(Bloomberg) — China’s recovery gained traction in March, showing the world’s second-largest economy is strengthening after stringent pandemic restrictions were dropped and Covid infection waves eased.
Economy
The economy has delivered good news. Are recession fears over?
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Growing recession alarm at the outset of this year warned of a coming business slowdown and significant job losses — until a government report last month showed that unemployment stands at its lowest level in more than 50 years.
A couple weeks later, in mid-February, fresh retail sales data blew past economist expectations, suggesting resilient consumer spending, the lifeblood of the U.S. economy.
The blockbuster economic performance boosted hopes that the economy would avoid a recession altogether.
Treasury Secretary Janet Yellen, speaking to “Good Morning America” last month, rejected concern about a downturn, saying the economy remains “strong and resilient.” Goldman Sachs cut its odds of a recession in the next 12 months to 25%.
The U.S. economy is humming, at least in some key metrics, but most economists say that the nation remains on a crash course toward a likely recession within the next year. A survey conducted last month by the National Association for Business Economics found that 58% of economists expect a recession in 2023.
An aggressive series of interest rate hikes at the Federal Reserve is expected to continue cooling the economy, economists told ABC News, noting the decline of personal savings that previously fueled the pandemic recovery.
To be sure, economists often err in their forecasts and some told ABC News that the path of averting a downturn is still possible.
Jeffrey Roach, chief economist at LPL Financial, called the coexistence of strong economic data and persistent recession fears a “conundrum.”
“There’s so much flux in the market,” he added, acknowledging the mixed signals sent by the economy in recent weeks. “The economy is still in this massive retooling from the pandemic.”
The high prices that weigh on the economy trace back to the pandemic-induced supply bottlenecks that made it harder to access a slew of goods, including essentials like gas and food.
Meanwhile, COVID forced billions worldwide indoors, shifting demand away from concert tickets and restaurant meals and toward the exact goods in short supply. The Russia-Ukraine war has exacerbated the shortages and sent prices even higher.
The Federal Reserve has imposed a string of aggressive rate hikes since last year that aim to lower inflation by cooling the economy and choking off demand. The approach, however, risks tipping the U.S. into a recession and putting millions out of work.
The Fed’s rate hikes have helped bring inflation down significantly from a summer peak. However, the policy has failed to slow the overall economy, as evidenced by the recent strong economic data, economists told ABC News.
The combination of easing inflation and sustained economic growth have driven hope among some of a “soft landing,” in which the Fed slows the economy and brings down inflation, while preventing the U.S. from entering a recession.
But a slowdown brought about by the Fed typically lags months behind a given rate hike, Nancy Lazar, chief global economist at Piper Sandler, told ABC News.
“Just because the economy is doing OK today doesn’t mean the economy won’t go into recession,” she said. “It’s happening slowly.”


Federal Reserve Chair Jerome Powell addresses reporters during a news conference in Washington, February 1, 2023.
Jonathan Ernst/Reuters, FILE
Some parts of the economy have shown signs of a slowdown. Home sales fell for the 12th consecutive month in January, reaching their lowest rate since November 2010, according to the National Association of Realtors.
The personal savings rate fell to an all-time low in December, suggesting that U.S. consumers have spent down much of their pandemic reserves.
Tina Quigley, president and CEO of the Las Vegas Global Economic Alliance, a group tasked with attracting and boosting economic activity, said the city thrived last year as leisure and travel bounced back from a pandemic lull.
By the end of last year, the average nightly rate for a hotel room in Las Vegas stood at $165, well above the pre-pandemic high of $127, she said. The Las Vegas airport saw 52.6 million passengers pass through its doors last year; a jump from 51.5 million in 2019.
“I don’t want to paint a picture of everything being sunshine and rainbows but certainly 2022 was a very good year,” she said.
Still, the organization assisted far fewer companies in establishing locations in Las Vegas last year compared to the year prior, suggesting recession fears had curtailed business plans and may foretell a further slowdown, Quigley said. The group helped 11 companies locate in Las Vegas last year, a sharp decline from 39 a year prior, it said.
“That pipeline has slowed down,” Quigley said. “We’re preparing for a recession, but not overreacting to it.”
Roach, of LPL Financial, said he expects a recession but recent strong economic indicators raise the likelihood of a mild downturn.
“Recessions are often necessary to break the back of inflation,” Roach said. “But given the fact that there’s so much fundamental stability in the economy, that recession won’t be as bad as your average recession.”
Zweli’s, a chain of three Zimbabwean restaurants in Durham, North Carolina, has enjoyed an uptick in business in recent months, said co-owner Leonardo Willliams, who runs the company with his wife.
Whereas last year a restaurant had about one or two tables occupied at a given time; now it’s four or five, he said. The company plans to hire 10 workers over the next month, increasing its workforce by 40%, he added.
“Business is slowly creeping back up,” he said.
However, rising costs have eaten away at the company’s profits, since major food purveyors charge twice as much for some products as they did before the pandemic, he said. And he fears that a recession would force corporate clients to cut back on catering, which accounts for 70% of the company’s revenue.
“It’s scary,” he said. “As small businesses, we’re equipped to be problem solvers but how much can one take?”





