China’s economic recovery is vulnerable to losing momentum as key trading partners from Japan to the U.S. struggle with resurgences of the deadly coronavirus and resort to fresh measures to control its spread.
While the world’s second-largest economy returned to growth in the second quarter amid relative success in containing the virus, much of that momentum relied on state-driven industry as consumers remain cautious.
“The Covid-19 situation continues to deteriorate in parts of the world,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “This may weaken demand for China’s goods and services and is a main risk facing China’s economy.”
Officials nodded at the global risks after a slew of data Thursday showed a steady but uneven recovery.
Gross domestic product expanded 3.2% in the three months to June from a year ago, reversing a 6.8% decline in the first quarter and beating the median forecast of 2.4%. Output in the first half was still down 1.6% on the same period in 2019.
In an indication of the mixed recovery, industrial output rose 4.8% in June from a year earlier — matching estimates — yet retail sales shrank 1.8%, much weaker than a projected 0.5% increase. At the same time fixed-asset investment shrank 3.1% in the first half of the year, versus a forecast drop of 3.3%.
Liu Aihua, spokeswoman for the National Bureau of Statistics in Beijing, told reporters that the continued spread of the virus globally will remain a key constraint on any domestic recovery.
“It is difficult to restart the world economy and trade,” she said, adding that “the recovery of domestic demand is restricted to a certain extent currently.”
To be sure, exports and imports both rose in June, signaling a firmer footing at home and abroad and which some analysts say points to an improving picture still to come.
“I think the economic recovery in China will continue in the next few quarters, even when export growth is facing some headwinds.” said Bo Zhuang, chief China economist at research firm TS Lombard.
Still, data on global growth continues to disappoint. The U.K. economy’s 1.8% expansion in May was much weaker than expected. While a ZEW gauge of current conditions in Germany improved in July, confidence for the next six months slipped. The Bank of Japan warned that the economy remains in an “extremely severe situation.”
Hopes for containing the virus are being strained as infections continue to spread around the world, including places like Australia and Hong Kong where it had been brought under control, pushing global cases above the 13.5 million mark.
Australia’s second most populous state — Victoria — recorded its biggest spike in coronavirus cases Thursday, a week after it was placed into partial lockdown as it’s gripped by a second wave of infections.
The virus continues to flare across the U.S., with Texas reporting a record Covid-19 deaths and almost 11,000 new cases, and California seeing near-record surges.
None of which bodes especially well for China, which needs export growth to return to a sustainable expansion.
Private and external demand are the two biggest sources of uncertainty for the second half of the year.
Private companies cut back on investment in the first six months while spending by state-owned firms saw a big jump in June, rising 2.1% in the first six months after falling 1.9% through May. Manufacturing investment was down almost 12%.
A drop in the surveyed jobless rate drew caution that the reading doesn’t capture the full labor market and that tens of millions may still be out of work due to the pandemic.
What Bloomberg’s Economists Say
China’s economy bounced back strongly in 2Q – but now the challenge will be to sustain the recovery. “Continued momentum in June production bodes well for growth in 2H. But weak consumer spending remains a serious, persistent drag.”
— Chang Shu and David Qu
See full note here
Simmering geopolitical tensions with the U.S. are another risk to both China’s exports and manufacturing investment, while the risk of a second wave of the virus cannot be ruled out.
“A bumpy and uneven reopening in other countries implies weaker external demand, which will likely become a drag on industrial activity growth in China,” said Helen Qiao, chief Greater China economist at Bank of America.
©2020 Bloomberg L.P.
Remarks by President Trump on the Economy – Whitehouse.gov
James S. Brady Press Briefing Room
12:31 P.M. EST
THE PRESIDENT: Well, thank you very much. And I just want to congratulate everybody. The stock market, Dow Jones Industrial Average just hit 30,000, which is the highest in history. We’ve never broken 30,000. And that’s despite everything that’s taken place with the pandemic. I’m very thrilled with what’s happened on the vaccine front. That’s been absolutely incredible. It’s — nothing like that has ever happened medically. And I think people are acknowledging that, and it’s having a big effect.
But the stock market has just broken 30,000. Never been broken, that number. That’s a sacred number: 30,000. Nobody thought they’d ever see it. That’s the ninth time since the beginning of 2020, and it’s the 48th time that we’ve broken records in — during the Trump administration. And I just want to congratulate all the people within the administration that worked so hard. And most importantly, I want to congratulate the people of our country, because there are no people like you.
Thank you very much, everybody. Thank you.
