By Shrutee Sarkar
BENGALURU (Reuters) – The resurgence in coronavirus cases is the biggest threat to the recovering euro zone economy, according to a Reuters poll of economists, who say growth and inflation are more likely to create negative surprises over the coming year than positive ones.
Around 30 million people have been infected by the virus globally, and more than 900,000 have died, triggering some of the deepest recessions on record and breaking up supply chains around the world. COVID-19 global tracker https://www.reutersagency.com/en/coverage/covid-19-global-tracker
While a strong euro zone rebound is underway as lockdown restrictions have been eased and businesses reopened, France and Spain among others in the 19-member bloc are grappling with a virus resurgence.
That is raising the possibility of renewed restrictions and lockdowns.
“A flaring in the number of COVID-19 infections over the summer months has made it very clear that if there is no effective vaccine, growth will be handicapped,” said Peter Vanden Houte, chief economist at ING.
“There is also the fear of negative second-round effects once the current recession starts to be reflected in a swelling number of unemployed…(and) we cannot exclude higher precautionary savings dampening consumption.”
A return to where the economy was before the outbreak earlier this year is not expected until at least end-2022.
That comes despite the European Central Bank’s planned 1.35 trillion euros of pandemic-related additional asset purchases and an historic 750 billion euro recovery fund from the European Union due to kick in next year.
But the concern is that no new stimulus is on the horizon, other than national governments extending worker furloughs put in place early this year as they struggle with soaring debt.
Euro zone unemployment, which finally declined just before the coronavirus struck to where it was before the last financial crisis more than a decade ago, is already rising.
Ninety percent of economists, or 37 of 41 who responded to an additional question in the Sept. 15-17 Reuters poll, said a further surge in infections was the biggest risk to the euro zone economy over the coming year.
The remaining handful of respondents cited a strong euro, and no trade deal reached between the EU and United Kingdom when the Brexit transition period expires at the end of the year.
For a graphic on Reuters Poll: Euro zone economic outlook:
The Reuters poll of over 80 economists pointed to 8.1% quarterly growth this quarter, by far the strongest on record, following an historic 11.8% contraction in Q2. That forecast was unchanged from the August poll.
Quarter-on-quarter growth is then set to slow sharply to a still-strong 2.5% in Q4, but down from 3.0% predicted last month.
In a worst-case scenario, the economy was forecast to grow 4.5% in Q3, compared to 4.0% in the last poll. The worst-case for Q4 is now just a 0.4% contraction versus a 2.0% fall in the August poll.
But over 80% of respondents said the risks to both their euro zone growth and inflation forecasts were skewed more to the downside over the coming year.
“The virus is making new waves and the economy is still far from operating at pre-COVID levels in most sectors,” said Elwin de Groot, head of macro strategy at Rabobank, who expects no growth in the final three months of this year.
“But as governments are likely to shift towards more targeted measures – rather than blanket ones – the ‘true’ economic damage may only reveal itself in the next quarters.”
Most economists have remained pessimistic about the bloc’s growth outlook since the pandemic struck, and some have lowered their inflation views even further from last month.
The consensus for this quarter was 0.1% versus 0.3% predicted a month ago, followed by stagnation the next quarter. On a full-year basis, results were broadly in line with the ECB’s staff projections, at 0.4% for 2020, 1.0% for 2021 and 1.3% for 2022.
For a graphic on Reuters Poll: Euro zone economic growth and inflation outlook:
(For other stories from the Reuters global long-term economic outlook polls package:)
(Reporting by Shrutee Sarkar and Richa Rebello; Polling by Hari Kishan and Nagamani Lingappa; Editing by Ross Finley and Alexandra Hudson)
Voters Tend to Trust Trump on the Economy. Yet He’s Behind. Why? – The Wall Street Journal
It’s been 28 years since adviser James Carville helped propel Bill Clinton to the presidency by posting a sign in campaign headquarters reminding everyone there: “It’s the economy, stupid.” That was his singular way of drilling home the message that the economy mattered more to voters than anything else.
So far in 2020, though, it doesn’t seem to be the economy. Even though voters today prefer President Trump to handle the economy as much as ever, he remains behind as the race enters its final two weeks. That raises two questions: Why? And could the economic issue still propel him to a final-days turnaround?
