adplus-dvertising
Connect with us

Economy

Here are vulnerable parts of the U.S. economy that coronavirus may infect – MarketWatch

Published

 on


Festering worries about the spread of COVID-19 is a potential peril for the U.S. economy, but ailing manufacturers and tepid investment are already muzzling growth.

Wall Street has been hoping for fresh signs of a rebound in business spending, but the first batch of reports for February is unlikely to deliver any grounds for optimism.

To be sure, the recently signed trade truce with China and a new free-trade agreement with Mexico and Canada have erased much of the uncertainty that companies coped with last year. The hope was that exports would rebound and investment would accelerate.

300x250x1

The spread of a novel coronavirus in China, however, is likely to set back a recovery in the global economy, at least in the first half of the year. Global supply chains have been disrupted and that could keep a lid on imports and exports, especially if the viral outbreak becomes even worse.

The damage is likely to be visible very soon in surveys of manufacturers in the New York and Philadelphia regions conducted by the Federal Reserve each month.

See: MarketWatch Economic Calendar

“The inability to get parts from China has idled plants in Europe and North America,” economists at Northern Trust told clients. “Global manufacturing, which has been struggling amid trade frictions, is likely to remain in retreat for a good portion of 2020.”

Read: Industrial output slumps in January for fourth decline in past five months

Goldman Sachs on Friday said the crisis could be even more costly than it previously forecast, shaving as much as 0.6% off U.S. economic growth in the first quarter. That’s a pretty big chunk for an economy expanding about 2% a year.

The anxiety is evident on Wall Street.

Even though the Dow Jones Industrial Average

DJIA, -0.09%,

S&P 500

SPX, +0.18%

and the Nasdaq Composite Index

COMP, +0.20%

leapt to levels at or near records last week, though moves were more subdued on Friday ground as investors assessed developments in China for signs of an increase spread of the infectious disease that originated in Wuhan, China last year.

The 2020 presidential election, meanwhile, raises the possibility of a far-left Democratic candidate such as Bernie Sanders winning the nomination.Sanders has promised to raise taxes on businesses and wealthy people, increase regulations and redo the U.S. health care system if elected.

The uncertain 2020 outcome might be enough to keep businesses on the sidelines, economists say, until they see who emerges as the Democratic standard-bearer against President Trump. Other Democrats such as Joe Biden and Michael Bloomberg are viewed as more business friendly.

One part of the economy that is better insulated from the health crisis abroad and political uncertainties at home is the U.S. housing market. Tumbling mortgage rates have revived growth in the past six months and should continue to give builders a boost.

Look for a pullback in new construction in January, however, after a housing starts rose in December to the highest level since 2006. Funky weather is probably exaggerating the swings in starts.

Whatever the case, the newfound eagerness of Americans to buy more homes isn’t just the result of lower mortgage rates. Consumers are very confident in the economy owing to ultralow unemployment, rising wages and the strongest labor market in decades.

Read: Consumers feel good about the economy: sentiment returns near 15-year high

While businesses play the part of the tortoise, households have been the hares. Consumer spending is keeping alive a record economic expansion that is almost 11 years old and shows no sign of mortality.

“Bottom-line, lopsided U.S. economic growth driven by consumers, government spending, and housing activity remains in place, but the production and investment side of the economy continues to languish,” said Scott Anderson, chief economist of Bank of the West.


#div-gpt-ad-1569967089584-0 > div > iframe width: 100% !important; min-width: 300px; max-width: 800px;

Let’s block ads! (Why?)

728x90x4

Source link

Continue Reading

Economy

Britain's economy went into recession last year, official figures confirm – The Globe and Mail

Published

 on


Open this photo in gallery:

People walk over London Bridge, in London, on Oct. 25, 2023.SUSANNAH IRELAND/Reuters

Britain’s economy entered a shallow recession last year, official figures confirmed on Thursday, leaving Prime Minister Rishi Sunak with a challenge to reassure voters that the economy is safe with him before an election expected later this year.

Gross domestic product shrank by 0.1 per cent in the third quarter and by 0.3 per cent in the fourth, unchanged from preliminary estimates, the Office for National Statistics (ONS) said on Thursday.

The figures will be disappointing for Mr. Sunak, who has been accused by the opposition Labour Party – far ahead in opinion polls – of overseeing “Rishi’s recession.”

300x250x1

“The weak starting point for GDP this year means calendar-year growth in 2024 is likely to be limited to less than 1 per cent,” said Martin Beck, chief economic adviser at EY ITEM Club.

“However, an acceleration in momentum this year remains on the cards.”

