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Brazil economy back to 2009 size after record 9.7% slump in second quarter – The Guardian

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By Jamie McGeever

BRASILIA (Reuters) – Brazil’s economy shrank in the second quarter by the most on record as anti-coronavirus lockdown measures slammed activity in almost every sector, dragging Latin America’s largest economy back to the size it was in 2009.

The pandemic triggered a 9.7% fall in gross domestic product from the prior quarter, government statistics agency IBGE said on Tuesday, and an 11.4% decline compared with the same period last year.

The magnitude of the slump in activity across the economy in the second quarter was huge: industry fell 12.3%, services 9.7%, fixed investment 15.4%, household consumption 12.5% and government spending 8.8%.

Household consumption, which accounts for two-thirds of all economic activity in Brazil, was a particularly heavy drag, IBGE said.

Only agriculture expanded in the quarter, by 0.4%.

Brazil’s economy is now 15% smaller than it was at its peak in 2014. Carlos Kawall, director at ASA Investments and a former treasury secretary, said Brazil’s economy is unlikely to grow back to where it was just last year until 2023.

“It’s a horrible period for the economy. From the standpoint of the economy, social implications, and unemployment, it has been a disaster,” he said, revising downward his 2021 growth forecast to 2.1% from 2.7% due to uncertainty about the labor market and consumption outlook.

The economy ministry was more upbeat, noting that many of Brazil’s emerging market peers posted larger GDP contractions in the second quarter and that the outlook for this year has been brightening in recent weeks.

Economy Minister Paulo Guedes said the Q2 figures were a “distant sound, the sound of the pandemic’s impact back then,” and that the economy has begun a “V-shaped” recovery.

But economists at Goldman Sachs and Citigroup cut their 2020 GDP forecasts to -5.4% form -5.0%, and to -6.5% from -6.0%, respectively.

The government’s current forecast is for a 4.7% contraction this year, which would still be the largest annual fall in records dating back to 1900. The average forecast in a weekly central bank survey of economists is for a 5.3% decline.

The downturn in the April-June period was steeper than economists had expected. The median estimates in a Reuters poll of economists were for a 9.4% fall on the quarter and an annual decline of 10.7%.

The value of Brazil’s GDP at current prices was 1.65 trillion reais ($306 billion) in the second quarter, IBGE said.

IBGE also revised the January-March figures to a 2.5% fall in GDP from the initial estimate of a 1.5% decline.

($1 = 5.38 reais)

(Reporting by Jamie McGeever Additional reporting by Marcela Ayres; Editing by Catherine Evans, Chizu Nomiyama and Jonathan Oatis)

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Global shares mixed amid worries on coronavirus, economy – TheRecord.com

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TOKYO – Global shares were mixed on Friday as investors weighed the uncertainties around global economic outlook and a new rise in coronavirus cases in many countries.

Wall Street appeared set for a subdued start to trading, with Dow futures sinking nearly 0.1% and S&P 500 futures up nearly 0.2%.

France’s CAC 40 fell 0.2% to 5,031, while Germany’s DAX gained 0.3% to 13,246. Britain’s FTSE 100 lost 0.2% to 6,040 after the government imposed new limits on public gatherings to counter an increase in virus cases.

Traders are assessing whether recent gains in the stock market are overdone considering a glum economic outlook. Economists say that the speed of the recovery from the global recession will depend on containing the spread of the coronavirus, which is picking up again in many countries.

Central banks including the Federal Reserve, Bank of England and Bank of Japan this week refrained from providing more stimulus but are committed to keeping rates low until growth picks up sustainably.

U.S. jobs figures on Thursday highlighted how the economy is struggling to rebound. Official records showed that the number of Americans applying for unemployment benefits fell only slightly last week to 860,000, a historically high number that illustrates the broad economic damage still taking place nine months after the first case of COVID-19 was detected in the U.S.

Some investors appeared disappointed by a lack of new action by the Fed, whose easy monetary policy has helped drive stock markets.

“Hesitations as to whether the U.S. economy can sustain the current pace of recovery amid the lack of additional fiscal policy support and the Fed standing put on stimulus had the market reeling once again,” said Jingy Pan, senior market analyst at IG.

Japan’s benchmark Nikkei 225 gained 0.2% to finish at 23,360.30. South Korea’s Kospi added 0.3% to 2,412.40. Australia’s S&P/ASX 200 lost 0.3% to 5,864.50. Hong Kong’s Hang Seng rose 0.5% to 24,455.41, while the Shanghai Composite edged up 2.1% to 3,338.09.

