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Israel economy shrinks 2.4% in 2020, grows 6.3% in fourth quarter – The Guardian

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JERUSALEM (Reuters) – Israel’s economy contracted a less than expected 2.4% in 2020, with the coronavirus pandemic weighing on consumer spending, the Central Bureau of Statistics said on Tuesday in a preliminary estimate.

It was the first time the economy had shrunk since a marginal decline in 2002, but Israel in 2020 outperformed a 5.5% average contraction in OECD countries.

The economy, which grew 3.4% in 2019, had been expected to shrink 3.3% to 3.7% in 2020 based on government and central bank estimates because of COVID-19.

Growth is expected to rebound in 2021, with the Bank of Israel forecasting a 6.3% rise if Israel’s rapid COVID-19 vaccination pace is maintained.

Despite a third lockdown, the economy grew an annualised 6.3% in the fourth quarter after a 41.5% jump in the third quarter. Analysts on average had projected a 0.5% decline.

In 2020, private spending declined 9.4%, while exports rose 0.6% despite the crisis and a stronger shekel. Imports slid 8.1%, investment in fixed assets dipped 1.5%, while government spending gained 2.9% last year.

(Reporting by Steven Scheer, Editing by Timothy Heritage)

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Bond Rout Shows Risk of Uneven Recovery in World's Top Economies – BNN

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(Bloomberg) — The U.S. economy appears primed to recover from the Covid-19 slump much faster than others, causing havoc on bond markets this week and potentially exacerbating the kind of imbalances that caused trouble after the last crisis.The prospect that the U.S. recovery could decouple from developed-world peers and the implication of that for global currencies and trade is likely to figure high on the agenda when finance ministers and central bankers from the Group of 20 major economies meet online later today.“A multi-speed rebound in the global economy continues with a strong U.S., a moderating China and a choppy euro-area,” said Catherine Mann, chief economist at Citigroup Inc. “For 2021 at least, the U.S. as global locomotive is back on track.”

The speed differences are the result of economic policy choices as well as variance in the severity of virus outbreaks, rules for containing them and rollout of vaccination programs. If the gaps persist for too long, it could stir up tensions over trade and currencies like the ones that followed the financial crisis — as well as deepening inequality between countries.The U.S., where President Joe Biden is pushing another $1.9 trillion in pandemic relief measures through Congress, appears most committed to running its economy hot. U.S. officials are calling on others to keep their foot on the gas too.“I urge G-20 countries to continue to take significant fiscal and financial policy actions and avoid withdrawing support too early,” Treasury Secretary Janet Yellen wrote to fellow attendees before today’s meeting. “Together, our efforts will be greater than the sum of our individual responses.”

The U.S. will expand 6.2% this year, recouping all its 2020 losses and then some, JPMorgan economists forecast. By contrast, the euro area, Japan and the U.K. aren’t expected to reach their pre-Covid GDP until 2022.While all major economies boosted government spending to shore up growth in 2020, hardly any except the U.S. will be running expansionary fiscal policy this year, according to JPMorgan’s calculations.

In the near term, everyone gets a lift out of rapid growth in the U.S. –- because it’s the world’s biggest importer.For countries that have weaker economies or are less willing to stimulate them, “it basically means more external demand,” said Alicia Garcia Herrero, chief Asia-­Pacific economist at Natixis SA in Hong Kong.She sees no problem for the rest of the world if the U.S. embarks on a big stimulus, provided it doesn’t trigger the kind of inflation that would lead investors in dollar assets rushing for the exit. “That is the big if,” she says.In the longer run, the perception that other economies were taking advantage of the U.S. role as consumer of last resort can fuel trade conflicts, like it did with China under President Donald Trump. Even before that, in the early 2010s, U.S. officials would complain that Europe was running too-tight policy and not contributing enough to global growth.The same kind of tensions could await in a post-Covid world if policy support is withdrawn “in an uncoordinated or haphazard manner,” wrote Neil Shearing, chief economist at Capital Economics, in a Chatham House paper published last week.“Countries that under-stimulate their economies must rely on demand from the rest of the world,” he wrote. “There are already ominous signs that the recovery has become unbalanced,” like growing current-account surpluses in China, Vietnam and Taiwan, and deficits in the U.S.