Britain’s economy has shown signs of starting 2024 on a stronger footing, with monthly GDP growth of 0.2 per cent in January, and unofficial surveys suggesting growth continued in February and March.

Tax cuts announced by finance minister Jeremy Hunt and expectations of interest-rate cuts are likely to help the economy in 2024.

However, Britain remains one of the slowest countries to recover from the effects of the COVID-19 pandemic. At the end of last year, its economy was just 1 per cent bigger than in late 2019, with only Germany faring worse among Group of Seven nations.

The economy grew just 0.1 per cent in all of 2023, its weakest performance since 2009, excluding the peak-pandemic year of 2020.

GDP per person, which has not grown since early 2022, fell by 0.6 per cent in the fourth quarter and 0.7 per cent across 2023.

Sterling was little changed against the dollar and the euro after the data release.

The Bank of England (BOE) has said inflation is moving toward the point where it can start cutting rates. It expects the economy to grow by just 0.25 per cent this year, although official budget forecasters expect a 0.8-per-cent expansion.

BOE policy maker Jonathan Haskel said in an interview reported in Thursday’s Financial Times that rate cuts were “a long way off,” despite dropping his advocacy of a rise at last week’s meeting.

Thursday’s figures from the ONS also showed 0.7 per cent growth in households’ real disposable income, flat in the previous quarter.

Thomas Pugh, an economist at consulting firm RSM, said the increase could prompt consumers to increase their spending and support the economy.

“Consumer confidence has been improving gradually over the last year … as the impact of rising real wages filters through into people’s pockets, even though consumers remain cautious overall,” Mr. Pugh said.

Britain’s current account deficit totalled £21.18-billion ($36.21-billion) in the fourth quarter, slightly narrower than a forecast of £21.4-billion ($36.6-billion) shortfall in a Reuters poll of economists, and equivalent to 3.1 per cent of GDP, up from 2.7 per cent in the third quarter.

The underlying current account deficit, which strips out volatile trade in precious metals, expanded to 3.9 per cent of GDP.

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Economy

How will a shrinking population affect the global economy? – Al Jazeera English

Published

 on


Falling fertility rates could bring about a transformational demographic shift over the next 25 years.

It has been described as a demographic catastrophe.

The Lancet medical journal warns that a majority of countries do not have a high enough fertility rate to sustain their population size by the end of the century.

300x250x1

The rate of the decline is uneven, with some developing nations seeing a baby boom.

The shift could have far-reaching social and economic impacts.

Enormous population growth since the industrial revolution has put enormous pressure on the planet’s limited resources.

So, how does the drop in births affect the economy?

And regulators in the United States and the European Union crack down on tech monopolies.

The gender gap in tech narrows.

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Economy

John Ivison: Canada's economy desperately needs shock treatment after this Liberal government – National Post

Published

 on


Lack of business investment is the main culprit. Canadians are digging holes with shovels while our competitors are buying excavators

Get the latest from John Ivison straight to your inbox

Article content

It speaks to the seriousness of the situation that the Bank of Canada is not so much taking the gloves off as slipping lead into them.

Senior deputy governor, Carolyn Rogers, came as close to wading into the political arena as any senior deputy governor of the central bank probably should in her speech in Halifax this week.

Article content

But she was right to sound the alarm about a subject — Canada’s waning productivity — on which the federal government’s performance has been lacklustre at best.

Advertisement 2

Article content

Productivity has fallen in six consecutive quarters and is now on a par with where it was seven years ago.

Lack of business investment is the main culprit.

In essence, Canadians are digging holes with shovels while many of our competitors are buying excavators.

“You’ve seen those signs that say, ‘in emergency, break glass.’ Well, it’s time to break the glass,” Rogers said.

She was explicit that government policy is partly to blame, pointing out that businesses need more certainty to invest with confidence. Government incentives and regulatory approaches that change year to year do not inspire confidence, she said.

Recommended from Editorial

  1. Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, holds a press conference at the Bank of Canada in Ottawa on Wednesday, March 6, 2024.

    Canada’s lagging productivity at crisis level, BoC official says

  2. Homes for sale at the Juniper condo development in North Vancouver, British Columbia, Canada, on Tuesday, Sept. 13, 2022.

    Expected BoC rate cuts luring buyers back into housing market

The government’s most recent contribution to the competitiveness file — Bill C-56, which made a number of competition-related changes — is a case in point. It was aimed at cracking down on “abusive practices” in the grocery industry that no one, including the bank in its own study, has been able to substantiate. Rather than encouraging investment, it added a political actor — the minister of industry — to the market review process. The Business Council of Canada called the move “capricious,” which was Rogers’s point.

