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Coranavirus Outbreak Clouds 2020 Global Economy

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(Bloomberg) — The rapid spread of the coronavirus pandemic will loom large in the minds of economists in the coming days as the number of global cases soars and the impact on commerce spreads.

While the World Health Organization didn’t recommend any restrictions on travel or trade when it declared the outbreak a global health emergency, more than two-thirds of China’s economy will remain closed as a result of the virus this week, and disruption could spread further.

The Federal Reserve and Bank of England have both indicated they are closely monitoring the pandemic, while economists are reexamining their calls for 2020 expansion. Bloomberg Economics forecasts the hit to growth will be most severe in China, and ripple across the world.

Back on the regular economic calendar, the U.S. is set to release its first jobs report for 2020 on Friday, while a raft of Fed policy makers and peers from Australia, Europe and Canada are due to speak.

Here’s what happened last week and below is our weekly wrap of what else is going on in the world economy this week.

U.S. and Canada

With Donald Trump staking his re-election bid on the strength of the U.S. economy, that topic is set to feature in his State of the Union address Tuesday. Meanwhile, officials from the Fed are back on the road speaking after their January decision to hold rates steady.

Fed Policy Ready for Headwinds

Bank of Canada Deputy Governor Carolyn Wilkins, one of the frontrunners to take the top job at the central bank later this year, speaks in Toronto Wednesday.

For more, read Bloomberg Economics full Week Ahead for the U.S.

Europe, Middle East and Africa

The euro-area economy has looked on a somewhat surer footing recently, despite a fourth-quarter stumble that may proved short-lived. Final Purchasing Managers Indexes this week will offer more insight, as will industrial production numbers from Germany and France, the region’s biggest economies. European Central Bank President Christine Lagarde, who’s been a bit more optimistic on the outlook, will have a chance to give her take when she speaks to European lawmakers on Thursday.

Russia enters the week with a sequence of economic data releases before holding its first interest-rate meeting of the year on Friday. With growth data expected to show an expansion of just 1.3% in 2019, the government has come under pressure to boost the near-stagnant economy. Inflation probably slowed to 2.5% in January, well below a target of 4% set by the Russian central bank, which may cut its key rate by 25 basis points to 6%. Polish, Romanian and Czech central bankers also meet.

In Turkey, inflation data on Monday will probably show a reading of 11.9%, leaving real interest rates in negative territory following a cumulative 1,275-point reduction over the central bank’s last five meetings — the institution held its year-end inflation projection at 8.2% on Thursday.

Asia

China returns after the Lunar New Year holiday was extended to curb the spread of a deadly new SARS-like virus. That’s likely to mark the largest remote-work experiment to date as millions of people are being asked to log on from home. The virus is set to curb travel and spending in Hong Kong, which reports fourth quarter and full-year GDP numbers on Monday that will probably show the biggest full-year contraction since 2009. Central banks in Australia, Thailand, the Philippines and India will decide on interest rates.

Latin America

Brazilian policy makers are expected to cut the benchmark interest rate by a quarter point on Wednesday in their first board meeting of the year, with the move following four previous half-point cuts. Central bank President Roberto Campos Neto has said that a food-price shock at the end of last year is passing quickly, while recent activity data fell short of analysts’ estimates.

The same day, Argentine Economy Minister Martin Guzman will meet with International Monetary Fund Director Kristalina Georgieva on the sidelines of an event at the Vatican. The South American country’s new government is looking to renegotiate billions of dollars of debt held by creditors and the IMF.

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Brazil economic activity much brisker than expected in June – Financial Post

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BRASILIA — Economic activity in Brazil rose more than expected in June, a central bank index showed on Monday, contributing to a second-quarter rally helped by a service sector rebound following the impact of the COVID-19 pandemic.

The IBC-Br economic activity index, a leading indicator of gross domestic product, rose a seasonally adjusted 0.69% in June from May, much higher than the 0.25% growth expected by economists, according to a Reuters poll.

In the second quarter, activity increased 0.57% over the previous quarter.

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The IBC-Br index was up 3.09% on a non-seasonally adjusted basis from June 2021, while in the 12 months through June it grew 2.18%, the central bank said.

Official GDP figures will be released by the statistics agency IBGE on Sept. 1.

Economy Minister Paulo Guedes recently estimated that the economy will grow above 2% this year, driven by the strength of the labor market and the normalization of economic activities that have suffered during the pandemic, with an emphasis on the services sector.

Meanwhile, private economists who started the year projecting a 0.3% rise in GDP in 2022 are now expecting 2% growth, according to a weekly central bank survey.

After the IBC-Br figures, Bank of America revised its GDP growth forecast to 2.5% from 1.5% previously, saying activity data was surprising on the upside as the service sector remained strong.

“Increase in social transfers and tax cuts should cushion the slowdown in the second half,” wrote David Beker, head of Brazil Economics at BofA.

For the second half, analysts had expected a slowdown amid aggressive monetary tightening led by the central bank to tame inflation, which has already pushed interest rates to 13.75% from a record low of 2% in March 2021. (Reporting by Marcela Ayres; Editing by Steven Grattan, Hugh Lawson and Rosalba O’Brien)

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Chinese Households’ Pivot to Thriftiness Is Bad News for World Economy – Bloomberg

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Chinese Households’ Pivot to Thriftiness Is Bad News for World Economy  Bloomberg



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Japan’s economy rebounds from COVID, growing 2.2 percent in Q2 – Al Jazeera English

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Growth driven by rise in private consumption following the lifting of pandemic curbs in March.

Japan’s economy grew an annualised 2.2 percent in the second quarter, as robust private consumption provided a boost to the country’s long-delayed recovery from the COVID-19 pandemic.

The relatively strong economic data released on Monday comes after gross domestic product (GDP) grew just 0.1 percent during the January-March period.

The growth was driven largely by a 1.1 percent rise in private consumption, which accounts for more than half of Japan’s GDP, as dining out, leisure and travel rebounded following the lifting of pandemic curbs in March.

The latest results mean Japan’s 542.12 trillion yen ($4.07 trillion) economy is now larger than it was before the pandemic hit.

The world’s third-largest economy, however, still faces an uncertain road to recovery amid slowing global growth and rising inflation, supply chain constraints, a weakening yen, and a resurgence in domestic COVID-19 infections, which have topped 200,000 daily cases in recent weeks.

In July, the International Monetary Fund cut Japan’s growth outlook for 2022 to 1.7 percent, down from 2.4 percent in April.

Japan’s economic recovery from the pandemic has lagged other countries due to weak consumption, which has been exacerbated by ongoing border controls and domestic pandemic restrictions that continued until March.

The weak recovery has turned the Bank of Japan into a global outlier, with it sticking to an ultra-loose monetary policy as other central banks raise rates to tame rising inflation.

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