Coronavirus Economic Toll Grows in Asia and Europe - Foreign Policy

Economy

Coronavirus Economic Toll Grows in Asia and Europe – Foreign Policy

Published

4 years ago

February 18, 2020

Harry Miller

The cascading economic impact of the new coronavirus outbreak in China is becoming more apparent worldwide, with Apple’s surprise cut to its sales forecast due to supply chain disruptions spooking global markets and Asian governments downgrading growth prospects. German investor sentiment, meanwhile, is collapsing amid fears the outbreak will kneecap the incipient recovery in global manufacturing.

The fallout from the outbreak of the virus and China’s efforts to contain it—with more than 70,000 known cases and more than 1,800 deaths so far—comes at a particularly bad time for economies like Japan and Germany, which were just beginning to recover after a year of global trade tensions weighed on their manufacturing and exports. The virus has hit the global automotive industry particularly hard, which has a nasty knock-on effect not just inside China but also in Japan, South Korea, Germany—and potentially even the United States.

Despite China’s insistence that the rate of new infections is stabilizing, alongside an ostensible return to business earlier this month, the economic damage is most apparent inside China. Some sectors, like automobiles, are still all but shuttered as factories deal with worker absences and supply chain shortages and most car dealers remain closed. Other sectors, including mining, travel, construction, and retail, are also taking a big hit as Chinese consumers and workers, limited by travel restrictions and fears of infection, have halted most of their usual activity.

“It seems increasingly likely that February will prove to be an economic write-off for China,” said the commodities consultancy Wood Mackenzie in a note.

Most forecasters expected the Chinese economy to take a big hit to growth in the first quarter before recovering—thanks to government-fueled stimulus—later in the year. But sentiment about China’s growth prospects is souring: The new Bank of America fund managers survey shows top investors expect Chinese GDP growth rates to stabilize just over 5 percent per year for the next three years, a big drop from last year’s already sluggish 6 percent and a far cry from the halcyon days of double-digit growth less than a decade ago.

Chinese recovery could prove elusive despite Beijing’s efforts to boost lending and lower interest rates, Wood Mackenzie said. Small and medium-sized businesses were meant to keep paying salaries for absent workers during the shutdown, but many won’t be able to as their own revenues are squeezed. That means less disposable income for consumers down the road—turning what should have been a temporary pause in domestic demand for consumer goods into potential permanent demand destruction, the consultancy said.

And even though most of the virus infections and deaths have occurred inside China, the economic fallout is becoming increasingly visible among its Asian neighbors. On Tuesday, South Korean President Moon Jae-in essentially declared an economic emergency, calling for desperate measures to limit the damage to an economy deeply intermeshed with China’s. Singapore, for its part, slashed its growth outlook this year and is planning a multibillion-dollar stimulus package to offset lost economic activity. Thailand and Malaysia, too, have cut their own growth expectations, and Malaysia is planning an economic stimulus of its own to contain the damage.

But Japan, which has the most virus cases outside China, might be facing the biggest challenges after an already dismal fourth quarter showed a shrinking economy, with the biggest contraction in more than five years. Japanese automakers like Toyota and Nissan have seen output disrupted both at Chinese factories and at home, while inbound Chinese tourism is paralyzed for now. That raises the real risk of a recession for Japan, which just launched a huge economic stimulus package late last year and may need to prime the pump even further to avoid a full-blown crisis.

Even further afield, the virus is taking its toll. Chinese companies working on projects for the Belt and Road Initiative around Southeast Asia will almost certainly suffer delays and higher costs as supply-chain and worker disruptions percolate through to projects on the ground. Brazil, which relies on the Chinese market as its largest trading partner, will likely see slower growth this year due to the fallout from the outbreak. And, of course, the slowdown will likely derail U.S. plans to massively increase exports of farm produce, energy, and manufactured goods to China, which could delay any real recovery in the distressed Farm Belt and Rust Belt.

And Europe, too, is starting to worry. European automakers such as Volkswagen have already seen production affected at factories inside China, and now there are growing concerns of additional supply chain disruptions that could affect manufacturing in European plants.

Investors in Germany fear the worst, after a dismal year for Europe’s biggest economy, mired in a manufacturing slump thanks to a dire outlook for its key auto sector. On Tuesday, the ZEW survey of German investors showed a collapse in sentiment, with fears that the virus and its knock-on effects in China will upend global trade and hamstring Germany’s export-led recovery.

The gloomy outlook briefly sent the euro to almost three-year lows against the dollar—which, given U.S. President Donald Trump’s constant tirades against unfair competition from lesser-valued foreign currencies, only threatens to ratchet up trans-Atlantic trade tensions even further.

Let’s block ads! (Why?)

Source link

Economy

Japanese government maintains view that economy is in moderate recovery – ForexLive

Published

2 hours ago

April 23, 2024

Harry Miller

High risk warning:

Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading and seek advice from an independent financial or tax advisor if you have any questions.

