Feeling a little dread about the economy? You're not alone - CNN

Economy

Feeling a little dread about the economy? You're not alone – CNN

Published

1 year ago

May 5, 2022

Harry Miller

A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.

(CNN)There are plenty of reasons for that feeling of economic doom that’s going around:

Worst start for the stock market in 80-plus years.
Highest inflation in 40-plus years.
Largest single interest rate hike in 20-plus years.
Dimmest public view of the US economy in 10-plus years.

And there’s very little President Joe Biden or anyone else can do but sit back and watch like the rest of us.

The stock market has been creating its own reality for years.
Energy prices are set by OPEC, which isn’t increasing oil production to anybody’s liking quite yet.
The supply chain problems emanate from China, which has its own economic troubles.
The interest rate hike announced Wednesday by the Federal Reserve, which operates independently from the White House, will make it harder for home and car buyers and businesses to get access to cheap money.

The Fed’s rate hike of half a percentage point is large, which helped push stocks lower Thursday. But the federal funds target rate, which now stands at 1%, is still historically low and hasn’t been above 5% since before the Great Recession.

CNN’s Matt Egan writes that the Fed could raise its rates to at least 3% by the end of the year to combat inflation. He notes the rate peaked at 22% in 1981 — which seems bonkers today — as Fed officials went scorched-earth to combat runaway inflation back then.

Higher rates could be good for savers, he writes, and challenge the stock market, which he says has “become accustomed to — if not addicted to — easy money.”

How will higher rates affect you?

Mortgage rates are up 2 percentage points, from below 3% a year ago to more than 5%, the highest since 2009, reports CNN’s Anna Bahney.

This is likely driving some homebuyers from the market, and for others, creating a mad dash to get something and lock in a rate. Housing prices, theoretically, will cool … eventually.

Interest rate hikes to fight inflation

Higher rates are going to make borrowing more expensive — even though the hike is the Fed’s answer to everything else already getting more expensive. It’s the tough medicine the Fed’s economists have prescribed to cool the inflation instigated by a chain reaction of factors:

Supply chain kinks that won’t straighten out.
Energy and food market problems created by Russia’s war in Ukraine.
New Covid-19 lockdowns in China.

Presidents get the blame

None of those explanations will shield Biden from shouldering blame. A majority of US adults in a new CNN poll say the President’s policies have hurt the economy, and 8 in 10 say the government isn’t doing enough to combat inflation.

And it won’t do any good for Biden to simply focus on the many bright spots in the US economy — like an extremely low unemployment rate and the continued comfort that millions of Americans feel to quit their jobs.

This is the dichotomy for Biden and policymakers. There’s a sense of dread, but a lack of worry. Americans are spending money, feeling comfortable enough to quit their jobs, and the housing and car markets have not yet started to tank.

The economy is still humming

In his recent piece on the stock market’s worst start to a year since 1939, CNN’s Paul R. La Monica writes, “Stagflation worries persist, but so far, it’s all ‘flation’ and no ‘stag.’ “

Wait, what?

He writes: “Although confidence and sentiment measures have been declining due to inflation concerns, retail sales remain strong, a phenomenon that some economists have dubbed ‘revenge spending’ following two brutal pandemic years. And as far as corporate profits go, actions speak louder than words.”

There are signs that job growth, however, has started to slow, and April jobs data, set to be released on Friday by the Bureau of Labor Statistics, will be much scrutinized.

What Matters term of the day: ‘Double-dip recession’

From another La Monica story:

Some economists and market strategists now worry that a brief recession is inevitable because of these first few rate hikes.

But if the Fed takes a victory lap too soon and slows the pace of future rate increases, the risk is that inflation could come roaring back and lead to another longer and deeper downturn.

That’s the dreaded double-dip recession scenario. In 1980, the economy had a short recession that lasted just six months, followed by a 16-month downturn that stretched from the summer of 1981 through the fall of 1982.

CNN’s Stephen Collinson writes smartly about the difficulty in this for Biden, whose Democratic Party is facing a very bad November if Americans are sour on the economy as they vote in the midterm elections.

White House says look at the economy with more nuance

On CNN’s “New Day,” Brianna Keilar asked Jared Bernstein, a member of Biden’s Council of Economic Advisers, if the President was out of touch on the economy.

“Not at all,” he said, arguing Biden will mention inflation every time he talks about the economy.

However, Bernstein argued that the numbers suggest people are doing better than the dreadful perception.

“We have a couple of things going on at the same time,” Bernstein said. “We have households experiencing extreme discomfort, something the President is acutely attuned to regarding inflation. But we also have those households hitting this period from a position of strength based on their balance sheets, based on the job market.”

