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How will the coronavirus affect the world economy? – DW (English)



Less consumption, idle factories, broken global supply chains. It’s not just the Chinese economy that is suffering from the spread of the coronavirus — but the moment of truth is yet to come.

The coronavirus epidemic is spreading further in China and Chinese experts believe that it could peak in 10 to 14 days. Around 45 million people in the Chinese province of Wuhan are cut off from the outside world. In order to curb the spread of the virus, Beijing has extended the Chinese New Year holiday, and pushed back the opening of the stock markets. When it finally opened on Monday, stock prices crashed. They, however, stabilized again on Tuesday.

As a precaution, Beijing had given the financial system an unusually high injection of 1.2 trillion yuan (€156 billion, $171 billion) to keep the domestic money market and banking system functioning. In addition, import duties on goods that are important in the fight against the disease were eased.

Closed offices and factories

But it’s not only the stock markets that have been hit. Chinese consumption has also plummeted as a result of the outbreak. Large New Year’s events were canceled; tourist attractions and cinemas were closed. The doors remain closed at around 2,000 Starbucks, hundreds of McDonald’s restaurants, 130 Uniqlo shops and at all 30 Ikea stores.

The travel industry has also been badly affected. Several countries issued travel warnings about China; some airlines even suspended flights to China. Lufthansa and its subsidiaries Swiss and Austrian Airlines canceled their connections to and from Beijing until February 29. The Chinese authorities urged its own population to postpone travel abroad and prohibited domestic travel groups.

At the post office in Wuhan parcels are disinfected before they go out

Most factories and offices will remain closed this week. Several carmakers, including Volkswagen, BMW, Volvo, Toyota and Tesla, extended their annual New Year production breaks. Additionally, China’s largest oil refinery cut production by around 600,000 barrels a day due to shrinking fuel demand.

Learning from SARS

When SARS hit China 17 years ago, domestic trade suffered significantly and stock markets fell. However, the global economy is now much more interconnected and the Chinese economy is much more important. At the time China’s share of the world economy was only around 5%, today it is more than 16%.

Now the world’s second-largest economy is an important export market for German products, an important production location for German industrial companies and the starting point for many global supply chains.

In Wuhan, new emergency hospitals are going up quickly to treat patients

In Wuhan, new emergency hospitals are going up quickly to treat patients

The ifo Institute’s economic expert Timo Wollmershäuser believes that “the economic consequences will be greater than the SARS epidemic.” That crisis, which lasted 6 months, cost China about 1% growth in gross domestic product (GDP), a number so small that it was hardly reflected in the German figures. “Since then, the country’s economic importance has grown, the infection rate is greater and the Chinese government has reacted harder,” said Wollmershäuser.

Too early for a true analysis

Many experts believe that it is too early to talk about the extent of economic consequences. Jens Hildebrandt, the director of the German Chamber of Commerce in Beijing, told DW that the country is at a practical standstill anyhow because of the Chinese New Year and spring festivities. “All factories close for three to four weeks,” he added. Thus, even under normal circumstances, the entire economy — except for the important tourism industry — would be offline.

How the coronavirus outbreak is impacting employment and ongoing production will only become apparent from next or the week after next, according to Hildebrandt, since the Chinese government has extended the holidays until February 2 and in some cities until February 9.

The reason is that a large part of the migrant workers come from the region around Wuhan, which is almost completely quarantined, says Hildebrandt. Only in the coming week will it become clear how many workers will return to the main production locations in the Shanghai and Beijing areas and in southern China, and to what extent production and thus the international supply chains will be affected by the virus.

Hitting the supply chain

“We see no signs as of now that supply chains will be completely disrupted, even if there are delays,” said Gerhard Wolf, head of foreign trade at the Association for Wholesale, Foreign Trade and Services (BGA). His credo: No need to panic.

Currently Germany's VW Group generates about 40% of its sales with China

Currently Germany’s VW Group generates about 40% of its sales with China

So far, there is no trace of panic among German companies, says Hildebrandt from the German Chamber of Commerce in Beijing. “At the moment they are acting rather calmly, though plans are being drawn up for how to deal with the situation.”

The German Institute for Economic Research (DIW) is also taking a careful approach. “It is still far too early to be able to carry out a serious analysis of the economic effects of the coronavirus,” said DIW President Marcel Fratzscher. “If the spread of the coronavirus in China and worldwide can be successfully contained, then the economic costs should be limited and be limited to a short-term loss of production in China.”

Stopping the supply chain

However, should the production stops in China last longer, the international supply chains would be at risk, warns Klaus-Jürgen Gern from the Kiel Institute for the World Economy.

“China is significant as a supplier to the rest of the world,” said Gern. A long standstill could interrupt supply chains in the chemical, automotive, textile and electronics industries, warn Allianz economists. International companies would no longer get the parts they need and would have to find other suppliers or shut down production.

One that has already been hit is the South Korean manufacturer Hyundai Motor. The company announced on Tuesday it would suspend all production in South Korea later this week. The reason for the suspension is that the cable harnesses required for production, which Hyundai usually gets from China, are just not coming.

