By Gabriel Crossley and Kevin Yao
BEIJING (Reuters) – China will be looking to tweak its economic policies to get consumers to spend more, policy advisers in Beijing said after retail sales emerged as a weak spot in better-than-expected GDP data, underlining the need for reform.
They said that while supporting employment was key in the short run, reforms to help fatten ordinary people’s wallets were needed to boost domestic spending – a priority for President Xi Jinping’s “dual circulation” strategy to cut China’s reliance on overseas markets.
“We need to discuss ways to boost incomes,” said Yao Jingyuan, an adviser to the Chinese cabinet. “Who doesn’t spend if they’re rich?”
The advisers are influential in Beijing, and their recommendations are likely to be considered. Calls for deepening reforms to spur domestic consumption have been rising since Xi unveiled the dual circulation strategy last year.
Allowing more migration to cities, increasing the minimum wage, and easing restrictions like one on the sale of cars in big metros could be some of the policy initiatives to be considered, the advisers said.
China’s economy grew 2.3% in 2020, according to official data this week, making it likely the only major economy that expanded last year.
But retail sales fell 3.9% over the full year, marking the first contraction since 1968, and final consumption dragged on growth for the first time in at least four decades, the data showed.
(Graphic: Consumption drags on growth for first time since 1978: https://graphics.reuters.com/CHINA-ECONOMY/CHART/jznpnmxbovl/chart.png)
Worryingly for policymakers, retail sales rose just 4.6% on year in December, missing expectations and slowing for the first time since steadily accelerating from the pandemic-induced slump the previous winter.
Incomes from catering fell by 16.6% in 2020, and people’s average spending on education, culture and entertainment dropped by nearly a fifth.
Lost wages, more saving, job losses, and continued fears over COVID-19 accounted for much of the sluggish consumption, analysts said. They warned that if sustained, the slowdown could drag on economic recovery and jeopardize goals to rebalance the economy away from wasteful infrastructure investment and polluting industry.
Officials tout the vast potential of China’s market – 1.4 billion people strong, with 400 million middle class consumers – but many of them have become wary amid the pandemic, building up precautionary savings.
(Graphic: China’s household savings rise amid pandemic: https://graphics.reuters.com/CHINA-ECONOMY/CHART/nmopaoldapa/chart.png)
Policy advisers told Reuters that to boost consumption, incomes need to go up, and for that, jobs are key.
Official surveyed unemployment rates, which economic analysts say under-report actual job losses, rose sharply early in the year before subsiding to 5.2% in December. Although the export sector has seen a recent boom in hiring, analysts say labour demand remains weak in certain sectors, especially services.
“We should start with stabilising employment, because we can boost incomes of ordinary people only when employment is secured,” said Xu Hongcai, deputy director of the economic policy commission at China Association of Policy Science.
Xu said that raising minimum wages, allowing more rural residents to settle in cities, and strengthening social safety nets would help increase earnings, and so spending, in the long run.
Some regulations could also be loosened, said Yao, the cabinet adviser.
“In Beijing and big cities, we still restrict auto purchases…there are no such restrictions in London, New York or Tokyo,” he said.
LINGERING FEARS Incomes suffered under lockdowns and strict movement curbs. Some, especially migrant workers, lost months of wages. Urban disposable income growth slowed to 1.2% in 2020 from 5.0% the previous year.
Consumers chose to fill their bank accounts rather than empty their wallets. Households added 11.3 trillion yuan ($246.69 billion) in new bank savings in 2020, up from 9.7 trillion yuan the previous year, according to central bank data.
Fear of the virus, and continued small-scale outbreaks, continues to dissuade spending.
After a recent rebound in COVID-19 cases in the north of the country, around 30 million people were placed under a form of lockdown. Millions more have been asked to avoid travelling for Lunar New Year, usually a consumption hotspot.
“I won’t go out unless it’s absolutely necessary. This saves me from worry and saves me money too,” said Hou Aiping, a retired woman in her 50s who now only leaves home in Beijing to visit her parents and the supermarket.
“Even though the epidemic is contained, and I always wear my mask, I can’t guarantee I’ll be completely safe,” she said.
($1 = 6.4858 Chinese yuan renminbi)
(Additional reporting by Cheng Leng and Beijing newsroom; Editing by Raju Gopalakrishnan)
US adds a strong 379000 jobs in hopeful sign for economy – Burnaby Now
WASHINGTON — U.S. employers added a robust 379,000 jobs last month, the most since October and a sign that the economy is strengthening as confirmed viral cases drop, consumers spend more and states and cities ease business restrictions.
The February gain marked a sharp pickup from the 166,000 jobs that were added in January and the loss of 306,000 in December. Yet it represents just a fraction of the roughly 9.6 million jobs that the economy needs to regain to return to pre-pandemic levels.
The pickup in hiring lowered the unemployment rate from 6.3% to 6.2%, the Labor Department said Friday in its monthly jobs report. That is down dramatically from the 14.8% jobless rate of April of last year, just after the virus erupted in the United States. But it’s well above the pre-pandemic unemployment rate of 3.5%.
