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Pandemic to hit Japan’s economy more than expected, U.S.-China tension adds to concern

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By Kaori Kaneko

TOKYO (Reuters) – Japan’s economy will contract more than previously expected and suffer mild deflation during the current fiscal year, analysts predict, underscoring the fragile nature of the recovery from the devastating coronavirus pandemic.

Analysts also see renewed, escalating tensions between the United States and China as an additional source of concern for the world’s third-largest economy, which is heavily reliant on exports, a Reuters poll showed on Friday.

“Economic activity will continue to face restrictions from social distancing measures” needed to prevent the spread of the virus, said Taro Saito, executive research fellow at NLI Research Institute.

“Japan’s economy will likely rebound next fiscal year but won’t recoup the huge losses incurred this year,” he said.

The economy is forecast to shrink 5.6% in the current fiscal year to next March, the poll of 32 economists showed, more than a 5.3% contraction projected last month. In a worst case scenario it will shrink 8.0%.

The downgrade came as many analysts revised their forecasts for April-June gross domestic product (GDP) to a 27% contraction – last month’s worst case forecast – from a nearly 24% drop projected in July.

The government will publish April-June GDP data on Monday.

Japan’s economy will grow just 3.3% in the following year beginning in April 2021, the Aug. 4-13 poll showed, unchanged from the previous poll in July.

Core consumer prices, which exclude volatile fresh food but includes energy costs, will fall 0.3% this fiscal year and rebound just 0.2% next year, according to the poll.

With the economy in deflation and its 2% inflation target proving increasingly elusive, the Bank of Japan’s next move will be an expansion of stimulus, said a majority of those polled.

“The battle against the coronavirus will be a long one. Governments and central banks can’t end steps to combat the pandemic until an effective vaccine becomes available,” said Mari Iwashita, chief market economist at Daiwa securities.

JAPAN FACING U.S.-CHINA FEUD

A recent sharp deterioration in U.S.-China relations could complicate the outlook, as the world’s two largest economies disagree on issues such as trade, technology and the pandemic.

Asked how the conflict between the two nations will affect Japan’s economy, about 90% of economists surveyed said it would have a negative impact.

Over 80% of respondents also said Japanese companies would face adverse effects if Washington and Beijing move toward creating their own economic zones, which would mark a retreat of globalisation.

“Economic blocs led by those two countries, or de-globalisation, would lower global productivity growth. That would have a negative impact on Japan’s potential growth and Japanese firms’ productivity growth,” said Hiroshi Ugai, chief economist at JPMorgan Securities Japan.

(For other stories from the Reuters global long-term economic outlook polls package)

(Reporting by Kaori Kaneko; Polling by Daniel Leussink in Tokyo and Shaloo Shrivastava and Tushar Goenka in Bengaluru; Editing by Leika Kihara and Sam Holmes)

Source:: Reuters

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The price of the pandemic on Montreal's economy – Montreal Gazette

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Article content continued

Discussions over the financing began about one year ago, and the closing of the deal took place via videoconference, the CEO said.

“It’s one of the new realities of running a business during the pandemic,” Arsenault said. “The investors were located a few blocks from us, but we did everything via Microsoft Teams.”

Since Effenco counts customers in 10 countries, including France and the U.S., “not being able to travel is a bigger deal for us than teleworking,” Arsenault said. “With the pandemic we’ve had to rely on our foreign offices to bring in business. Teleworking itself has been no problem. The productivity is good. Many of our employees are happy to stay home when it rains.”

Teleworking “has helped to fuel the jobs recovery in greater Montreal,” says Montréal International’s Bernard. “Jobs have recovered much faster in the suburbs, and that’s due in large part to teleworking. Industries that rely on a physical proximity with the customer — lodging, restaurants, culture — aren’t bouncing back as fast in Montreal because the employees are not there.”

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Global shares mixed amid worries on coronavirus, economy – TheRecord.com

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TOKYO – Global shares were mixed on Friday as investors weighed the uncertainties around global economic outlook and a new rise in coronavirus cases in many countries.

Wall Street appeared set for a subdued start to trading, with Dow futures sinking nearly 0.1% and S&P 500 futures up nearly 0.2%.

France’s CAC 40 fell 0.2% to 5,031, while Germany’s DAX gained 0.3% to 13,246. Britain’s FTSE 100 lost 0.2% to 6,040 after the government imposed new limits on public gatherings to counter an increase in virus cases.

Traders are assessing whether recent gains in the stock market are overdone considering a glum economic outlook. Economists say that the speed of the recovery from the global recession will depend on containing the spread of the coronavirus, which is picking up again in many countries.

Central banks including the Federal Reserve, Bank of England and Bank of Japan this week refrained from providing more stimulus but are committed to keeping rates low until growth picks up sustainably.

U.S. jobs figures on Thursday highlighted how the economy is struggling to rebound. Official records showed that the number of Americans applying for unemployment benefits fell only slightly last week to 860,000, a historically high number that illustrates the broad economic damage still taking place nine months after the first case of COVID-19 was detected in the U.S.

Some investors appeared disappointed by a lack of new action by the Fed, whose easy monetary policy has helped drive stock markets.

