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German economy 'flirts with recession' as Q4 output stagnates – Financial Post

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BERLIN — The German economy stagnated in the fourth quarter due to weaker private consumption and state spending, data showed on Friday, renewing fears of a recession just as Chancellor Angela Merkel’s conservatives are preoccupied with a search for a new leader.

Europe’s biggest economy has been losing momentum as its manufacturers linger in a recession prompted by a reduction in exports while its automotive sector faces disruption from an expensive shift to electric cars.

Private consumption and state spending have been providing growth impetus and, if those two sectors continue to weaken this year, the risk of recession will rise.

“We think the economy will continue to flirt with recession in the first half of this year,” Andrew Kenningham of Capital Economics wrote in a note.

One bright spot from the preliminary data was an upward revision in the third-quarter growth figure to 0.2% from a previously reported 0.1%.

The Federal Statistics Office said investments in the construction sector grew in the fourth quarter, while spending on machinery and equipment declined considerably compared with the July-to-September period. Exports also weakened in the final three months of last year, it said.

Merkel’s government has resisted calls for a fiscal stimulus to put the economy firmly back on a growth path.

Those calls will grow louder if the economy fails to rebound, a likely scenario given that manufacturers are expected to face headwinds from the economic impact of the coronavirus outbreak in China.

But Merkel’s government is unlikely to loosen the purse strings. Her conservative party is in crisis after an eastern branch voted with the far right to elect a state governor, forcing the leader of her Christian Democrats (CDU) to abandon her ambitions to succeed the chancellor.

POLITICAL CRISIS

Annegret Kramp-Karrenbauer, who after the scandal said she would quit as CDU leader, is searching for a successor to lead the conservatives into the next election, due in October 2021.

Both Merkel’s conservatives and their Social Democrat (SPD) coalition partners are likely to suffer losses in a national election. SPD Finance Minister Olaf Scholz has dashed hopes of a massive stimulus by sticking to Germany’s policy of no new debt.

The crisis in the conservative party makes it even less likely that the government will take drastic fiscal measures to lift the economy.

Kenningham said the coronavirus, which is impacting both the global supply chain and demand from China, could result in weaker German growth in the first quarter of this year.

The outlook for the German economy is also darkened by uncertainties linked to Britain’s Jan. 31 exit from the European Union as well as a threat by U.S. President Donald Trump to impose higher tariffs on car imports from Europe.

Germany’s DIHK Chambers of Industry and Commerce said the quarterly stagnation should be a wake-up call for the government to increase investments and cut corporate taxes.

“Now is the time for politicians in this country to courageously do its economic homework,” said DIHK Managing Director Martin Wansleben. “Businesses urgently need relief signals: the fast implementation of investment projects and tax cuts should be high up on the government’s agenda.”

On the year, gross domestic product in Germany expanded by 0.4% from October through December after a 0.6% expansion in the previous three months, seasonally adjusted figures from the Federal Statistics Office showed.

Analysts polled by Reuters had expected a 0.1% expansion quarter-on-quarter and a 0.4% expansion year-on-year in seasonally adjusted terms. (Writing by Joseph Nasr Editing by Michelle Martin/Mark Heinrich)

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North Korea tells UN it will focus on economy now that it has ‘effective war deterrent’ – Global News

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An earthquake struck off the coast of Taiwan on Wednesday, swaying buildings in Taipei, the capital.

Taiwan’s Central Weather Bureau said the magnitude 5.9 quake struck at a depth of 106 kilometres (66 miles).

There were no immediate reports of damage or casualties.

An Associated Press journalist said the office building where the AP bureau is in Taipei swung slightly for about 10 to 15 seconds.






1:53
Residents survey damage after strong earthquake hits the Philippines


Residents survey damage after strong earthquake hits the Philippines

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U.S. housing market to remain a bright spot in a weak economy

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By Hari Kishan and Richa Rebello

BENGALURU (Reuters) – U.S. house prices will continue to surge well into next year and beyond, outpacing inflation and the overall economy, a Reuters poll of property analysts found, making it a bright spot against an otherwise gloomy economic backdrop.

In a stark reversal, the U.S. housing market – at the epicenter of the global financial crisis more than a decade ago – was expected to extend a helping hand to an economy severely battered by the coronavirus pandemic.

Buoyed by record-low interest rates and strong pent-up demand from a segment of the workforce largely unaffected by pandemic-induced job cuts, house prices will continue to rise over the next two years, the Sept. 15-29 poll of over 40 analysts showed.

U.S. house prices were predicted to rise 4.0% this year and by an average 3.5% in 2021 and 2022. That suggests the trend since 2013 of house price rises outpacing consumer inflation would continue for the next three years at least, according to current inflation expectations.

Underscoring the view that the latest data showing a surge in house prices was not just a blip, over 60% of analysts, or 24 of 39 who responded to an additional question, said that trend would continue to hold for at least another year. The remaining 15 said less than a year.

