UK economy shrinks for first time since 2012 - Canadanewsmedia
Connect with us

Economy

UK economy shrinks for first time since 2012

Published

on

UK Economy: GDP for the three months ended June contracted 0.2% compared to the previous quarter, the Office for National Statistics said Friday. Experts had expected growth to be flat.

The contraction comes as the global economy slows and fears rise that Britain could crash out of the European Union, dealing a gut punch to an already-weak economy.

Prime Minister Boris Johnson has committed to leaving the bloc on October 31 even without an exit agreement in place to protect trade. That would plunge the economy into recession, according to government forecasts.

The pound fell 0.6% against the dollar on Friday below $1.21, marking a decline of about 5% since the beginning of July. It dropped 0.7% against the euro.

Shrinking economy

Uncertainty over Brexit helped drag down the UK economy last quarter.

Companies unwound stockpiles that they’d built up ahead of an earlier Brexit deadline at the end of March. Shutdowns at car plants that were timed to coincide with the deadline also held back growth.

The largest drag came from a drop in manufacturing output, which caused the production sector to shrink 1.4%.

UK economy

Weakness in other parts of the economy added to the environment of uncertainty.

“The often-dominant service sector delivered virtually no growth at all,” said Rob Kent Smith, head of national accounts at the Office for National Statistics.

Additionally, business investment continues to trend downward. It’s not clear that will improve as companies pump more resources into planning for a messy Brexit.

“Contraction in the second quarter is a rude awakening,” said Tej Parikh, chief economist at the Institute of Directors, a business lobby. “While consumers have helped keep the economy afloat, it is increasingly worrying that underlying growth is largely absent.”

Brexit recession?

The UK government tried to put a positive spin on the data, with Treasury chief Sajid Javid saying it comes during a “challenging period across the global economy.”

“The fundamentals of the British economy are strong — wages are growing, employment is at a record high and we’re forecast to grow faster than Germany, Italy and Japan this year,” Javid said.

Domino's is stockpiling pizza ingredients to protect against a disorderly BrexitUK economy

Many economists believe the United Kingdom will dodge an immediate recession by rebounding in the current quarter.

Resumed stockpiling, along with solid consumer spending, should provide a boost, according to James Smith, developed markets economist at Dutch bank ING.

“The contraction in the second quarter appears at this stage to be an outlier,” Commerzbank economist Peter Dixon said.

But Brexit could quickly put any recovery into reverse.

Official forecasts have warned that a disorderly Brexit would cause UK stock markets to fall 5%, while the pound would plummet 10%. GDP would shrink by 2% by the end of 2020, it estimates.

“We would expect to see quite a sharp contraction — an instantaneous contraction, almost,” Dixon said.

Slowing global growth and listlessness in Europe also pose a threat. “There are downside risks to the UK forecast, whatever happens to Brexit,” he added.

Let’s block ads! (Why?)

Continue Reading

Economy

Economic cost of a warmer planet

Published

on

By

Earlier this year California-based utility Pacific Gas and Electric (PG&E) became one of the clearest cases of how climate change can wipe out a company that has not done enough to prepare for a warming planet.

After costs related to wildfires ballooned, PG&E filed for bankruptcy protection. The company faced approximately $30bn in liabilities as a result of its role in the 2017 and 2018 fires.

State investigators linked 100 deaths to the fires. Federal judge William Alsup blamed the cause of some of the fires on the utility’s negligence and said the utility had paid $4.5bn to shareholders in dividends over the past five years while failing to take adequate safety precautions.

And now Germany‘s car industry is facing the threat of losing its position as a leading centre for production. A series of missteps – from diesel-cheating scandals to a lack of preparedness for the end of the combustion engine – has left the road open to Uber, Tesla and Chinese electric brands. An industry that employs more than 800,000 people is facing a make-or-break moment.

So, are businesses doing enough to prepare for climate change or do executives have their heads in the sand?

According to a Global Commission on Adaptation report, businesses need to plan more for a warming planet. Companies that do not adapt may not survive.

The report claims investing $1.8 trillion to climate-proof business and the broader economy by 2030 could generate up to $7.1 trillion in net benefits. Half of the world’s biggest companies believe climate adaptation could result in $236bn in increased revenue.

One of the authors of the report is Feike Sijbesma, chief executive of Dutch life sciences company Royal DSM. Economics editor Abid Ali talks to him about climate change adaptation and why it is important for businesses around the world.

Sijbesma points out that no country in the world can escape from climate change.

“Addressing climate change mitigation and addressing climate change adaptation is in the interest of all countries and in the interest of all companies,” Sijbesma says.

“Of course, as companies we are not philanthropic organisations, we need to make money, but there are more interests than only making money and there are more interests than only the short term.”

Source: Al Jazeera News

Let’s block ads! (Why?)