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Charting the Global Economy: US Inflation Comes Off the Boil – BNN Bloomberg



(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Inflationary pressures in the US simmered down on the heels of cheaper gasoline and other fuel costs, which may help persuade the Federal Reserve to ease up a touch on the monetary policy brakes.

In the UK, the economy shrank in the second quarter for the first time since Covid-19 lockdowns more than a year ago. Singapore reduced its growth forecast for this year after its economy contracted last quarter, while rapid inflation encouraged steep interest-rate hikes by monetary authorities in Mexico and Argentina.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:


Inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively boosting interest rates. Consumer prices increased 8.5% from a year ago after hitting a more than 40-year high of 9.1% a month earlier.

Ending emergency unemployment benefits had a significant impact on boosting employment, according to a St. Louis Fed working paper that may underline Republican criticism of a 2021 program.

Rental costs are soaring at the fastest pace in more than three decades, surpassing a median of $2,000 a month for the first time ever.


The UK economy shrank in the second quarter for the first time since the pandemic, driven by a decline in spending by households and on fighting the coronavirus. Gross domestic product fell 0.1% after an 0.8% gain in the first quarter. The Bank of England expects that inflation raging at a 40-year high will tip the economy into a recession later this year.

Spain is opening its doors to foreign workers to fix labor shortages and ease a demographic slump threatening its future prosperity. In contrast with more anti-immigrant politics in much of Europe, the government has loosened rules to allow the recruitment of employees in their countries, mostly in Latin America, for both skilled and unskilled jobs that are hard to fill.


Singapore trimmed its 2022 growth forecast to reflect an increasingly challenging global environment, after the economy slipped into contraction in the second quarter. Final data for the June quarter Thursday showed gross domestic product shrank 0.2% from the previous three months, and worse than the zero growth estimated by Ministry of Trade and Industry earlier.

A global spell of high inflation, aggressive monetary tightening and the risk of a recession are prompting economists to revise Indonesia’s economic forecasts for the remainder of the year. Analysts raised inflation projections for the third and fourth quarters by almost a full percentage point to 5% and 5.15%, respectively, median forecasts from Bloomberg’s latest monthly survey showed.

Emerging Markets

Argentina’s central bank raised its benchmark Leliq rate to 69.5%, representing the largest hike in almost three years and signaling a more aggressive stance against surging inflation. Mexico’s central bank boosted its key rate to an all-time high of 8.5%.

Brazil consumer prices tumbled by the most on record in July after President Jair Bolsonaro slashed utility taxes to tame the soaring cost of living and lift his re-election chances. 

Kenya’s presidential election took place Tuesday as East Africa’s largest economy grapples with surging living costs and rampant unemployment. Deputy President William Ruto and Raila Odinga, a former prime minister who’s running for president for a fifth time, were the clear front-runners to succeed incumbent leader Uhuru Kenyatta. Final results are expected by Aug. 16.


When Group of Seven leaders gathered in the Bavarian Alps in June, they pledged to stand with Ukraine for the long haul. Their Group of 20 counterparts are proving less supportive. Only half have joined the international sanctions imposed on fellow member Russia over its invasion of Ukraine.

Chinese exports to Russia are back near levels seen before the Kremlin’s invasion of Ukraine, propelling a rebound in trade that’s helped cool off a historic rally in the ruble. Russia bought $6.7 billion of goods in July from China, an increase of more than a third from the previous month and up by more than an annual 20%.

Bloomberg interviewed several families — in Nigeria, India, Brazil and the US — various times between June and August last year about the swaps and sacrifices they were making in order to keep food on the table as prices rose. It turns out, chronicling what was then eye-popping food inflation wouldn’t capture the depths of what was to come. 

©2022 Bloomberg L.P.

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Victoria looks to be a national leader in the circular economy – Saanich News



When athletes stood on the podium during last summer’s Tokyo Olympics, the medals hanging from their necks were made from melted-down metals in six million old cell phones and other discarded electronics.

Others, nowadays, enjoy having their home moderated by insulation made from the excess scraps of denim that don’t get to become jeans.

Those are two examples of the circular economy that researchers say could recover $4.5 trillion worth of otherwise wasted resources by 2030. Keeping materials out of the landfill in the market is something the City of Victoria hopes to capitalize on as it adds a circular lens to its 20-year economic strategy.

Spurred by a motion from Coun. Jeremy Loveday, the city will now add a section to Victoria 3.0 on becoming a national leader in the circular economy.

“Making sure our economic priorities align with our goals regarding climate action and waste reduction, I think this helps us also to be in a better place to capitalize on the economic benefit of the circular economy which is predicted to continue to grow,” Loveday said before council approved the motion this month.

The action will include ensuring there are zoned areas for circular businesses and non-profits to operate within the city. Those will include light industry spaces, which Victoria-based Project Zero says reduces a key barrier for entrepreneurs trying to scale up their up-cycle or repair businesses.

“There isn’t anything right now that’s on that smaller scale or that’s financially accessible,” said Georgia Lavender, who leads Project Zero’s circular economy program.