In energy trading, benchmark U.S. crude gained 14 cents to $41.11 a barrel. Brent crude, the international standard, added 15 cents to $43.45 a barrel.

The dollar cost 104.57 Japanese yen, down from 104.63 yen Thursday. The euro stood at $1.1850, up from $1.1804.

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A slow September for the U.S. economy: Morning Brief – Yahoo Canada Finance

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Friday, September 18, 2020” data-reactid=”16″>Friday, September 18, 2020

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Things could be worse, but this doesn’t make them good.

The U.S. economic recovery slowed in September, according to economists.

But given the absence of new stimulus and the continued spread of COVID-19, this growth-at-a-slower-pace outcome suggests the recovery may continue even in the absence of a new stimulus package.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="And the fact that the economy isn’t in an outright contraction is a nice upside surprise given that fresh stimulus had been seen as essential for any recovery to continue just a few months back.” data-reactid=”22″>And the fact that the economy isn’t in an outright contraction is a nice upside surprise given that fresh stimulus had been seen as essential for any recovery to continue just a few months back.

“The pace of economic recovery has slowed in the last month, but that is arguably still an impressive result given the surge in coronavirus cases over the summer, and the more recent expiry of the enhanced unemployment benefits,” said Paul Ashworth, an economist at Capital Economics in a note on Thursday.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Retail sales, for instance, are back above pre-pandemic levels. But consumption in the services sector — such as at restaurants, where much of current unemployment is focused — has slowed at levels well below those that prevailed last year.” data-reactid=”24″>Retail sales, for instance, are back above pre-pandemic levels. But consumption in the services sector — such as at restaurants, where much of current unemployment is focused — has slowed at levels well below those that prevailed last year.

September’s data also showed a temporary pop from the Labor Day holiday, with economists at Bank of America Global Research noting that seated diners, according to OpenTable and TSA passenger data, both took a step back last week after a pop around the holiday.

Like Capital Economics, however, Bank of America also sees a recovery that continues to be quite resilient. “Bottom line: Labor Day has distorted the signal from many of the high frequency indicators that we track,” the firm said in a report published Wednesday.

“However, the New York Fed weekly economic index and Dallas mobility and engagement index continue to signal that the recovery has continued in September, but there is still a long road ahead before the economy is fully healed.”

Over at Oxford Economics, Gregory Daco notes that the firm’s proprietary recovery tracker index fell for week ended September 4 — the most recent week for which the firm has complete data — though most of this decline was due to the selloff in markets that tightened financial conditions.

Daco is also tracking concerning signs in the labor market, however, where gains slowed in early September at both the national and regional level.

“Employment continued to climb on stronger job openings and increased employment at small businesses, but momentum slowed,” Daco writes. Adding that, “regional labor market recoveries have lost strength, posing a risk to consumer spending absent additional fiscal aid.”

The labor market recovery lost momentum in early September while overall activity has been resilient even amid the absence of additional fiscal stimulus. (Source: Oxford Economics)
The labor market recovery lost momentum in early September while overall activity has been resilient even amid the absence of additional fiscal stimulus. (Source: Oxford Economics)

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="But given the mid-summer conversation about a “benefits cliff” the economy has now walked off with the CARES Act expiring at the end of July, a slowing but not contracting economy is a positive and surprising development.” data-reactid=”42″>But given the mid-summer conversation about a “benefits cliff” the economy has now walked off with the CARES Act expiring at the end of July, a slowing but not contracting economy is a positive and surprising development.

Which suggests a more durable recovery is possible if either a vaccine is available earlier than expected or fiscal stimulus is made available to consumers in the months ahead.

But these positive developments are far from an all-clear that the pandemic-induced downturn is behind us and that further diligence isn’t warranted.

“Activity in the housing sector has returned to its level at the beginning of the year, and we are starting to see signs of an improvement in business investment,” Federal Reserve Chair Jerome Powell said Wednesday. “The recovery has progressed more quickly than generally expected, and forecasts from FOMC participants for economic growth this year have been revised up since our June Summary of Economic Projections.”

“Even so, overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain,” Powell said.