“Hesitations as to whether the U.S. economy can sustain the current pace of recovery amid the lack of additional fiscal policy support and the Fed standing put on stimulus had the market reeling once again,” said Jingy Pan, senior market analyst at IG.

Japan’s benchmark Nikkei 225 gained 0.2% to finish at 23,360.30. South Korea’s Kospi added 0.3% to 2,412.40. Australia’s S&P/ASX 200 lost 0.3% to 5,864.50. Hong Kong’s Hang Seng rose 0.5% to 24,455.41, while the Shanghai Composite edged up 2.1% to 3,338.09.

In energy trading, benchmark U.S. crude gained 14 cents to $41.11 a barrel. Brent crude, the international standard, added 15 cents to $43.45 a barrel.

The dollar cost 104.57 Japanese yen, down from 104.63 yen Thursday. The euro stood at $1.1850, up from $1.1804.

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A slow September for the U.S. economy: Morning Brief – Yahoo Canada Finance

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Friday, September 18, 2020” data-reactid=”16″>Friday, September 18, 2020

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Things could be worse, but this doesn’t make them good.

The U.S. economic recovery slowed in September, according to economists.

But given the absence of new stimulus and the continued spread of COVID-19, this growth-at-a-slower-pace outcome suggests the recovery may continue even in the absence of a new stimulus package.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="And the fact that the economy isn’t in an outright contraction is a nice upside surprise given that fresh stimulus had been seen as essential for any recovery to continue just a few months back.” data-reactid=”22″>And the fact that the economy isn’t in an outright contraction is a nice upside surprise given that fresh stimulus had been seen as essential for any recovery to continue just a few months back.

“The pace of economic recovery has slowed in the last month, but that is arguably still an impressive result given the surge in coronavirus cases over the summer, and the more recent expiry of the enhanced unemployment benefits,” said Paul Ashworth, an economist at Capital Economics in a note on Thursday.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Retail sales, for instance, are back above pre-pandemic levels. But consumption in the services sector — such as at restaurants, where much of current unemployment is focused — has slowed at levels well below those that prevailed last year.” data-reactid=”24″>Retail sales, for instance, are back above pre-pandemic levels. But consumption in the services sector — such as at restaurants, where much of current unemployment is focused — has slowed at levels well below those that prevailed last year.

September’s data also showed a temporary pop from the Labor Day holiday, with economists at Bank of America Global Research noting that seated diners, according to OpenTable and TSA passenger data, both took a step back last week after a pop around the holiday.

Like Capital Economics, however, Bank of America also sees a recovery that continues to be quite resilient. “Bottom line: Labor Day has distorted the signal from many of the high frequency indicators that we track,” the firm said in a report published Wednesday.

“However, the New York Fed weekly economic index and Dallas mobility and engagement index continue to signal that the recovery has continued in September, but there is still a long road ahead before the economy is fully healed.”

Over at Oxford Economics, Gregory Daco notes that the firm’s proprietary recovery tracker index fell for week ended September 4 — the most recent week for which the firm has complete data — though most of this decline was due to the selloff in markets that tightened financial conditions.

Daco is also tracking concerning signs in the labor market, however, where gains slowed in early September at both the national and regional level.

“Employment continued to climb on stronger job openings and increased employment at small businesses, but momentum slowed,” Daco writes. Adding that, “regional labor market recoveries have lost strength, posing a risk to consumer spending absent additional fiscal aid.”

The labor market recovery lost momentum in early September while overall activity has been resilient even amid the absence of additional fiscal stimulus. (Source: Oxford Economics)
The labor market recovery lost momentum in early September while overall activity has been resilient even amid the absence of additional fiscal stimulus. (Source: Oxford Economics)

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="But given the mid-summer conversation about a “benefits cliff” the economy has now walked off with the CARES Act expiring at the end of July, a slowing but not contracting economy is a positive and surprising development.” data-reactid=”42″>But given the mid-summer conversation about a “benefits cliff” the economy has now walked off with the CARES Act expiring at the end of July, a slowing but not contracting economy is a positive and surprising development.

Which suggests a more durable recovery is possible if either a vaccine is available earlier than expected or fiscal stimulus is made available to consumers in the months ahead.

But these positive developments are far from an all-clear that the pandemic-induced downturn is behind us and that further diligence isn’t warranted.

“Activity in the housing sector has returned to its level at the beginning of the year, and we are starting to see signs of an improvement in business investment,” Federal Reserve Chair Jerome Powell said Wednesday. “The recovery has progressed more quickly than generally expected, and forecasts from FOMC participants for economic growth this year have been revised up since our June Summary of Economic Projections.”

“Even so, overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain,” Powell said.

Adding: “A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="By&nbsp;Myles Udland, reporter and co-anchor of&nbsp;The Final Round. Follow him at&nbsp;@MylesUdland” data-reactid=”52″>By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

What to watch today

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Economy” data-reactid=”54″>Economy

  • 8:30 a.m. ET: Current account balance, second quarter (-$160.0 billion expected, -$104.2 billion during the first quarter)

  • 10:00 a.m. ET: Leading index, August (1.3% expected, 1.4% in July)

  • 10:00 a.m. ET: University of Michigan Sentiment, September preliminary (75.0 expected, 74.1 in August)

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