Advisory warning:

FOREXLIVE™ is not an investment advisor, FOREXLIVE™ provides references and links to selected news, blogs and other sources of economic and market information for informational purposes and as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the blogs or other sources of information. Clients and prospects are advised to carefully consider the opinions and analysis offered in the blogs or other information sources in the context of the client or prospect’s individual analysis and decision making. None of the blogs or other sources of information is to be considered as constituting a track record. Past performance is no guarantee of future results and FOREXLIVE™ specifically hereby acknowledges clients and prospects to carefully review all claims and representations made by advisors, bloggers, money managers and system vendors before investing any funds or opening an account with any Forex dealer. Any news, opinions, research, data, or other information contained within this website is provided on an “as-is” basis as a general market commentary and does not constitute investment or trading advice, and we do not purport to present the entire relevant or available public information with respect to a specific market or security. FOREXLIVE™ expressly disclaims any liability for any lost principal or profits which may arise directly or indirectly from the use of or reliance on such information, or with respect to any of the content presented within its website, nor its editorial choices.

Disclaimer:

FOREXLIVE™ may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Finance Magnates CY Limited

Adblock test (Why?)

Source link

Economy

Can falling interest rates improve fairness in the economy? – The Globe and Mail

Published

3 hours ago

April 23, 2024

Harry Miller

The ‘poor borrower’ narrative rules in media coverage of the Bank of Canada and high interest rates, and that’s appropriate.

A lot of people have been financially slammed by the rate hikes of the past couple of years, which have made it much more expensive to carry a mortgage, lines of credit and other borrowing. The latest from the Bank of Canada suggests rate cuts will come as soon as this summer, which on the whole would be a welcome development. It’s not just borrowers who need relief – the boarder economy has slowed to a crawl because of high borrowing costs.

But high rates are also a big win for some people. Specifically, those who have little or no debt and who have a significant amount of money sitting in savings products and guaranteed investment certificates. The country’s most well-off people, in other words.

Lower rates will mean diminished returns for savers and less interest paid by borrowers. It’s a stretch to say lower rates will improve financial inequality, but they do add a little more fairness to our financial system.

Wealth inequality is often presented as the chasm between well-off people able to pay for houses, vehicles, trips and high-end restaurant meals and those who are driving record use of food banks and living in tent cities. High interest rates and inflation have given us more nuance in wealth inequality. People fortunate enough to have bought houses in recent years are staggering as they try to manage mortgage payments that have risen by hundreds of dollars a month. You can see their struggles in rising numbers of late payments and debt defaults.

Rates are expected to fall in a measured, gradual way, which means their impact on financial inequality won’t be an instant gamechanger. But if the Bank of Canada cuts 0.25 of a percentage point off the overnight rate in June and again in July, many borrowers will start noticing how much less interest they’re paying, and savers will find themselves earning less.

Subscribe to Carrick on Money

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

Rob’s personal finance reading list

Snowballs and avalanches

A look at two strategies for paying off debt – the debt avalanche and the debt snowball. I’ll go with the avalanche.

How not to ruin your kitchen countertop

Anyone who has renovated a kitchen lately knows how expensive stone countertops can be. Look after yours by protecting it from a few common kitchen items.

What you need to know about stock market corrections

A helpful explanation of stock market corrections. It seems an opportune time to look at corrections, given how volatile stocks have been lately. Like scouts, investors should always be prepared.

Put that snack back

Food inflation requires more careful grocery shopping. Here’s a roundup of food products – cookies, snacks, ice cream – that don’t taste as good as they used to. Food companies have always adjusted their recipes from time to time. Is this happening more because of inflation’s impact on raw material prices? A U.S. list – most products are available are familiar to Canadians, too.

Ask Rob

Q: I have Tangerine children’s accounts for my kids. Can you suggest a better alternative?

A: The rate on the Tangerine children’s account is 0.8 per cent, which actually compares well to the big banks and their comparable accounts. For kids aged 13 and up, check out something new called the JA Money Card.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

Tools and guides

A comprehensive guide on how to build a good credit score.

In the social sphere

Social Media: An offbeat way of fighting high food costs

Watch: Is now the hardest time ever to buy a home?

Money-Free Zone: Singer-songwriter Maggie Rogers has a new album called Don’t Forget Me and it’s generating some buzz because it’s a great listen. Smooth vocals and a laid back countryish vibe that hits a faster pace on one of my favourite cuts, Drunk.

More PF from The Globe

– He keeps ‘a few thousand in crisp new bills’ at home – is that a good idea?

– The pension pivot: Employers recognizing that workers need help with debt as much as retirement

– Her bond ETF is ‘a dud and not promising at all’ – should she sell?

– Despite high fees, Canadians remain perplexingly loyal to mutual funds. Here’s why

More Rob Carrick and money coverage

Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.