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Economy

Richmond Fed chief: With outlook hazy, economy needs support – 570 News

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WASHINGTON — As president of the Federal Reserve Bank of Richmond since 2018, Tom Barkin is a member of the Fed’s powerful committee that sets interest rates. The committee has been engaged this year in an extraordinary drive to support the economy and the financial system through ultra-low rates and new lending programs designed to keep credit markets running smoothly and encourage companies and households to borrow and spend.

Barkin takes part in the rate-setting committee’s discussions, though under the Fed’s rotation system, he is not a voting member of the committee this year.

The Associated Press spoke recently with Barkin about the unusual uncertainty surrounding the economic outlook, how the coronavirus may be affecting financial inequality and the economy’s ongoing need for rescue aid.

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Q: What’s the biggest risk facing the economy right now?

A: The biggest risk is on the health side. Will we have a vaccine or a treatment or will we have a set of infections that causes consumers to withdraw from the economy again? As I’ve talked to my contacts in the district, (among) firms, you see such a wide range of uncertainty that it does lead to a level of caution on things like hiring, on things like investing, on things like spending. And so I do think, similarly on the consumer side, how are you going to engage in commerce if you don’t know if you’re going to be putting your family at risk?

Q: Will inequalities in income or wealth slow the recovery?

A: One of the tragic things about this virus is it’s gone very hard after low-end service-level personal contact jobs. And this question of how many of those jobs will recover if restaurants reopen with only 50 or 60 or 70 per cent capacity — you’re going to lose restaurant jobs. If amusement parks and entertainment venues are not able to come back at the same scale or density, you’re going to lose those sorts of lower-pay service-level jobs. And so I do think there is a real risk there — that the normal we get back to will be less robust than the one we just left.

Q: Does the economy need more stimulus from the government or can it recover on its own?

A: One of my concerns as I look at the economy over the next six months, 12 months, 18 months, is whether we will have enough support from (from Congress) to get us back to where we were. That support could be things like deployment of broadband to enhance online learning. It could be things like making Pell Grants available for (job training) programs. My understanding of 2010, 2011, 2012 is that state and local governments had to cut back. And of course, you had the federal government eventually also cutting back. And it would’ve been helpful to have those entities continuing to spend into the recovery. And we’ll need that here as well.

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Interviewed by Christopher Rugaber.

Edited for clarity and length.

Christopher Rugaber, The Associated Press

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Economy

China Wants Everyone to Trade In Their Old Cars, Fridges to Help Save Its Economy

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China’s world-beating electric vehicle industry, at the heart of growing trade tensions with the US and Europe, is set to receive a big boost from the government’s latest effort to accelerate growth.

That’s one takeaway from what Beijing has revealed about its plan for incentives that will encourage Chinese businesses and households to adopt cleaner technologies. It’s widely expected to be one of this year’s main stimulus programs, though question-marks remain — including how much the government will spend.

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German Business Outlook Hits One-Year High as Economy Heals

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German business sentiment improved to its highest level in a year — reinforcing recent signs that Europe’s largest economy is exiting two years of struggles.

An expectations gauge by the Ifo institute rose to 89.9. in April from a revised 87.7 the previous month. That exceeds the 88.9 median forecast in a Bloomberg survey. A measure of current conditions also advanced.

“Sentiment has improved at companies in Germany,” Ifo President Clemens Fuest said. “Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers.”

A stronger global economy and the prospect of looser monetary policy in the euro zone are helping drag Germany out of the malaise that set in following Russia’s attack on Ukraine. European Central Bank President Christine Lagarde said last week that the country may have “turned the corner,” while Chancellor Olaf Scholz has also expressed optimism, citing record employment and retreating inflation.

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There’s been a particular shift in the data in recent weeks, with the Bundesbank now estimating that output rose in the first quarter, having only a month ago foreseen a contraction that would have ushered in a first recession since the pandemic.

Even so, the start of the year “didn’t go great,” according to Fuest.

“What we’re seeing at the moment confirms the forecasts, which are saying that growth will be weak in Germany, but at least it won’t be negative,” he told Bloomberg Television. “So this is the stabilization we expected. It’s not a complete recovery. But at least it’s a start.”

Monthly purchasing managers’ surveys for April brought more cheer this week as Germany returned to expansion for the first time since June 2023. Weak spots remain, however — notably in industry, which is still mired in a slump that’s being offset by a surge in services activity.

“We see an improving worldwide economy,” Fuest said. “But this doesn’t seem to reach German manufacturing, which is puzzling in a way.”

Germany, which was the only Group of Seven economy to shrink last year and has been weighing on the wider region, helped private-sector output in the 20-nation euro area strengthen this month, S&P Global said.

–With assistance from Joel Rinneby, Kristian Siedenburg and Francine Lacqua.

(Updates with more comments from Fuest starting in sixth paragraph.)

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Parallel economy: How Russia is defying the West’s boycott

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When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.

Officially, Apple does not sell its products in Russia.

The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.

But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.

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Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.

Zoya bought the watch without a moment’s delay.

The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.

“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.

“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”

Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.

But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.

Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.

The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.

 

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