Economy
Can Russia and China succeed in dethroning the dollar?
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From: Counting the Cost
Russia turns to China’s Yuan as its foreign currency of choice and supports it in trade with other countries.
Since being shut out of much of the global financial system, Russia has sought alternatives to soften the effects of Western sanctions.
It has turned to China for an economic lifeline and has been increasingly embracing the yuan.
Trade between the two countries hit a record of $190bn last year, with much of those payments made in Chinese and Russian currencies.
The two biggest geopolitical rivals of the United States want to counterbalance the dominance of the dollar worldwide.
Elsewhere, Ukraine has won the IMF’s first loan to a country at war.





Economy
Charting the Global Economy: Recovery in China Gathers Pace
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![8fk]oem8pg219s085bjy8e62_media_dl_1.png](https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2023/04/japans-huge-international-investments-cumulative-japanese-p.jpg?quality=90&strip=all&w=288&h=216&sig=P0fbDUnd3wuvMnjAs8a15A)
![8fk]oem8pg219s085bjy8e62_media_dl_1.png](https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2023/04/japans-huge-international-investments-cumulative-japanese-p.jpg?quality=90&strip=all&w=288&h=216&sig=P0fbDUnd3wuvMnjAs8a15A)
Asia
China’s economic recovery gathered pace in March, with gauges for manufacturing, services and construction activity remaining strong, boosting the outlook for growth this year.
South Korea’s construction deals fell by a record margin in the fourth quarter as the property market cooled with rising interest rates weakening demand and inflation fueling costs.
Europe
Underlying inflation in the euro area hit a fresh high, handing ammunition to ECB officials who say interest-rate increases aren’t over yet. The rise to 5.7% in March’s core price reading, which strips out volatile items like fuel and food costs, came alongside a record plunge in headline inflation to 6.9% from 8.5% in February.
While Sweden sits between France and Switzerland in a ranking of dollar billionaires, many poorer Swedes have seen the gap between the haves and the have-nots widen dramatically in recent times. At the heart of Sweden’s woes is a dysfunctional housing market, which has not only cemented social divides, but exacerbated them.
A key gauge of US inflation rose in February by less than expected and consumer spending stabilized, suggesting the Fed may be close to ending its most aggressive cycle of interest-rate hikes in decades. Excluding food and energy, the core personal consumption expenditures price index climbed 4.6%, matching the smallest annual increase since October 2021.
Banks reduced their borrowings from two Fed backstop lending facilities in the most recent week, a sign that liquidity demand may be stabilizing. US institutions had a combined $152.6 billion in outstanding borrowings in the week through March 29, compared with $163.9 billion the previous week.
The biggest banking scare since the 2008 financial crisis will ricochet through the economy for months as households and businesses find it harder to gain access to credit. That’s the scenario facing the US after the collapse of three regional lenders, and a giant global one, over an 11-day span, according to several economists.
World
South Africa and Ghana each lifted rates by more than expected, and Thailand signaled more tightening is on the horizon. Mexico slowed its pace of hikes while Hungary’s resisted government pressure to start monetary easing. Colombia increased rates to a 24-year high and Egypt went ahead with a jumbo hike.
Bank of Japan Governor Haruhiko Kuroda changed the course of global markets when he unleashed a $3.4 trillion firehose of Japanese cash on the investment world. Now Kazuo Ueda is likely to dismantle his legacy, setting the stage for a flow reversal that risks sending shockwaves through the global economy.
Emerging Markets
President Vladimir Putin’s drive to expand Russia’s armed forces is adding to labor shortages as his war in Ukraine draws hundreds of thousands of workers into the military from other sectors of the economy. The total number taken into service is likely to have exceeded half a million, according to Bloomberg’s Russia economist Alexander Isakov.
—With assistance from Ruth Carson, Enda Curran, Alexandra Harris, Sam Kim, Masaki Kondo, John Liu, Michael MacKenzie, Reade Pickert, Chris Reiter, Zoe Schneeweiss, Mark Sweetman, Craig Torres, Alexander Weber and Anton Wilen.





Economy
Can Russia and China succeed in dethroning the dollar?
|



Russia turns to China’s Yuan as its foreign currency of choice and supports it in trade with other countries.
Since being shut out of much of the global financial system, Russia has sought alternatives to soften the effects of Western sanctions.
It has turned to China for an economic lifeline and has been increasingly embracing the yuan.
Trade between the two countries hit a record of $190bn last year, with much of those payments made in Chinese and Russian currencies.
The two biggest geopolitical rivals of the United States want to counterbalance the dominance of the dollar worldwide.
Elsewhere, Ukraine has won the IMF’s first loan to a country at war.





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