Adding: “A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="By&nbsp;Myles Udland, reporter and co-anchor of&nbsp;The Final Round. Follow him at&nbsp;@MylesUdland” data-reactid=”52″>By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

What to watch today

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Economy” data-reactid=”54″>Economy

  • 8:30 a.m. ET: Current account balance, second quarter (-$160.0 billion expected, -$104.2 billion during the first quarter)

  • 10:00 a.m. ET: Leading index, August (1.3% expected, 1.4% in July)

  • 10:00 a.m. ET: University of Michigan Sentiment, September preliminary (75.0 expected, 74.1 in August)

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Resurging coronavirus biggest threat to euro zone economy: economists – The Journal Pioneer

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By Shrutee Sarkar

BENGALURU (Reuters) – The resurgence in coronavirus cases is the biggest threat to the recovering euro zone economy, according to a Reuters poll of economists, who say growth and inflation are more likely to create negative surprises over the coming year than positive ones.

Around 30 million people have been infected by the virus globally, and more than 900,000 have died, triggering some of the deepest recessions on record and breaking up supply chains around the world. COVID-19 global tracker https://www.reutersagency.com/en/coverage/covid-19-global-tracker

While a strong euro zone rebound is underway as lockdown restrictions have been eased and businesses reopened, France and Spain among others in the 19-member bloc are grappling with a virus resurgence.

That is raising the possibility of renewed restrictions and lockdowns.

“A flaring in the number of COVID-19 infections over the summer months has made it very clear that if there is no effective vaccine, growth will be handicapped,” said Peter Vanden Houte, chief economist at ING.

“There is also the fear of negative second-round effects once the current recession starts to be reflected in a swelling number of unemployed…(and) we cannot exclude higher precautionary savings dampening consumption.”

A return to where the economy was before the outbreak earlier this year is not expected until at least end-2022.

That comes despite the European Central Bank’s planned 1.35 trillion euros of pandemic-related additional asset purchases and an historic 750 billion euro recovery fund from the European Union due to kick in next year.

But the concern is that no new stimulus is on the horizon, other than national governments extending worker furloughs put in place early this year as they struggle with soaring debt.

Euro zone unemployment, which finally declined just before the coronavirus struck to where it was before the last financial crisis more than a decade ago, is already rising.

Ninety percent of economists, or 37 of 41 who responded to an additional question in the Sept. 15-17 Reuters poll, said a further surge in infections was the biggest risk to the euro zone economy over the coming year.

The remaining handful of respondents cited a strong euro, and no trade deal reached between the EU and United Kingdom when the Brexit transition period expires at the end of the year.

For a graphic on Reuters Poll: Euro zone economic outlook:

https://fingfx.thomsonreuters.com/gfx/polling/jznpnlbqopl/Reuters%20Poll-%20EZ%20economic%20outlook%20-%20September%202020.PNG

The Reuters poll of over 80 economists pointed to 8.1% quarterly growth this quarter, by far the strongest on record, following an historic 11.8% contraction in Q2. That forecast was unchanged from the August poll.

Quarter-on-quarter growth is then set to slow sharply to a still-strong 2.5% in Q4, but down from 3.0% predicted last month.

In a worst-case scenario, the economy was forecast to grow 4.5% in Q3, compared to 4.0% in the last poll. The worst-case for Q4 is now just a 0.4% contraction versus a 2.0% fall in the August poll.

But over 80% of respondents said the risks to both their euro zone growth and inflation forecasts were skewed more to the downside over the coming year.

“The virus is making new waves and the economy is still far from operating at pre-COVID levels in most sectors,” said Elwin de Groot, head of macro strategy at Rabobank, who expects no growth in the final three months of this year.

“But as governments are likely to shift towards more targeted measures – rather than blanket ones – the ‘true’ economic damage may only reveal itself in the next quarters.”

Most economists have remained pessimistic about the bloc’s growth outlook since the pandemic struck, and some have lowered their inflation views even further from last month.

The consensus for this quarter was 0.1% versus 0.3% predicted a month ago, followed by stagnation the next quarter. On a full-year basis, results were broadly in line with the ECB’s staff projections, at 0.4% for 2020, 1.0% for 2021 and 1.3% for 2022.

For a graphic on Reuters Poll: Euro zone economic growth and inflation outlook:

https://fingfx.thomsonreuters.com/gfx/polling/yzdvxqdjgpx/Reuters%20Poll-%20ECB%20and%20EZ%20outlook.PNG

(For other stories from the Reuters global long-term economic outlook polls package:)

(Reporting by Shrutee Sarkar and Richa Rebello; Polling by Hari Kishan and Nagamani Lingappa; Editing by Ross Finley and Alexandra Hudson)

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