Five times this year, The Wall Street Journal/NBC News poll has asked voters who they think would be better at handling the economy, Mr. Trump or Democrat Joe Biden. Five times they have named the president, by margins ranging from seven to 11 percentage points. Plenty of Americans, in short, appear to buy the president’s argument that the economy was in fine shape before the coronavirus hit, and that it isn’t his fault it has plunged since then.
More than that, when the poll asked voters just last week which issue is most important to them, they named the economy more than any other issue, including the coronavirus. All of that simply serves to frame the mystery of why that set of conditions isn’t working better for Mr. Trump.
The answer starts with evidence suggesting the dominance of the economic issue may be something of a myth, which has its roots in that 1992 campaign. It simply isn’t true that the candidate or party given better marks on handling the economy wins an election, even when the economy seems to get top billing. Voters have other issues propelling them with nearly equal force—and sometimes they view those as matters that also affect their own everyday economy.
Bill McInturff, a Republican pollster who co-directs the Journal/NBC News poll, notes that the same set of conditions prevailed in 2018: Voters said they thought Republicans would do a better job handling the economy, yet the party lost 41 seats in House elections that year. In some respects—the shift of suburban women toward the Democrats, more energized minority voters, concern about health care—this year resembles 2018 more than 2016 when Mr. Trump won.
With the second debate between President Trump and Democratic challenger Joe Biden’s canceled, they instead appeared in simultaneous town halls on competing TV networks. The two candidates offered Americans a contrast in tone and style. Photo: Jim Watson/Agence France-Presse/Getty Images,Evan Vucci/Associated Press
And though it’s little remembered now, a similar set of circumstances prevailed in 2012. Voters called the economy the most important issue, and more said they preferred Republican Mitt Romney to Democratic President Barack Obama on handling it. Yet Mr. Obama won re-election.
Then, as now, there was a cluster of other issues that, when taken together, rivaled the economy in importance to voters. This year the coronavirus, health care, race relations, climate change and ability to unite the country also are pressing and emotional matters for many voters. On every one, voters tend to prefer Mr. Biden, sometimes by wide margins.
More broadly, now as in 2016, the race seems as much about a struggle over the nation’s culture as about economic issues.
Moreover, voters relate the health of the economy to the handling of the pandemic: If they buy Mr. Biden’s argument that the economy can’t improve until the coronavirus is under better control, they actually see the pandemic as an economic issue. That benefits Mr. Biden.
Democratic pollster Peter Hart, who helps oversee the Journal/NBC News poll, says that as Americans already are standing in long lines to cast ballots, 2020 is a year in which voters see the broader course of the country as the real issue. “The massive turnout in 2020 is occurring because voters understand the stakes that go far, far beyond the two candidates,” he says. “Hidden behind the pandemic are the big issues of race, climate, gender, and safety.”
Mr. Trump also hasn’t played his advantage on the economy particularly well. He talks about his record of accomplishment, but doesn’t lay out many specifics about what he’d do in a second term to revive and extend economic growth. And his fabled rallies tend to veer down side alleys as they did in Michigan on Sunday, when the president’s argument that Michigan Democratic Gov. Gretchen Whitmer needs to do more to open up the state’s economy veered into chants from the crowd of, “Lock her up.” Mr. Trump echoed “Lock them all up” just days after the FBI arrested a group of men for plotting to kidnap the governor. That put the emphasis on a divisive message rather than a unifying economic one.
Perhaps Mr. Trump will find better ways in the campaign’s final days to focus voters on the economy, to his benefit. Presidential elections tend to tighten in the end, as wandering voters return to their home base, and as candidates manage to frame the final choice to their benefit. Mr. Trump gets one more big chance, in Thursday’s debate, to bring the argument back to the economy.
Write to Gerald F. Seib at email@example.com
IMF reveals 2021 forecasts for oil prices and the Middle East economy
DUBAI, United Arab Emirates — The International Monetary Fund downgraded its outlook for Middle East and Central Asian economic recovery, predicting a 4.1% contraction for the region as a whole — 1.3 percentage points worse than its previous assessment in April — in its latest regional outlook report released Monday.
Jihad Azour, director of the IMF’s Middle East and Central Asia department, noted a large disparity in economic loss between oil importing and exporting countries as the region has been hit by the coronavirus pandemic and a plunge in oil prices.