The non-profit has been running a local entrepreneur incubator for five years, but the term “circular economy” was still new to people a couple of years ago, she said. But Lavender has been inspired lately by all sectors and levels of government seeing the approach as a way to support local innovation, job creation and supply chain resiliency.

“We’ve seen a really big shift toward regions wanting to implement a circular economy model and really seeing the opportunities it holds, not only from an environmental perspective but also an economic development perspective,” she said.

Some of Project Zero’s Victoria start-ups now commercializing include the cup-share service Nulla and BinBreeze, which uses waste wood to improve compost bin productivity and pest deterrence.

Lavender said the innovators are helping to cut emissions while creating jobs, and Vancouver Island as a whole has the opportunity to position itself as a leader in the circular sector. The focus could help the supply chain be more resilient, Lavender said, by using local manufacturing to reuse resources instead of shipping waste off the Island for processing.

The Victoria direction also commits to business space in the coming Arts and Innovation District, the creation of a circular economy hub, exploring partnerships for a zero waste demonstration site and launching an innovation grant.

“Things like that just create more opportunity for these ventures to keep their operations within Victoria and not have to move to other regions,” Lavender said.

READ: Project Zero aims to create circular Vancouver Island economy

READ: CRD aims to be zero waste national leader, reduce enough to curb landfill expansion

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Soft landing hopes for U.S. economy brighten outlook on stocks – The Globe and Mail



Optimism is seeping back into the U.S. stock market, as some investors grow more convinced that the economy may avoid a severe downturn even as it copes with high inflation.

The benchmark S&P 500 has rebounded about 15% since mid-June, halving its year-to-date loss, and the tech-heavy Nasdaq Composite is up 20% over that time. Many of the so-called meme stocks that had been pummeled in the first half of the year have come screaming back, while the Cboe Volatility Index, known as Wall Street’s fear gauge, stands near a four-month low.

In the past week, bullish sentiment reached its highest level since March, according to a survey from the American Association of Individual Investors. Earlier this year, that gauge tumbled to its lowest in nearly 30 years, when stocks swooned on worries over how the Federal Reserve’s monetary tightening would hit the economy.

“We have experienced a fair amount of pain, but the perspective in how people are trading has turned violently towards a glass half full versus a glass half empty,” said Mark Hackett, Nationwide’s chief of investment research.

Data over the last two weeks bolstered hopes that the Fed can achieve a soft landing for the economy. While last week’s strong jobs report allayed fears of recession, inflation numbers this week showed the largest month-on-month deceleration of consumer price increases since 1973.

The shift in market mood was reflected in data released by BoFA Global Research on Friday: tech stocks saw their largest inflows in around two months over the past week, while Treasury Inflation-Protected Securities, or TIPS, which are used to hedge against inflation, notched their fifth straight week of outflows.

“If in fact a soft landing is possible, then you’d want to see the kind of data inputs that we have seen thus far,” said Art Hogan, chief market strategist at B. Riley Wealth. “Strong jobs number and declining inflation would both be important inputs into that theory.”

Through Thursday, the S&P 500 was up 1.5% for the week, on track for its fourth straight week of gains.

Until recently, optimism was hard to come by. Equity positioning last month stood in the 12th percentile of its range since January 2010, a July 29 note by Deutsche Bank analysts said, and some market participants have attributed the big jump in stocks to investors rapidly unwinding their bearish bets.

With stock market gyrations dropping to multi-month lows, further support for equities could come from funds that track volatility and turn bullish when market swings subside.

Volatility targeting funds could soak up about $100 billion of equity exposure in the coming months if gyrations remain muted, said Anand Omprakash, head of derivatives quantitative strategy at Elevation Securities.

“Should their allocation increase, this would provide a tailwind for equity prices,” Omprakash said.

Investors next week will be watching retail sales and housing data. Earnings reports are also due from a number of top retailers, including Walmart and Home Depot, that will give fresh insight into the health of the consumer.

Plenty of trepidation remains in markets, with many investors still bruised from the S&P 500′s 20.6% tumble in the first six months of the year.

Fed officials have pushed back on expectations that the central bank will end its rate hikes sooner than anticipated, and economists have warned that inflation could return in coming months.

Some investors have grown alarmed at how quickly risk appetite has rebounded. The Ark Innovation ETF, a prominent casualty of this year’s bear market, has soared around 35% since mid-June, while shares of AMC Entertainment Holdings , one of the original “meme stocks,” have doubled over that time.

“You look across assets right now, and you don’t see a lot of risks priced in anymore to markets,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

Keith Lerner, co-chief investment officer at Truist Advisory Services, believes technical resistance and ballooning stock valuations are likely to make it difficult for the S&P 500 to advance far beyond the 4200-4300 level. The index was recently at 4249 on Friday afternoon.

Seasonality may also play a role. September – when the Fed holds its next monetary policy meeting – has been the worst month for stocks, with the S&P 500 losing an average 1.04% since 1928, Refinitiv data showed.

Wall Streeters taking vacations throughout August could also drain volume and stir volatility, said Hogan, of B. Riley Wealth.

“Lighter liquidity tends to exaggerate or exacerbate moves,” he said.

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