12:32 P.M. EST
China’s Li Sees Economy Returning to ‘Proper’ Range Next Year – Yahoo Canada Finance
The Canadian Press
NEW YORK — Best Buy Co. reported fiscal third-quarter results that blew through analysts’ expectations as the nation’s largest consumer electronics retailer enjoyed surging demand for items like home theatre and appliances that help people learn, cook, work and connect in their homes during the pandemic.
The Richfield, Minnesota-based retailer, said that third-quarter profits rose 33% while sales were up 21%. Sales at stores opened at least a year rose 23%, while online sales in the U.S. surged 174%.
Still, shares fell 5% in Tuesday morning trading as Best Buy warned that sales could slow down during the current quarter as the number of virus cases surge.
“As we start the fourth quarter, the demand for the products and services we sell remains at elevated levels, but similar to last quarter, it continues to be difficult for us to predict how sustainable these trends will be,” Matthew Bilunas, Best Buy’s chief financial officer, told analysts during the call. “In fact, we are seeing COVID cases surge throughout the U.S. and Canada at a time of significant holiday volume through our stores, online and supply chain. “
Bilunas also noted other factors such as potential government stimulus, the risk of continued high employment and the availability of inventory like computers to match customer demand.
Best Buy joins big box stores like Walmart, Target, Home Depot and Lowe’s in reporting strong fiscal results. Unlike mall-based stores and other businesses that sell non-essentials, big box retailers were allowed to stay open during the lockdown in the spring and have all seen their dominance increase as consumers focus on necessities and home-related activities.
Before the pandemic, Best Buy had expanded its services to such options as at-home consulting and same-day delivery. It also sped up its online shipping. But the pandemic has forced Best Buy to adjust its operations and launch new shopping experiences that provide more convenience and safety for customers.
Early fall, Best Buy began using 250 of its stores as fast-shipping hubs for online orders. It’s now adding 90 more locations during the holiday period. It says its goal is to have all 340 stores ship more than 70% of its ship-from-store units during the holiday quarter. It’s also testing new store formats as it transforms locations to fulfilment hubs.
For example, in four Minneapolis locations, Best Buy reduced its square footage for shopping to 15,000 square feet from an average of 27,000. The product assortment on the sales floor will still include the primary categories these locations featured before the remodel, but instead the focus will be on the most popular items, the retailer said. The remodels will result in increased space for staging product for in-store pickup and to help ship-from-store transactions, as well as provide the ability to stage inventory for items that may not be on the sales floor.
Best Buy reported fiscal third-quarter profit of $391 million, or $1.48 per share, compared with $293 million, or $1.10 per share, in the year-ago period. Earnings, adjusted for restructuring costs and amortization costs, were $2.06 per share.
The results exceeded Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.76 per share.
The consumer electronics retailer posted revenue of $11.85 billion in the period, also beating Street forecasts. Eight analysts surveyed by Zacks expected $11.02 billion.
Shares fell $6.69 to $1150 in late morning trading. Shares have increased 39% since the beginning of the year, while the S&P 500 index has increased 11%. The stock has increased 69% in the last 12 months.
Elements of this story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on BBY at https://www.zacks.com/ap/BBY
Anne D’Innocenzio, The Associated Press
German economy grew by 8.5% in third quarter, but recession fears grow – The Guardian
BERLIN (Reuters) – Germany’s gross domestic product grew by a record 8.5% in the third quarter as Europe’s largest economy partly recovered from an unprecedented plunge caused by the first wave of the COVID-19 pandemic in spring, the statistics office said on Tuesday.
The stronger-than expected rebound was mainly driven by higher household spending and soaring exports, the office said.
“This enabled the German economy to make up for a large part of the massive decline in gross domestic product caused by the coronavirus pandemic in the second quarter of 2020,” it added.
The reading marked an upward revision to an earlier flash estimate of 8.2% growth, and followed a 9.8% plunge in the second quarter.
The outlook is clouded by a second wave of coronavirus infections and a partial lockdown to slow the spread of the disease. Restaurants, bars, hotels and entertainment venues have been closed since Nov. 2, but shops and schools remain open.
Chancellor Angela Merkel and regional state premiers are planning to extend the “lockdown-light” on Wednesday until Dec. 20, according to a draft prepared for their meeting.
A contraction in the service sector is expected to weigh heavily on gross domestic product in the fourth quarter, while lockdown measures in other countries are likely to hit export-oriented manufacturers as well.
DIW economist Claus Michelsen said a decline in economic output was therefore on the cards, with initial estimates indicating a GDP drop of around 1% in the final quarter.
“Germany and many important trading partners are likely to slide back into recession,” Michelsen said.
(Reporting by Michael Nienaber and Rene Wagner; Editing by Riham Alkousaa and EKevin Liffey)
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