter, was also laid off. “The people who haven’t left yet will leave. And those who can’t afford to leave, they’ll get stuck here and get poorer. It’s the sad reality.”
(Additional reporting by Alaa Kanaan and Dala Osseiran; Writing by Ellen Francis,; Editing by William Maclean, Tom Perry, Philippa Fletcher, canadanewsmedia staff)
India, RCEP and the future of economic globalisation
Is this a backlash against trade or just another economic war? The world’s biggest trade pact was just moments from being signed when India pulled out. India’s Prime Minister Narendra Modi said the deal would hurt its farmers, businesses, workers and consumers.
The Regional Comprehensive Economic Partnership (RCEP) would have brought together the 10 members of the Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia, and New Zealand.
Despite what seems to be a backlash against globalisation and the 16-month trade war between the United States and China, the remaining nations plan to push ahead with an agreement – leaving a door open for India.
Globalisation has limits, as India bolted at the prospect at the gradual elimination of tariffs which would have opened up the floodgates for cheap Chinese goods plus agricultural produce from Australia and New Zealand.
Simon MacAdam, a global economist at Capital Economics, and author of the report: Does Globalisation Have a Future? tells Al Jazeera that it is important to bear in mind that on many metrics the world may have already reached “peaked globalisation”.
“This isn’t a new thing. It hasn’t just come about because Donald Trump entered the White House and launched into a trade war against China and it hasn’t just come about because of the collapsing of various trade deals in recent years.”
He adds: “This is something that has been going on for about a decade now. Trade flows are a percentage of the world economy, are the same now pretty much as they were around the time of the financial crisis and that’s symptomatic of several factors. It’s not just about economic nationalism and politicians increasingly looking inwards. It’s also to do with the lasting overhanging effects of the financial crisis, it’s to do with changes in technology.”
How is France becoming more unequal?
Emmanuel Macron‘s decision to cut taxes for the wealthy earned him the moniker “president for the rich” and his decision to raise taxes on diesel and petrol led to the popular yellow jacket protests, which later morphed into revolt against inequality.
Just how unequal is French society? Earlier this year, Bernard Arnault briefly overtook Bill Gates to become the second-richest man in the world. The centibillionaire plans to take over the jeweller Tiffany for more than $14bn. The personal fortunes of French billionaires has grown twice as fast as their US and Chinese counterparts in 2019, according to Bloomberg.
Jacques Reland of The Global Policy Institute explains that it is more difficult than before for the poor in France to exit poverty because the problem is not just about wages, it is about access to education and jobs.
“In France, people tend to quickly demonstrate … maybe that’s why France has still … one of the best redistribution and social welfare systems in the OECD,” Reland says noting that the demonstrations have played an important role in creating awareness about issues of inequality in France.
Source: Al Jazeera News
CN to cut jobs as North American economy slows down
Canadian National Railway Co. is potentially cutting hundreds of jobs due to a slowdown in freight shipments that it blames on the wobbling North American economy and global trade wars.
Canada’s largest railway on Friday confirmed it will lay off an undisclosed number of people. CN would not confirm reports that suggested it will cut 1,600 employees, but said layoffs have already started in both management and union jobs.
“The company is adjusting its resources to demand. This includes the difficult decision of adjusting its workforce to demand levels … due to a weakening of many sectors of the economy,” CN spokesman Alexandre Boulé said in a statement.
Lyndon Isaak, president of the Teamsters Canada Rail Conference, confirmed that layoffs are underway. Though he did not know the total number of jobs that would be lost, he expects just a small percentage of his membership to be affected.
“As I understand it, the bulk of the layoffs will be at headquarters in Montreal,” he said.
The job cuts are unrelated to ongoing contract negotiations, Isaak added.
“This has to do with the ebb and flow of rail traffic,” he said. “It’s just the way the business goes.”
The job losses come several weeks after CN said it expects to ship less freight this year than it did in 2018 due to “deterioration” in rail demand. The railway still reported increased revenue and a $1.12-billion profit in the third quarter.
The decline in volume is despite the promise of filling railways with crude shipments, a growing market as the Canadian oil industry tries to move its product in the absence of new pipeline infrastructure. CN reported a higher volume of crude shipments in the third quarter, yet posted a drop in shipments of metals and minerals, grain, potash and forestry products.
Analysts are optimistic that crude-by-rail volumes will increase once the Alberta government sorts out problems with its contracts, which it is trying to transfer to private players.
Canada’s second-largest railroad, Canadian Pacific Railway Ltd., also cut its guidance in October, laying the blame on “softer volumes, macroeconomic challenges and geopolitical tensions.” CP noted particular challenges with potash trade with China and India.
CN’s layoff plans coincide with collective bargaining with the union Teamsters Canada. About 3,000 conductors, trainpersons and yardpersons voted in favour of strike action last month. Talks resumed this week.
With files from Naomi Powell
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