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Oil rises towards $46 on U.S. inventory drop, economy hopes – TheChronicleHerald.ca

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By Alex Lawler

LONDON (Reuters) – Oil rose towards $46 a barrel on Wednesday, gaining for a third day, supported by a report that U.S. crude inventories fell and as surveys showing stronger manufacturing raised hopes of an economic recovery from the coronavirus pandemic.

U.S. crude stocks fell by 6.4 million barrels, the American Petroleum Institute (API) said, more than forecast. [API/S] Manufacturing surveys around the world showed expanding activity in August, although the outlook remains shaky.

Brent crude , the global benchmark, was up 31 cents, or 0.7%, at $45.89 a barrel as of 1220 GMT, climbing for a third day. U.S. West Texas Intermediate rose 28 cents, or 0.7%, to $43.04.

“Market players are currently riding a wave of optimism, though it could come crashing down at any moment,” said Stephen Brennock of oil broker PVM.

U.S. crude inventories were forecast to fall by 1.9 million barrels.

The U.S. government’s Energy Information Administration issues its official figures at 1430 GMT, which will be scrutinised to see if they confirm the API’s numbers. [EIA/S]

The EIA figures “may provide some short-term volatility but are unlikely to provide enough impetus to break oil out of its recent trading ranges,” said Jeffrey Halley, analyst at broker OANDA.

Oil has recovered from historic lows hit in April, when Brent slumped to a 21-year low below $16 and U.S. crude went negative.

A record supply cut by the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+, has helped support prices.

The producers have begun to return some crude to the market as demand partially recovers and OPEC in August raised output by about 1 million barrels per day (bpd), a Reuters survey found on Tuesday. [OPEC/O]

(Additional reporting by Yuka Obayashi; editing by Louise Heavens and David Evans)

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Economy Week Ahead: Factories, Consumer Spending and Employment – The Wall Street Journal

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The Grove retail and entertainment complex in Los Angeles drew shoppers as restrictions on gatherings have eased.

Photo: valerie macon/Agence France-Presse/Getty Images

The U.S. jobs report for September highlights a week of data that will show how economies are recovering from coronavirus-induced recessions and from continued disruptions related to the pandemic.

Wednesday

China’s official purchasing managers index for manufacturing is expected to show factory activity expanded for the seventh straight month in September. Economists said manufacturers have sped up production to avoid shipment delays in the event buyers experience a return of Covid-19 this winter.

Thursday

The
Bank of Japan’s
tankan corporate sentiment survey for the third quarter is expected to improve, reflecting a gradual resumption of economic activity. In the second quarter, sentiment among Japan’s large manufacturers deteriorated to its lowest level in 11 years and even a significant gain will still show that more companies say business conditions are unfavorable than favorable.

The number of workers covered by Europe’s furlough schemes has been declining since lockdowns were eased, but without causing a surge in the number of people without jobs. That trend likely continued in August, with figures released by the European Union’s statistics agency expected to show that the jobless rate rose to 8.1% from 7.9% in July.

U.S. jobless claims have steadied at an elevated level in recent weeks, suggesting a slowdown in the labor market’s recovery. Economists expect only a slight decline in the number of applications for unemployment benefits during the week ended Sept. 26, underscoring continued labor-market disruption and a historically high number of layoffs.

U.S. consumer spending is expected to post another monthly increase in August, though at a slower pace than recent months. That would likely reflect several trends, including a partial rebound in employment, the expiration of some federal government benefits tied to the pandemic, and strong demand for many goods alongside a weaker recovery in the service sector.

The Institute for Supply Management’s September purchasing managers index for manufacturing is likely to reflect a strong rebound in factory activity amid a slow global recovery and strong domestic demand for autos, electronics and other goods.

Friday

Consumer prices in the eurozone were lower than they were a year earlier in August, and figures to be released by the European Union’s statistics agency are expected to show that they remained so in September, increasing the likelihood that the European Central Bank will have to provide further stimulus if it is to meet its inflation target.

U.S. nonfarm payrolls are expected to post another strong gain and the unemployment rate to decline in September as more businesses recall workers. But the pace of hiring might have slowed and the overall level of employment will likely remain millions of jobs short of pre-pandemic levels, underscoring the severe damage from the pandemic and the long road to full recovery.

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Economy

Economy Week Ahead: Factories, Consumer Spending and Employment – Wall Street Journal

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The Grove retail and entertainment complex in Los Angeles drew shoppers as restrictions on gatherings have eased.

The Grove retail and entertainment complex in Los Angeles drew shoppers as restrictions on gatherings have eased.

Photo: valerie macon/Agence France-Presse/Getty Images

The U.S. jobs report for September highlights a week of data that will show how economies are recovering from coronavirus-induced recessions and from continued disruptions related to the pandemic.