“Three factors support relatively high home prices – undersupply after a decade of underbuilding, single-family housing attractiveness in a socially distancing world, and most importantly low interest rates,” said Nathaniel Karp, chief U.S. economist at BBVA.

“However, economic uncertainty remains elevated and the recovery after the pandemic could take time, which are the risks to the current valuations.”

U.S. house prices outlook: https://fingfx.thomsonreuters.com/gfx/polling/xlbvgjmgepq/Reuters%20Poll-U.S.%20house%20prices%20outlook.PNG

Already tight inventory levels have been squeezed to record lows after construction activity came to a grinding halt because of the coronavirus pandemic, and with no policy relief expected, home buyers may outbid each other and crank up prices.

Existing home sales reached a seasonally adjusted annual rate of 6 million units in August, the highest since the tail end of the previous housing boom in 2006, and were expected to average around 5.5 million units in the coming year.

“A surge in demand has put further strain on an already tight inventory. The latest supply of existing homes dropped below three months (of inventory) for the first time since records began in 1982, and that implies sales will ease back toward the end of the year,” said Matthew Pointon, property economist at Capital Economics.

When asked to rate the affordability on a scale of 1 to 10, with 1 as extremely cheap and 10 as very expensive, the poll gave a median of 7, up from 6 in the previous poll when predictions were for house prices to rise at a slower pace than currently expected.

“U.S. home prices are not yet at a level that is concerning,” said Matthew Gardner, chief economist at Windermere Real Estate. “That said, we need significant growth in the number of new homes built to meet current demand. If more units are not provided, we could see unsustainable upward price pressure in the resale market.”

(Reporting by Hari Kishan; Additional reporting and polling by Richa Rebello and Tushar Goenka; Editing by Ross Finley and Andrea Ricci)

Source:- Reuters poll – TheChronicleHerald.ca

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U.S. housing market to remain a bright spot in a weak economy – TheChronicleHerald.ca

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By Hari Kishan and Richa Rebello

BENGALURU (Reuters) – U.S. house prices will continue to surge well into next year and beyond, outpacing inflation and the overall economy, a Reuters poll of property analysts found, making it a bright spot against an otherwise gloomy economic backdrop.

In a stark reversal, the U.S. housing market – at the epicenter of the global financial crisis more than a decade ago – was expected to extend a helping hand to an economy severely battered by the coronavirus pandemic.

Buoyed by record-low interest rates and strong pent-up demand from a segment of the workforce largely unaffected by pandemic-induced job cuts, house prices will continue to rise over the next two years, the Sept. 15-29 poll of over 40 analysts showed.

U.S. house prices were predicted to rise 4.0% this year and by an average 3.5% in 2021 and 2022. That suggests the trend since 2013 of house price rises outpacing consumer inflation would continue for the next three years at least, according to current inflation expectations. [ECILT/US]

Underscoring the view that the latest data showing a surge in house prices was not just a blip, over 60% of analysts, or 24 of 39 who responded to an additional question, said that trend would continue to hold for at least another year. The remaining 15 said less than a year.

“Three factors support relatively high home prices – undersupply after a decade of underbuilding, single-family housing attractiveness in a socially distancing world, and most importantly low interest rates,” said Nathaniel Karp, chief U.S. economist at BBVA.

“However, economic uncertainty remains elevated and the recovery after the pandemic could take time, which are the risks to the current valuations.”

U.S. house prices outlook: https://fingfx.thomsonreuters.com/gfx/polling/xlbvgjmgepq/Reuters%20Poll-U.S.%20house%20prices%20outlook.PNG

Already tight inventory levels have been squeezed to record lows after construction activity came to a grinding halt because of the coronavirus pandemic, and with no policy relief expected, home buyers may outbid each other and crank up prices.

Existing home sales reached a seasonally adjusted annual rate of 6 million units in August, the highest since the tail end of the previous housing boom in 2006, and were expected to average around 5.5 million units in the coming year.

“A surge in demand has put further strain on an already tight inventory. The latest supply of existing homes dropped below three months (of inventory) for the first time since records began in 1982, and that implies sales will ease back toward the end of the year,” said Matthew Pointon, property economist at Capital Economics.

When asked to rate the affordability on a scale of 1 to 10, with 1 as extremely cheap and 10 as very expensive, the poll gave a median of 7, up from 6 in the previous poll when predictions were for house prices to rise at a slower pace than currently expected.

“U.S. home prices are not yet at a level that is concerning,” said Matthew Gardner, chief economist at Windermere Real Estate. “That said, we need significant growth in the number of new homes built to meet current demand. If more units are not provided, we could see unsustainable upward price pressure in the resale market.”

(Reporting by Hari Kishan; Additional reporting and polling by Richa Rebello and Tushar Goenka; Editing by Ross Finley and Andrea Ricci)

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