Article content

Advertisement 3

Article content

While blatant price-fixing is rare, the lack of investment is a product of the paucity of competition in many sectors, where Canadian companies protected from foreign competition are sitting on fat profit margins and don’t feel compelled to invest to make their operations more efficient. “Competition can make the whole economy more productive,” said Rogers.

The Conservatives now look set to make this an election issue. Ontario MP Ryan Williams has just released a slick 13-minute video that makes clear his party intends to act in this area.

Using the Monopoly board game as a prop, Williams, the party’s critic for pan-Canadian trade and competition, claims that in every sector, monopolies and oligopolies reign supreme, resulting in lower investment, lower productivity, higher prices, worse service, lower wages and more wealth inequality.

(As an aside, it was a marked improvement on last year’s “Justinflation” rap video.)

Williams said that Canadians pay among the highest cell phone prices in the world and that Rogers, Telus and Bell are the priciest carriers, bar none. The claim has some foundation: in a recent Cable.co.uk global league table that compared the average price of one gigabyte, Canada was ranked 216th of 237 countries at US$5.37 (noticeably, the U.S. was ranked even more expensive at US$6).

Advertisement 4

Article content

Williams noted that two airlines control 80 per cent of the market, even though Air Canada was ranked dead last of all North American airlines for timeliness.

He pointed out that six banks control 87 per cent of Canada’s mortgage market, while five grocery stores — Sobeys, Metro, Loblaw, Walmart and Costco — command a similar dominance of the grocery market.

“Competition is dying in Canada,” Williams said. “The federal government has made things worse by over-regulating airlines, banks and telecoms to actually protect monopolies and keep new players out.”

So far, so good.

The Conservatives will “bring back home a capitalist economy” — a market that does not protect monopolies and creates more competition, in the form of Canadian companies that will provide new supply and better prices.

That sounds great. But at the same time, the Conservative formula for fixing things appears to involve more government intervention, not less.

Williams pointed out the Conservatives opposed RBC buying HSBC’s Canadian operations, WestJet buying Sunwing and Rogers buying Shaw. The party would oppose monopolies from buying up the competition, he said.

Advertisement 5

Article content

The real solution is to let the market do its work to bring prices down. But that is a more complicated process than Williams lets on.

Back in 2007, when Research in Motion was Canada’s most valuable company, the Harper government appointed a panel of experts, led by former Nortel chair Lynton “Red” Wilson, to address concerns that the corporate sector was being “hollowed out” by foreign takeovers, following the sale of giants Alcan, Dofasco and Inco.

The “Compete to Win” report that came out in June 2008 found that the number of foreign-owned firms had remained relatively unchanged, but recommended 65 changes to make Canada more competitive.

The Harper government acted on the least-contentious suggestions: lowering corporate taxes, harmonizing sales taxes with a number of provinces and making immigration more responsive to labour markets.

But it did not end up liberalizing the banking, broadcasting, aviation or telecom markets, as the report suggested (ironically, it was a Liberal transport minister, Marc Garneau, who raised foreign ownership levels of air carriers to 49 per cent from 25 per cent in 2018).

Advertisement 6

Article content

The point is, Canada has a competition problem but solving it requires taking on vested interests. Conservative Leader Pierre Poilievre has indicated he is willing to do that, calling corporate lobbyists “utterly useless” and saying he will focus on Canadian workers, not corporate interests.

“My daily obsession will be about what is good for the working-class people in this country,” he said in Vancouver earlier this month.

Even opening up sectors to foreign competition is no guarantee that investors will come. There are no foreign ownership restrictions in the grocery market (in addition to the five supermarkets listed above, there is Amazon-owned Whole Foods). When the Competition Bureau concluded last year that there was a “modest but meaningful” increase in food prices, it recommended Ottawa encourage a foreign-owned player to enter the Canadian market. It was a recommendation adopted by Industry Minister Francois-Philippe Champagne, to no avail thus far.

But it is clear from the Bank’s warning that the Canadian economy requires some shock treatment.

Robert Scrivener, the chairman of Bell and Northern Telecom in the 1970s, called Canada a nation of overprotected underachievers. That is even more true now than it was back then.

It’s time to break the glass.

jivison@criffel.ca

Get even more deep-dive National Post political coverage and analysis in your inbox with the Political Hack newsletter, where Ottawa bureau chief Stuart Thomson and political analyst Tasha Kheiriddin get at what’s really going on behind the scenes on Parliament Hill every Wednesday and Friday, exclusively for subscribers. Sign up here.

Article content

Get the latest from John Ivison straight to your inbox

Comments

Join the Conversation

This Week in Flyers

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Trending