Stock prices surged on the news of solid job growth, a day after Wall Street suffered deep losses on fears that inflation and interest rates could soon be headed higher.
One year after the pandemic triggered a violent recession, economists are increasingly optimistic that hiring will accelerate in the coming months as Americans seize the opportunity to once again travel, shop, attend sporting events and visit movie theatres and restaurants. Households as a whole have accumulated a huge pile of savings after having slashed spending on those services. Much of that money is expected to be spent once most people feel comfortable about going out.
Friday’s report showed that the nation’s job growth is still being driven by a steady recovery of bars, restaurants and other leisure and hospitality establishments. Bars and restaurants, in particular, snapped back last month, adding 286,000 jobs as business restrictions eased in California and other states. That trend will likely continue as Texas this week joined some other states in announcing that it would fully reopen its economy with no restrictions.
Also hiring last month were retailers, which added 41,000 jobs, health care companies with 46,000 and manufacturers with 21,000. On the other hand, construction companies shed 61,000 jobs, likely in part because of the severe storms and power outages in Texas.
Friday’s strong jobs report, by suggesting that the economy is on the mend, could complicate President Joe Biden’s push for his $1.9 trillion economic rescue package, which is being considered by the Senate after winning approval in the House. The Biden package would provide, among other things, $1,400 checks to most adults, an additional $400 in weekly unemployment aid and another round of aid to small businesses.
One discouraging note in the February data is that last month’s net job growth came entirely from people who reported that their layoffs had been temporary. By contrast, the number of people who said their jobs were permanently gone was largely unchanged compared with January. People who have permanently lost jobs typically face a tougher time finding new work. In many cases, their former employers have gone out of business.
With so much money being pumped into the economy, Oxford Economics forecasts that growth will reach 7% for all of 2021, which would be the fastest calendar-year expansion since 1984. The Congressional Budget Office projects that the nation will add a substantial 6.2 million jobs this year, though that wouldn’t be nearly enough to restore employment to pre-pandemic levels.
Still, the size of the Biden relief package, coming as the economy is already showing improvement, has stoked fears that growth could overheat and accelerate inflation, sending borrowing costs up and possibly leading the Federal Reserve to jack up interest rates. Those fears have roiled financial markets for the past two weeks.
Fed Chair Jerome Powell sought to assuage those concerns on Thursday — without success, based on sharp selloffs in the stock and bond markets — when he suggested that any meaningful rise in inflation would likely prove temporary and that the Fed would be in no hurry to raise its benchmark short-term rate.
Nor did Powell offer any hint that the Fed would act to push back against a surge in the yield on the 10-year Treasury note, which has jumped from about 0.9% last year to 1.5% late Thursday. Still, Powell sounded some optimistic notes. Citing in part the increasing distribution and administering of coronavirus vaccines, he said, “There’s good reason to expect job creation to pick up in the coming months.”
Other recent economic reports have also suggested better times ahead. Americans sharply increased their spending at retail stores and restaurants in January, when the $600 relief checks were mostly distributed. Retail sales jumped 5.3%, after three months of declines.
Factory output also picked up that month, and demand for long-lasting goods, such as autos and aircraft, rose 3.4%, the government said last week.
Home sales have been on a tear for most of the past year, driven by low mortgage rates and the desire of many Americans for more space during the pandemic. A huge jump in the proportion of people working from home has also driven up sales, which were nearly 24% higher in January than a year earlier.
Christopher Rugaber, The Associated Press
U.S. economy adds 379,000 jobs in February as hiring speeds up – MarketWatch
The numbers: The U.S. created 379,000 new jobs in February — the biggest gain in four months — in what’s likely to be a preview of a surge in hiring in the months ahead as most people get vaccinated and the economy fully reopens.
The increase in hiring last month was concentrated at businesses such as restaurants, retailers, hotels and entertainment venues as states eased restrictions on customer limits and public gatherings. Most other industries also added workers.
Hiring was also much stronger in January than initially reported.
The official unemployment rate, meanwhile, slipped to 6.2% from 6.3%, although economists widely believe the real rate is much higher.
Federal Reserve officials peg the jobless rate at closer to 10% after adjusting the data for distortions caused by the pandemic.
The rebound in job creation in February is likely the start of a major new cycle of hiring. Warmer weather, falling coronavirus cases, rising vaccinations and another massive increase in federal stimulus are likely to act as jet fuel for the economy in the spring and summer, Wall Street pros and Fed officials say.
The increase in new jobs easily exceeded Wall Street expectations. Economists surveyed by Dow Jones and The Wall Street Journal had forecast 210,000 new jobs. Stocks rose in premarket trading.
What happened: New jobs in leisure and hospitality — restaurants, hotels, casinos, theaters and the like — surged by 355,000 last month to account for most of the hiring in February.
These companies had lost more than 500,000 jobs in December and January after coronavirus cases reached a crescendo and the weather turned cold.
Hiring is likely to spring back even stronger in the months ahead as the weather warms and Americans fell more confident traveling, dining out, going to a game or visiting a museum or amusement park.