Wednesday

China’s official purchasing managers index for manufacturing is expected to show factory activity expanded for the seventh straight month in September. Economists said manufacturers have sped up production to avoid shipment delays in the event buyers experience a return of Covid-19 this winter.

Thursday

The
Bank of Japan’s
tankan corporate sentiment survey for the third quarter is expected to improve, reflecting a gradual resumption of economic activity. In the second quarter, sentiment among Japan’s large manufacturers deteriorated to its lowest level in 11 years and even a significant gain will still show that more companies say business conditions are unfavorable than favorable.

The number of workers covered by Europe’s furlough schemes has been declining since lockdowns were eased, but without causing a surge in the number of people without jobs. That trend likely continued in August, with figures released by the European Union’s statistics agency expected to show that the jobless rate rose to 8.1% from 7.9% in July.

U.S. jobless claims have steadied at an elevated level in recent weeks, suggesting a slowdown in the labor market’s recovery. Economists expect only a slight decline in the number of applications for unemployment benefits during the week ended Sept. 26, underscoring continued labor-market disruption and a historically high number of layoffs.

U.S. consumer spending is expected to post another monthly increase in August, though at a slower pace than recent months. That would likely reflect several trends, including a partial rebound in employment, the expiration of some federal government benefits tied to the pandemic, and strong demand for many goods alongside a weaker recovery in the service sector.

The Institute for Supply Management’s September purchasing managers index for manufacturing is likely to reflect a strong rebound in factory activity amid a slow global recovery and strong domestic demand for autos, electronics and other goods.

Friday

Consumer prices in the eurozone were lower than they were a year earlier in August, and figures to be released by the European Union’s statistics agency are expected to show that they remained so in September, increasing the likelihood that the European Central Bank will have to provide further stimulus if it is to meet its inflation target.

U.S. nonfarm payrolls are expected to post another strong gain and the unemployment rate to decline in September as more businesses recall workers. But the pace of hiring might have slowed and the overall level of employment will likely remain millions of jobs short of pre-pandemic levels, underscoring the severe damage from the pandemic and the long road to full recovery.

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Trump says the economy is booming. He's right — but you don't feel it – CNN

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Federal Reserve Chairman Jerome Powell spent all last week testifying about the recovery on Capital Hill. His message: This is a tale of two economies, and one looks much stronger than the other.
On paper, the economy is roaring back even stronger than Powell and many economists expected.: More than 22 million jobs vanished in the spring lockdown, but 10.6 million jobs have since been added back.
And US gross domestic product — the broadest measure of the economy — is expected to rebound sharply after collapsing at a revised, annualized and seasonally adjusted rate of 31.7% between April and June. The Atlanta Fed’s GDP Now model predicts GDP will jump at an annualized and seasonally-adjusted rate of 32% in the third quarter.
But that’s only one side of the story.

The other side

Many shops are still closed. About 11.5 million people who became unemployed because of Covid-19 remain out of work. And next week, unless Congress acts to provide more federal help, up to 100,000 airline industry jobs may be lost after the expiration of the CARES Act, which provided a $50 billion bailout to keep US airlines afloat.
Meanwhile, the sugar rush from Congress’s initial stimulus has worn off. Without more intervention we could be in for a long winter, especially as Covid-19 infections are rising again in some parts of the world.
“The risk going forward is that people are spending [now] because they have money in the bank even though they’re unemployed,” Powell said.
But once that money runs out, people might start scaling back their spending — a potential body blow to the recovery given consumer spending is the economy’s biggest engine.
Retail sales, one measure of how Americans’ spending behavior, have bounced back, recording their biggest monthly surge on record in May. But while the data has gotten better in the following months, the pace of improvement has slowed.

Fears of funds drying up

One possible reason is that unemployment benefits are now lower: a supplemental $600 in weekly jobless aid, part of Washington’s first stimulus bill, ran out at the end of July, and Congress hasn’t agreed on a new stimulus deal.
President Donald Trump signed an executive order to bolster benefits again, though by $400 a week this time, by diverting money from the Federal Emergency Management Agency. FEMA said that some states have already exhausted their allocated amounts.
Meanwhile, businesses using the Paycheck Protection Program to make it through the worst months of the crisis are worrying about funds drying up.
Problems like these underscore the importance of Congress taking action — and soon.
“I do think it’s likely that additional fiscal support will be needed,” Powell reiterated before the Senate Banking Committee on Thursday, even though the recovery will ultimately depend on the path of the pandemic.
If Washington fails to agree on more stimulus the fourth quarter of this year, as well as 2021, could look much weaker than expected, said Gus Faucher, chief economist at PNC, in a note.
But now that lawmakers are more focused on approving a new US Supreme Court justice, worries are growing that no further stimulus will be passed until after the election.
Experts at Oxford Economics still believe a $1.5 trillion stimulus package could be agreed upon before the election on November 3.
But the window to get a deal done is closing fast and will require that rarest of commodities in Washington: compromise.

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