China’s slowing growth highlights how the virus continues to challenge the world’s economic recovery.
China’s economy took a knock in August from stringent virus controls and tight curbs on property, fueling concerns about the global recovery as countries battle to get delta outbreaks under control.
Retail sales growth slowed to 2.5% from a year ago, much lower than the 7% estimate in a Bloomberg survey of economists, as consumers cut back on spending during the summer holiday break. Construction investment contracted 3.2% in the eight months of the year, a reflection of the government’s steady tightening of property restrictions as part of a campaign against financial risk.
China’s slowing growth underlines how the spread of the delta variant of the coronavirus is challenging the world’s economic recovery from the pandemic. The slowdown in construction — which pushed China’s steel output to a 17-month low in August — is rippling across the global economy by reducing Chinese demand for commodities such as iron ore.
“Markets so far have significantly underestimated the scale of growth slowdown in the second half,” said Lu Ting, chief China economist at Nomura Holdings Inc in Hong Kong. Authorities will stick to their approach of “short-term pains in order to seek long-term gains,” and will likely maintain property curbs, he said.
China introduced stringent new curbs on travel to squash an outbreak of the delta variant from late July, leading restaurant & catering sales to contract 4.5% in August from a year ago after climbing 14.3% in the previous month. While China quickly brought the outbreak under control, a new virus cluster has developed in southern China this month, suggesting consumers will continue to remain cautious.
China’s 10-year government bond futures climbed for the first time in three days as the weak data revived expectations for policy easing. The CSI 300 Index pared its loss slightly after the data dump, down 0.3% as of 1:04 p.m. in Shanghai.
Key Highlights of Data Released by National Bureau of Statistics
- Retail sales rose 2.5% in August from a year earlier; estimate was 7%
- Industrial production increased 5.3%; estimate was 5.8%
- Fixed-asset investment in first eight months of the year gained 8.9% from same period in 2020; estimate was 9%
- Unemployment rate was unchanged at 5.1%
China’s government is refraining from broad stimulus to support the economy, with policy makers ramping up targeted programs for smaller businesses instead, and pledging fiscal support through the use of local government bonds. The PBOC maintained its measured policy approach Wednesday by rolling over its medium-term loans coming due rather than injecting more liquidity.
Many economists expect the People’s Bank of China will cut the reserve requirement ratio for banks again in coming months following a surprise reduction in July.
The NBS said in a statement that even though the economy continued to recover in August, “the international environment is complex and grim, and the impact from domestic virus outbreaks and natural disasters such as floods on the economy is showing.” The economic recovery “still needs to be solidified,” it said.
While consumption should see some snapback in September, the “economy would stay under a broad downtrend in the next couple of quarters,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “Policy should ease on the margin through faster government bond issuance and more loan quota, but it’s still too early for them to loosen the controls on property and local government debt.”
Beijing in recent months has been tightening access to financing for real estate developers, and reducing the pace of mortgage lending to home buyers as it tries to prevent the build up of financial risks and reduce its economic dependence on property. Growth in property investment slowed and property sales weakened in August.
At the same time, global demand has remained strong, supporting China’s vast industrial sector despite port congestion problems and high shipping costs. China posted record monthly export figures in August as U.S. and European buyers increased their orders before the Christmas shopping season.
However, there are risks to manufacturers from rising costs, and the continued shortage of computer chips, which has been especially damaging for the car industry. Beijing is also trying to limit the growth of heavy industry as part of a drive to reduce emissions.
“The recovery could see further slowdown amid fresh Covid outbreaks,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong. “A cross-cyclical combination of targeted tightening and easing is needed.”
Dialogue NB Seeks To Rebuild An Inclusive Economy Through Conversation – Huddle – Huddle Today
MONCTON – Dialogue NB CEO Nadine Duguay-Lemay says the business community has an integral place in a conversation about building a more equal and just New Brunswick.
That very conversation will take place on September 27 in Moncton with Dialogue Day 2021.
“When we talk about anti-racism, notions of equality, diversity, acceptance and inclusion and all those notions we celebrate, it’s not something we can do on our own,” said Duguay-Lemay.
“The business community actively needs to participate, if anything, because those topics concern them. That’s why you see so many business support the event.”
The volunteer-led non-profit organization plans to host an inclusive conversation on Monday at Moncton’s Crowne Plaza and virtually, online.