What’s Biden doing?

Bernstein argued Biden is doing everything he can to ease inflation by smoothing the supply chain with changes at US ports, releasing oil from the US Strategic Petroleum Reserve and more.

None of those efforts, on their own, are going to solve inflation, which is Biden’s problem. He can do everything he can, and it still may not feel like he’s accomplished much.

Adblock test (Why?)

Source link

Economy

Euro zone economy likely contracted in third quarter amid waning demand, survey suggests – The Globe and Mail

Published

42 mins ago

October 4, 2023

Harry Miller

We use cookies and data to

Deliver and maintain Google services
Track outages and protect against spam, fraud, and abuse
Measure audience engagement and site statistics to understand how our services are used and enhance the quality of those services

If you choose to “Accept all,” we will also use cookies and data to

Develop and improve new services
Deliver and measure the effectiveness of ads
Show personalized content, depending on your settings
Show personalized ads, depending on your settings

If you choose to “Reject all,” we will not use cookies for these additional purposes.

Non-personalized content is influenced by things like the content you’re currently viewing, activity in your active Search session, and your location. Non-personalized ads are influenced by the content you’re currently viewing and your general location. Personalized content and ads can also include more relevant results, recommendations, and tailored ads based on past activity from this browser, like previous Google searches. We also use cookies and data to tailor the experience to be age-appropriate, if relevant.

Select “More options” to see additional information, including details about managing your privacy settings. You can also visit g.co/privacytools at any time.

Adblock test (Why?)

Source link

Economy

Sub-Saharan Africa Economic Growth to Slow to 2.5% in 2023, World Bank Says

Published

10 hours ago

October 4, 2023

Harry Miller

JOHANNESBURG: Sub-Saharan Africa’s economic growth is expected to slow this year, dragged down by slumps in heavyweights South Africa, Nigeria and Angola, the World Bank said on Wednesday.
Regional growth will slow to 2.5% in 2023 from 3.6% last year, the bank said in a report, before rebounding to a projected 3.7% next year and 4.1% in 2025.

In per capita terms, the region has not recorded positive growth since 2015, as African countries’ economic activity has failed to keep pace with their rapid increase in population.
Some 12 million Africans are entering the labour market each year, the World Bank wrote in its twice-yearly “Africa’s Pulse” report. But current growth patterns generate just 3 million jobs in the formal sector.

“The region’s poorest and most vulnerable people continue to bear the economic brunt of this slowdown, as weak growth translates into slow poverty reduction and poor job growth,” Andrew Dabalen, the bank’s chief economist for Africa, said.
More than half of the region’s countries – 28 out of 48 – have seen their 2023 growth forecasts revised downward from the World Bank’s April estimates.
The continent’s most developed economy, South Africa, which is facing its worst energy crisis on record, is expected to grow just 0.5% this year.

Economic growth in top oil producers Nigeria and Angola is expected to slow to 2.9% and 1.3% respectively.
Sudan, which is in the midst of a major internal armed conflict that has destroyed infrastructure and brought the economy to a standstill, is expected to be hit by a 12% contraction, the Bank said.
Excluding Sudan, regional growth would be 3.1%.
“The region is projected to contract at an annual average rate per capita of 0.1% over 2015-2025, thus marking a lost decade of growth in the aftermath of the 2014-15 plunge in commodity prices,” the report stated.
While sub-Saharan inflation is expected to ease to 7.3% this year from 9.3% in 2022, it remains above central bank targets in most countries.
Meanwhile, recent military coups in Niger and Gabon in the wake of army takeovers in Guinea, Mali and Burkina Faso, as well as armed conflicts in Democratic Republic of Congo, Ethiopia, Somalia and Sudan, have created additional risk in Africa.
And mounting debt is draining resources, with 31% of regional revenues going to interest and loan payments in 2022.

Source link

Economy

The US Economy is Now Breaking in Plain Sight – Bloomberg

Published

15 hours ago

October 4, 2023

Harry Miller

We use cookies and data to

Deliver and maintain Google services
Track outages and protect against spam, fraud, and abuse
Measure audience engagement and site statistics to understand how our services are used and enhance the quality of those services

If you choose to “Accept all,” we will also use cookies and data to

Develop and improve new services
Deliver and measure the effectiveness of ads
Show personalized content, depending on your settings
Show personalized ads, depending on your settings

If you choose to “Reject all,” we will not use cookies for these additional purposes.

Select “More options” to see additional information, including details about managing your privacy settings. You can also visit g.co/privacytools at any time.

Adblock test (Why?)

Source link