Professional firms also added 63,000 employees — though most were temporary — while health-care providers and retailers both filled 40,000-plus jobs. Manufacturers chipped in with 21,000 new hires
Employment in construction fell by a surprising 61,000 even though companies are desperately seeking to hire. Poor weather last month was the main culprit.
Home sales have soared during the pandemic, but builders are facing a shortage of skilled workers that probably won’t ease up even if the pandemic does.
State and local governments also shed 86,000 jobs last month, mostly in education, but the decline likely reflects seasonal distortions tied to the pandemic. Private-sector hiring rose an even stronger 465,000 in February when government is excluded.
A smallish 50,000 people, meanwhile, rejoined the labor force in February, but that still means some 4.2 million people have gone missing during the pandemic. Those people are no longer counted in the official unemployment rate, making it artificially low.
The number of jobs created in January was revised up sharply to 166,000 from 49,000. The employment decline in December was raised to 306,000 from 227,000, however.
The big picture: The economy is poised to start growing by leaps and bounds again after a tough winter — if the coronavirus vaccines prove very effective.
An effective vaccine will allow states to remove all restrictions, let Americans go about their lives again without fear for their safety and give companies the incentive to hire. Fresh government financial aid will only add to the budding momentum.
What they are saying? “With vaccine distribution continuing to accelerate and with the economy in the initial stages of a reopening, the coming months should see robust gains,” said chief economist Curt Long of the National Association of Federally Insured Credit Unions.
‘The engine of economic recovery is restarting as the pandemic’s winter wave recedes, although there is still a long way to go,” said senior economist Daniel Zhao of Glassdoor. “The economy would need to add almost 1 million jobs a month for the rest of 2021 to return to pre-crisis levels by the end of the year.”
China rebounds with economic growth target above 6% – BBC News
China is aiming for an economic growth rate above 6% in 2021, after scrapping its target last year.
China’s Premier Li Keqiang announced the target on Friday at the opening of this year’s National People’s Congress.
The target marks a return to strong growth after the Covid-19 pandemic impacted the world’s second largest economy.
Although China’s economy grew last year, it only managed 2.3% growth, its weakest result in decades.
The new target highlights the Chinese economy’s strong rebound after the pandemic shutdowns led to a sharp 6.8% contraction in the first quarter of 2020.
The economy grew in the second half of 2020, and China was the only major global economy to post gains for the year, although they were slender compared to previous years.
Now the government hopes to continue that rebound.
“A target of over 6% will enable all of us to devote full energy to promoting reform, innovation, and high-quality development,” Premier Li Keqiang said.
“In setting this target, we have taken into account the recovery of economic activity.”
By some measures the target appears modest, falling well below the International Monetary Fund’s estimate of 8.1% growth for China’s economy this year.
Other analysts are also tipping stronger growth.
“The consensus for the year is about 8%-9% but this is coming from a low base. The focus is still on the quality versus the quantity of growth,” said Catherine Yeung, investment director at Fidelity International in Hong Kong.
In an analyst note, Bruce Pang from investment bank China Renaissance said the more flexible target leaves some room for structural reform and a transition to a more mature economy.
“We think it likely the target will be achieved, indicating that authorities are shifting focus to the quality of growth instead of speed,” he said.
Mr Li also set a target urban unemployment rate of around 5.5%, with a goal of more than 11 million new urban jobs, up from nine million last year.
It also set a budget deficit goal of around 3.2% of gross domestic product.
However, the finance ministry expressed concern about the state of the government budget.
“The outlook for government revenue and expenditure in 2021 appears quite grave, with even greater difficulty in balancing the budget and risks in key areas such as debt that cannot be overlooked,” it said in a report released at the start of the meeting.
Earth’s Atmosphere Can Generate a “Space Hurricane” – Universe Today
With Ansys Off 24% From Recent High, Investment Opportunity Awaits – Forbes
In Gallery 1313’s ‘Lockdown Show,’ John Ferri’s art reflects the beginnings of optimism – Toronto Star
Silver investment demand jumped 12% in 2019
Iran anticipates renewed protests amid social media shutdown
Galaxy M31 July 2020 security update brings Glance, a content-driven lockscreen wallpaper service
Business17 hours ago
BC residents will not be able to select their preferred version of the COVID-19 vaccine – BC News – Castanet.net
Health14 hours ago
Ontario to roll out next phase of COVID-19 vaccine strategy tomorrow; age and risk to be prioritized – CTV Toronto
Health23 hours ago
Ontario reports 994 new coronavirus cases; 10 more deaths – CP24 Toronto's Breaking News
Media23 hours ago
10:00 ET Media Advisory: Virtual Infrastructure Announcement in Brampton – Canada NewsWire
Science19 hours ago
Retracing the history of the mutation that gave rise to cancer decades later – Science Daily
Health19 hours ago
Ontario sees 994 new COVID-19 cases as health officials work to update vaccine rollout – CBC.ca
Sports23 hours ago
Ice Chips: Pittsburgh Penguins F Sidney Crosby remains in COVID protocol – TSN
Politics20 hours ago
'Leave the politics to the politicians,' lawyer urges judge in Meng case – Toronto Star