Dedicated to building social cohesion in New Brunswick, the sold-out event will feature discussions about racial justice in the workplace, rethinking the economy as it recovers from the pandemic and how to be a better ally to Indigenous people.
The event, which has sold out of in-person seats, will feature Jeremy Dutcher, a Wolastoq singer, songwriter, composer, musicologist and activist from Tobique First Nation, as its keynote speaker.
The mandate of the discussions is to ensure everyone feels heard, valued and that they belong, making diversity an asset – something Duguay-Lemay considers imperative to a functional economy.
“What I’ve found is that people don’t like to go into uncomfortable discussions. Some people want to embrace social cohesion but don’t know where to start, or are afraid of saying the wrong thing. This is our expertise – we’re good at the art of dialogue and multiple viewpoints at one table,” she said.
“We need a lot of different voices and perspectives at the table to rethink the system for the wellbeing of all. These discussions shouldn’t be happening in isolation.”
Duguay-Lemay said New Brunswick faces many economic challenges, noting a diverse workforce will help recover from those challenges.
She stressed that the business community needs to work toward a goal of truth and reconciliation, and in a call with Huddle, rebutted the metaphor of everyone being on the same boat during the pandemic.
“I’d argue we’re all facing the same storm, but not in the same boat. Some people are in yachts and some are in little boats about to capsize,” she said.
Other voices are emerging – female and Indigenous, for example – looking to address poverty and wage inequality and unfairness, employment access, systemic racism and environmental degradation, noted Duguay-Lemay, adding that the province’s 4,418 non-profits need more recognition as an economic partner.
“Inclusion is embedded in our DNA as Canadians. We’re already a country and province that abides by those laws, so it’s important to look at inclusion,” she said.
The conversations will also focus on racial justice in the workplace, how the pandemic hurt Indigenous and black Canadian employment, versus non-minorities, access to employment – and the social barriers that exist for racialized workers.
“I invite all organizations, employers, public and non-profits to look at their practices in place and ask if they walk the talk for truth and reconciliation. We’re all treaty people – how do we uphold this?” said Duguay-Lemay.
“We want to at least demonstrate to Indigenous people in New Brunswick that we hear their plight and are serious about truth and reconciliation.”
Greater social cohesion is the best step forward, Duguay-Lemay noted, adding that real dialogue can build an economy that works for everyone.
She said matters of racial justice in the workplace – and specific matters, such as owners objecting to the declaration of September 30 as a statutory holiday, contending that they can’t afford it – will be among the economic issues for which solutions will be sought.
The conversation will also focus on how the province’s recovery from the pandemic has exposed inequalities in the economy.
Duguay-Lemay stressed the need to learn from the way the pandemic exposed inequalities, and rethink a system that works for everyone.
“We need to think differently and it really shouldn’t be based on the interests of the privileged,” said Duguay-Lemay.
“As employers are looking to attract and retain talent, we hear about skill shortages all the time. This becomes a matter of attracting talent, whether from newcomers or tapping into Indigenous communities, how can we make our workplaces more equitable and inclusive?
The event will feature an “eclectic” round table of specialists, artists, activists and experts from numerous sectors, and identities in New Brunswick, with opportunities for networking, inspiration for change with concrete examples and skills to help become a social leader.
With the economy, we may be heading back to the 1970s – The Globe and Mail
Kenneth Rogoff, a former chief economist of the International Monetary Fund, is professor of economics and public policy at Harvard University.
With the disastrous U.S. exit from Afghanistan, the parallels between the 2020s and the 1970s just keep growing. Has a sustained period of high inflation just become much more likely? Until recently, I would have said the odds were clearly against it. Now, I am not so sure, especially looking ahead a few years.
Many economists seem to view inflation as a purely technocratic problem, and most central bankers would like to believe that. In fact, the roots of sustained inflation mainly stem from political economy problems, and here the long list of similarities between the 1970s and today is unsettling.
In the United States, following a period in which the president challenges institutional norms (Richard Nixon was the 1970s version), a thoroughly decent person takes office (back then, Jimmy Carter). Abroad, the U.S. suffers a humiliating defeat at the hands of a much weaker, but much more determined adversary (North Vietnam in the 1970s, the Taliban today).