“Combined together, those two shocks led to a sharp decline in economic activity that is different between oil exporting and oil importing countries,” Azour told CNBC’s Hadley Gamble via video call on Sunday. “On average, we will see growth going negative by 6.6% for oil exporting countries, and negative growth of 1% for all importing countries,” he said, adding that there will be differences between the countries within each group.
Oil prices will remain under pressure, IMF says
Oil prices will be the most important factor for oil exporters’ recovery, particularly states like Saudi Arabia, Iraq, Iran, the UAE, Bahrain and Kuwait, for whom the commodity makes up the majority of revenue. While prices have recovered from their historic plunge in March of this year, international benchmark Brent crude is still trading nearly 40% below pre-pandemic levels. Brent stood at $42.87 per barrel on Monday morning in London.
And the IMF doesn’t see oil prices staging a dramatic recovery anytime soon, predicting prices in the $40 to $50 range in 2021. That’s still half the $80 per barrel figure OPEC kingpin Saudi Arabia needs to balance its budget, according to the fund.
“The projections for oil prices are in the corridor between $40 to $45 for … early next year, and will be between $40 to $50” next year overall, Azour said. “I think what is going to be also important to watch is the recovery in demand. That proved to be an important factor in what we saw this year, in addition to the supply that could come from alternative energies.”
The oil demand outlook remains grim amid new waves of coronavirus gripping regions of the world and uncertainty about U.S. fiscal stimulus and the U.S. presidential election. The International Energy Agency in September cut its outlook for worldwide oil demand to 91.7 million barrels per day this year, a daily contraction of 8.4 million barrels year-on-year and more than the contraction of 8.1 million predicted in the agency’s August report.
OPEC posted an even worse outlook for this year, slashing its view for global oil demand last month to an average of 90.2 million barrels per day in 2020, a contraction of 9.5 million barrels per day year-on-year. The group of 13 oil-producing countries described the outlook for the commodity’s demand as “anemic,” and warned that risks remain “elevated and skewed to the downside.”
‘The best way to get out of this crisis’
Azour stressed diversification and continued coronavirus safety measures as key to strengthening the region’s economies, with a focus on providing opportunities for its youth population.
“I think what is important for the region going forward is we have now a situation where it’s clear that diversifying the economy is the best way to get out of this crisis,” Azour said.
Diversification will be a particular challenge given the blow to some of the region’s most vital non-oil sectors: tourism, transportation, retail and real estate. Air travel alone isn’t expected to rebound to pre-pandemic levels until at least 2023.
Real GDP growth for GCC states averaged 4.7% from 2000 to 2016, of which non-oil growth made up a mere 6.4%, according to the IMF’s report. But the oil-reliant Gulf states are now expected to see a 6% real GDP contraction this year, with non-oil sectors comprising 5.7% of that loss.
—CNBC’s Sam Meredith contributed to this report.
China's economy is the envy of the world – CNN
Alibaba spots an opportunity
US debt hasn’t been this high since World War II
- IBM and PPG Industries report after the close.
- The NAHB Housing Market Index for October is out at 10:00 a.m. ET.
China accuses Canada of condoning media criticism of Hong Kong comments – Global News
Kyle Dubas says he’s finished with the Maple Leafs roster moves – Pension Plan Puppets
OtterBox Launches Apple-Exclusive Cases for iPhone 12 mini, iPhone 12, iPhone 12 Pro, iPhone 12 Pro Max – Stockhouse
Silver investment demand jumped 12% in 2019
Iran anticipates renewed protests amid social media shutdown
Richmond BBQ spot speaks out about coronavirus rumours Vancouver Is Awesome
- Health24 hours ago
Coronavirus outbreaks at two Toronto hospitals tied to 29 cases
- News17 hours ago
Canada isn’t ruling out taking a stake in Canadian airlines
- Science23 hours ago
SpaceX launches another batch of Starlink satellites – Spaceflight Now – Spaceflight Now
- Business22 hours ago
After complaints, CRA encourages some failed CRB applicants to reapply on Monday – CBC.ca
- Real eState17 hours ago
Prices are going up again. What does this mean for the future of Vancouver's housing market? – Vancouver Sun
- Science15 hours ago
CRTC approves SpaceX's BITS licence application for Starlink project – MobileSyrup
- Tech20 hours ago
Apple begins shipping first iPhone 12 and iPhone 12 Pro pre-orders ahead of Friday release – 9to5Mac
- Investment21 hours ago
Israel, UAE agree deal to boost investment in each other's economies – The Journal Pioneer