Source link

Continue Reading

Economy

Peru economic growth jumps due to healthy domestic demand

Published

on

By

SANTIAGO — Peru’s economy grew 3.28% in July from the same month a year earlier, the second highest rate this year, due principally to healthy domestic demand and a slight rally in the mining sector, the government said on Sunday.

The rate was in line with analysts’ estimates in a Reuters poll. The Peruvian economy grew 2.74% in the last 12 months to July, the state statistics agency Inei said.

Peru is the world’s No. 2 producer of copper, zinc and silver. (Reporting by Marco Aquino, Writing by Aislinn Laing Editing by Paul Simao)

Let’s block ads! (Why?)

Source link

Continue Reading

Economy

Slower U.S. job growth expected

Published

on

By

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth likely slowed further in August, but the pace of gains probably remains sufficient to keep the economy expanding moderately amid rising threats from trade tensions and weakness overseas that have left financial markets fearing a recession.

The Labor Department’s closely watched monthly employment report on Friday will come in the wake of a survey on Tuesday that showed manufacturing contracting for the first time in three years in August. The economy’s waning fortunes, underscored by an inversion of the U.S. Treasury yield curve, have been largely blamed on the White House’s year-long trade war with China.

Washington and Beijing slapped fresh tariffs on each other on Sunday. While the two economic giants on Thursday agreed to hold high-level talks in early October in Washington, the uncertainty, which has eroded business confidence, lingers.

The economy is also facing headwinds from Britain’s potentially disorderly exit from the European Union, and softening growth in China and the rest of the world.

The Federal Reserve is expected to cut interest rates again this month to keep the longest economic expansion in history, now in its 11th year, on track. The U.S. central bank lowered borrowing costs in July for the first time since 2008.

“The general message from the labor market is that businesses are cutting back on hiring, but they are not laying off workers and that is important,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Consumers are what’s keeping the economy moving at this point.”

Nonfarm payrolls probably increased by 158,000 jobs last month after advancing 164,000 in July, according to a Reuters survey of economists. The anticipated job gains would be below the monthly average of 165,000 over the last seven months, but still above the roughly 100,000 per month needed to keep up with growth in the working age population.

The unemployment rate is forecast unchanged at 3.7% for a third straight month.

August job growth could, however, fall short of expectations because of a seasonal quirk related to students leaving their summer jobs and returning to school. Over the past several years, the initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength.

Other factors favoring slower job growth include declines in both the Institute for Supply Management’s manufacturing and services industries employment measures in August. In addition, global outplacement firm Challenger, Gray & Christmas reported a 37.7% jump in planned job cuts by U.S-based employers in August.

BULLISH CONSUMERS

But first-time applications for unemployment benefits, a more timely indicator of labor market health, have been hovering near historically low levels. Consumers were very bullish about the labor market in August and the government likely started recruiting for the 2020 Census last month.

Though the trade impasse does not appear to be spilling over to the labor market, job growth has been slowing since mid-2018.

The government last month estimated that the economy created 501,000 fewer jobs in the 12 months through March 2019 than previously reported, the biggest downward revision in the level of employment in a decade. That suggests job growth over that period averaged around 170,000 per month instead of 210,000. The revised payrolls data will be published next February.

The government has also trimmed economic growth for the second quarter. The employment report is expected to show average hourly earnings gaining 0.3% last month, matching July’s rise. But the annual increase in wages is seen dipping to 3.1% from 3.2% in July as last year’s surge falls out of the calculation.

“Recent downward revisions to estimates of economic growth, corporate profits, and employment growth all suggest that the economy is displaying classic late-cycle symptoms,” said Michael Feroli, an economist at JPMorgan in New York. “Moreover, these symptoms are unlikely to go away entirely even if a truce is reached in the current trade tensions.”

The length of the workweek will also be watched for clues on how soon companies might start laying off workers. The average workweek fell to its lowest level in nearly two years in July as manufacturers and other industries cut hours for workers. It is forecast rising to 34.4 hours in August from 34.3 hours in July.

“While one month does not make a trend, hours worked is a leading indicator worth noting,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings in New York. “A prolonged drop in hours worked signals that businesses may reduce hiring, with layoffs and cutbacks in private spending to likely follow.”

Manufacturing employment is expected to have risen by 8,000 jobs last month after increasing 16,000 in July. But factory payrolls could surprise on the downside after the ISM reported on Tuesday that its gauge of factory employment dropped in August to its lowest level since March 2016.

Manufacturing has ironically borne the brunt of the Trump administration’s trade war, which the White House has argued is intended to boost the sector. Factories cut overtime for workers in July.

Government employment could get a lift from hiring for the 2020 decennial census, which could create roughly 40,000 temporary jobs.

Let’s block ads! (Why?)

Source link

Continue Reading

Trending