Currencies may be another cause of contention. The dollar has been declining steadily after a spike early in the pandemic, causing anxiety among countries that don’t want their exports to become less competitive. Yellen has said the U.S. will let markets determine the greenback’s value.“The U.S. is likely to push back against other countries’ intervention in foreign exchange markets to weaken their currencies, despite other major advanced economies being in worse economic straits,” said Eswar Prasad, a professor at Cornell University.Australia’s central bank has argued the local dollar would be stronger if it weren’t for its latest stimulus measures. In Japan, Prime Minister Yoshihide Suga said he’s watching foreign exchange rates more closely than any other financial or economic indicator.

China’s yuan has gained about 10% against the dollar since June, spurring the government to consider relaxing restrictions on taking money out of the country in order to take the pressure off. Bloomberg Economics’ yuan stress indicators suggest the currency’s strength is set to continue in the near term.As well as addressing the uneven recovery in their own economies, G-20 leaders are also under pressure to prevent the gap with the world’s poorest nations from widening further. Those countries haven’t been able to ramp up government spending to fight the virus like their wealthier peers did, and they struggle to obtain vaccines.The G-20 has been working on a debt forgiveness plan that would involve private creditors. Yellen praised the effort in her letter, though she said implementation would be the real test. She also signaled support for boosting the International Monetary Fund’s lending power.“Without further international action to support low-income countries, we risk a dangerous and permanent divergence in the global economy,” Yellen said.

©2021 Bloomberg L.P.

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Bond Rout Shows Risk of Uneven Recovery in World's Top Economies – BNN

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(Bloomberg) — The U.S. economy appears primed to recover from the Covid-19 slump much faster than others, causing havoc on bond markets this week and potentially exacerbating the kind of imbalances that caused trouble after the last crisis.The prospect that the U.S. recovery could decouple from developed-world peers and the implication of that for global currencies and trade is likely to figure high on the agenda when finance ministers and central bankers from the Group of 20 major economies meet online later today.“A multi-speed rebound in the global economy continues with a strong U.S., a moderating China and a choppy euro-area,” said Catherine Mann, chief economist at Citigroup Inc. “For 2021 at least, the U.S. as global locomotive is back on track.”

The speed differences are the result of economic policy choices as well as variance in the severity of virus outbreaks, rules for containing them and rollout of vaccination programs. If the gaps persist for too long, it could stir up tensions over trade and currencies like the ones that followed the financial crisis — as well as deepening inequality between countries.The U.S., where President Joe Biden is pushing another $1.9 trillion in pandemic relief measures through Congress, appears most committed to running its economy hot. U.S. officials are calling on others to keep their foot on the gas too.“I urge G-20 countries to continue to take significant fiscal and financial policy actions and avoid withdrawing support too early,” Treasury Secretary Janet Yellen wrote to fellow attendees before today’s meeting. “Together, our efforts will be greater than the sum of our individual responses.”

The U.S. will expand 6.2% this year, recouping all its 2020 losses and then some, JPMorgan economists forecast. By contrast, the euro area, Japan and the U.K. aren’t expected to reach their pre-Covid GDP until 2022.While all major economies boosted government spending to shore up growth in 2020, hardly any except the U.S. will be running expansionary fiscal policy this year, according to JPMorgan’s calculations.

In the near term, everyone gets a lift out of rapid growth in the U.S. –- because it’s the world’s biggest importer.For countries that have weaker economies or are less willing to stimulate them, “it basically means more external demand,” said Alicia Garcia Herrero, chief Asia-­Pacific economist at Natixis SA in Hong Kong.She sees no problem for the rest of the world if the U.S. embarks on a big stimulus, provided it doesn’t trigger the kind of inflation that would lead investors in dollar assets rushing for the exit. “That is the big if,” she says.In the longer run, the perception that other economies were taking advantage of the U.S. role as consumer of last resort can fuel trade conflicts, like it did with China under President Donald Trump. Even before that, in the early 2010s, U.S. officials would complain that Europe was running too-tight policy and not contributing enough to global growth.The same kind of tensions could await in a post-Covid world if policy support is withdrawn “in an uncoordinated or haphazard manner,” wrote Neil Shearing, chief economist at Capital Economics, in a Chatham House paper published last week.“Countries that under-stimulate their economies must rely on demand from the rest of the world,” he wrote. “There are already ominous signs that the recovery has become unbalanced,” like growing current-account surpluses in China, Vietnam and Taiwan, and deficits in the U.S.