On the economic front, the global economy suffers a lingering productivity slowdown. According to the Northwestern University economist Robert Gordon’s magisterial account of innovation and growth, The Rise and Fall of American Growth, the 1970s marks a turning point in U.S. economic history, thanks to a sharp slowdown in meaningful economic innovation. Today, even if productivity pessimists grossly underestimate the phenomenal gains the next generation of biotech and artificial intelligence will bring, a large body of work finds that productivity growth has been slowing in the twenty-first century, and now the pandemic looks to be inflicting another heavy blow.
The global economy suffered a massive supply shock in the 1970s, as Middle East countries massively hiked the price of oil they charged the rest of the world. Today, protectionism and a retreat from global supply chains constitute an equally consequential negative supply shock.
Finally, in the late 1960s and 1970s, huge increases in government spending were not matched by higher taxes on the wealthy. The spending increases stemmed in part from president Lyndon Johnson’s “Great Society” programs in the 1960s, later amplified by the soaring cost of the Vietnam War. In recent years, first the Trump tax cuts, then pandemic-related catastrophe relief, and now progressive plans to expand the social safety net have hit the federal budget hard. Plans to fund these costs by raising taxes only on the rich will likely fall far short.
It is true that despite all these similarities, today’s independent central banks stand as a bulwark against inflation, ready to raise interest rates if inflation pressures seem to be getting out of hand. In the 1970s, only a few countries had independent central banks, and in the case of the U.S., it did not act like one, fuelling inflation with massive monetary expansion. Today, relatively independent central banks are the norm across much of the world. It is also true that today’s ultralow global real interest rates provide rich-country governments a lot more room to run deficits than they had in the 1970s.
On the other hand, the challenges of providing for aging populations has become vastly more difficult over the past five decades (at least in advanced economies and China). Underfunded public pension schemes arguably are a much larger threat quantitatively to government budget solvency than debt. At the same time, social pressures to increase government spending and transfers have exploded across the world, as inequality becomes more politically salient for many countries, and improving growth less so. And confronting climate change and other environmental threats will almost certainly put additional pressure on budgets and slow growth.
Sharply rising government debts will inevitably make it more politically painful for central banks to raise nominal interest rates if global real rates start turning upward. High debts are already a reason why some central banks today will hesitate to raise interest rates if and when postpandemic normalization occurs. Private debt, which has also soared during the pandemic, is perhaps an even bigger problem. Widespread private defaults would eventually have a huge fiscal impact via lower tax collection and higher social safety net costs.
Today’s economic challenges are certainly solvable, and there is no reason why inflation should have to spike. Leading central bankers today such as Jay Powell of the U.S. Federal Reserve and Christine Lagarde of the European Central Bank are a far cry from pliable Fed Chair Arthur Burns in the 1970s. They both have superb staffs to support them. Yet all central banks still face constant pressures, and it is hard for them to stand alone indefinitely, especially if politicians become weak and desperate.
America’s humbling defeat in Afghanistan is a big step toward recreating the perfect storm that led to slow growth and very high inflation of the 1970s. A few weeks ago, a little inflation seemed like a manageable problem. Now, the risks and the stakes are higher.
Copyright: Project Syndicate, 2021. www.project-syndicate.org
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CANADA STOCKS – TSX rises 0.3% to 20,461.93
* The Toronto Stock Exchange‘s TSX rises 0.30 percent to 20,461.93
* Leading the index were BlackBerry Ltd <BB.TO>, up 10.1%, Bombardier Inc, up 7.4%, and Capstone Mining Corp, higher by 5.8%.
* Lagging shares were Equinox Gold Corp, down 5.7%, Centerra Gold Inc, down 5.4%, and Eldorado Gold Corp, lower by 5.1%.
* On the TSX 107 issues rose and 126 fell as a 0.8-to-1 ratio favoured decliners. There were 8 new highs and 11 new lows, with a total volume of 252.5 million shares.
* The most heavily traded shares by volume were Bombardier Inc, Tc Energy Corp and Cenovus Energy Inc.
* The TSX’s energy group rose 3.72 points, or 2.8%, while the financials sector climbed 3.74 points or 1.0%.
* West Texas Intermediate crude futures rose 1.4%, or $1.01, to $73.24 a barrel. Brent crude rose 1.35%, or $1.03, to $77.22 [O/R]
* The TSX is up 17.4% for the year.
This summary was machine-generated on September 23 at 21:23.
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