Currencies may be another cause of contention. The dollar has been declining steadily after a spike early in the pandemic, causing anxiety among countries that don’t want their exports to become less competitive. Yellen has said the U.S. will let markets determine the greenback’s value.“The U.S. is likely to push back against other countries’ intervention in foreign exchange markets to weaken their currencies, despite other major advanced economies being in worse economic straits,” said Eswar Prasad, a professor at Cornell University.Australia’s central bank has argued the local dollar would be stronger if it weren’t for its latest stimulus measures. In Japan, Prime Minister Yoshihide Suga said he’s watching foreign exchange rates more closely than any other financial or economic indicator.

China’s yuan has gained about 10% against the dollar since June, spurring the government to consider relaxing restrictions on taking money out of the country in order to take the pressure off. Bloomberg Economics’ yuan stress indicators suggest the currency’s strength is set to continue in the near term.As well as addressing the uneven recovery in their own economies, G-20 leaders are also under pressure to prevent the gap with the world’s poorest nations from widening further. Those countries haven’t been able to ramp up government spending to fight the virus like their wealthier peers did, and they struggle to obtain vaccines.The G-20 has been working on a debt forgiveness plan that would involve private creditors. Yellen praised the effort in her letter, though she said implementation would be the real test. She also signaled support for boosting the International Monetary Fund’s lending power.“Without further international action to support low-income countries, we risk a dangerous and permanent divergence in the global economy,” Yellen said.

©2021 Bloomberg L.P.

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The economy is heating up again and it's good news for millions of unemployed – MarketWatch

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The U.S. economy is accelerating again after a coronavirus speed bump at the end of last year, but what’s missing is a big increase in hiring and people going back to work.

First the good news.

Consumer spending soared in January and incomes rose even faster thanks to $600 stimulus checks from the government and more generous unemployment benefits. Sales of new homes also shot up again and are sitting near a 14-year high. And manufacturers boosted production and investment for the ninth month in a row.

Yet so far the rebound in the economy hasn’t translated into faster hiring — no thanks to a record spike in coronavirus cases over the winter.

The economy lost jobs in December and barely added any in January, leaving more than 10 million people who were working before the pandemic unable to earn a living.

Almost as bad, some 1 million-plus new claims for unemployment benefits are being filed with the state and federal programs each week.

“I do think the economy is getting better,” said chief economist Richard Moody of Regions Financial, “but the labor market is still where the biggest hole is.”

See: A visual look at how an unfair pandemic has reshaped work and home

Things appear to be looking up, though.

Hiring is all but certain to pick up again as the coronavirus vaccines are rolled out, the weather warms, more government financial aid floods the economy and businesses in the service sector are allowed to more fully reopen.

Lots of companies are going to have lots of jobs to fill to meet an expected surge in pentup demand, especially service-oriented businesses such as restaurants, hotels airlines and entertainment venues hurt the most by the pandemic.

Many economists think the rebound in hiring might have gotten underway in February. Wall Street
DJIA,
-1.50%

is forecasting a 150,000 increase in new jobs in the U.S. Labor Department employment report due this coming Friday, though estimates range far and wide.

See: MarketWatch Economic Calendar

Winter storms and the power outage in Texas could act as a drag, but those events happened later in the month after the government mostly completed its survey for the February employment report.

Read: Inflation worries are back. Should you worry?

The official unemployment rate, meanwhile, is hard to take seriously. The current rate of 6.3% is widely believed to understate true unemployment by as much as four percentage points.

The pandemic has made it harder for the government to collect accurate data, a problem that has not gone away. By contrast, the Federal Reserve’s own unofficial estimate puts the jobless rate closer to 10%.

The more important figures to watch are the number of people classified as unemployed and the size of the labor force.

In January, the Bureau of Labor Statistics said 10.1 million people were unemployed, but that figure has hardly changed for three months.

The size of the labor force, meanwhile, has shrunk by 4.2 million since the start of the pandemic to some 160 million. That’s 4.2 million people who’ve basically lost all hope of finding work and aren’t even looking.

The number of unemployed needs to start falling rapidly and the size of the labor force has to increase sharply before the economy can truly heal.

The Biden administration is hoping to hasten the process with a pending stimulus plan that could reach up to $2 trillion, including another $1,400 for most families.

“One cannot deny the powerful impact that trillions of dollars in federal spending can have on consumers’ willingness and ability to spend,” said chief economist Scott Anderson of Bank of the West.

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