By Howard Schneider
WASHINGTON (Reuters) – A slowdown in U.S. growth last year was at least partly the fault of President Donald Trump’s global trade battles and the resulting hit to business investment, the administration’s top economist said on Thursday in an outlook for the coming years.
“Once we got renegotiation of trade agreements, we saw uncertainty in the market, and investment took a hit,” Tomas Philipson, acting chair of the Council of Economic Advisers, said in a briefing with reporters about the CEA’s annual Economic Report of the President.
Philipson said the CEA had only done internal estimates of the impact but referred journalists to a Federal Reserve study https://www.federalreserve.gov/econres/notes/feds-notes/does-trade-policy-uncertainty-affect-global-economic-activity-20190904.htm that said trade uncertainty may have reduced growth in U.S. and world gross domestic products by as much as 1%.
Trump has blamed the Fed as the economy slowed from a 2.9% annualized growth rate in 2018 to 2.3% last year, and the central bank did trim rates three times to boost the economy.
But policymakers cited trade-related risks as a chief reason for the rate cuts. Philipson agreed with Trump that it was necessary to confront China on trade but said it did cause short-term disruption.
“I don’t know if we fully agree on the quantitative point, but on the qualitative we certainly agree … It is well known, if we have uncertainty, investment takes a hit,” Philipson said.
It was a rare public acknowledgement from the administration of the costs of a trade war characterized as largely beneficial to the U.S. economy despite lingering questions about who pays the price of higher tariffs, whether global supply chains will be reorganized to the U.S. economy’s benefit and even whether China will deliver on commitments made under a Phase 1 trade deal.
Philipson said he expects investment to rebound this year “if uncertainty settles down, which we hope it will.”
The CEA report, an annual exercise that is one part review of events and one part aspirational statement, outlined what will likely prove key talking points for Trump’s reelection campaign: The economy now is doing better than it did under President Barack Obama; it only started doing better under Trump and is poised to thrive even more if Trump administration proposals are enacted.
Those conclusions are likely to get pushback from Democrats who note that the jobs recovery, for example, began under Obama and accelerated in his second term.
A rise in the net worth of the poorest half of Americans, cited in the report and in Trump’s recent State of the Union speech, has been largely driven by a rise in home ownership and home values that began late in Obama’s term.
The CEA report projected economic growth this year will hit 3.1% and continue at 3% annually through 2024, as long as a full suite of suggested reforms are enacted including trade deals, an infrastructure plan and immigration rules that would favor more skilled workers.
Those changes, the CEA contends, would boost the annual increase in labor productivity from below 2 percent annually to 2.6 percent, a rate more akin to the high-growth 1990s than the more tepid growth of recent years.
Fed policymakers, whose forecasts do not take into account any of the administration’s policy proposals, see the economy growing around 2% this year, with even the most optimistic seeing growth at no more than 2.3%, unchanged from last year’s pace.
(Reporting by Howard Schneider; Editing by Dan Burns and Cynthia Osterman)
Investment required in Niagara's airports: Report – StCatharinesStandard.ca
CBRE predicts record $50 billion investment for commercial real estate this year – Times Colonist
TORONTO — Canada could see a record-breaking $50-billion worth of investment in commercial real estate this year as economic tailwinds and immigration policies support the booming sector, according to a report by CBRE, but it says the strong economy is also creating challenges of affordability and supply.
The commercial real estate services firm said Tuesday that total investment would be about $5 billion higher than 2019 and about a billion dollars higher than the record set in 2018.
Growth comes even amid low vacancies in major markets as tech companies in particular continue to prize downtown locations. Other strong areas include investments in rental apartments as home affordability gets out of reach for many Canadians, and industrial growth driven by e-commerce demand for logistics centres.
“Canada has so many advantages, and so many underlying fundamentals that are positives over the long-term, that we certainly think that growth in the Canadian commercial real estate market is going to continue,” said CBRE Canada vice-chairman Paul Morassutti.
Those trends, along with strong population growth and stable banking and governance, would help steer the sector if a recession hits, said Morassutti.
“The wild card is a recession. My feeling is we’re very well positioned to weather a recession, and I think we’ll continue to flourish after that because of those attributes.”
Heightened interest in the market is also creating challenges, including rising rents and limited office and industrial space, while climate change is creating its own issues.
CBRE says prime office rents jumped 20.9 per cent in Vancouver between 2018 and 2019, 14.2 per cent in Montreal, and 10.1 per cent in Toronto, while national industrial rents rose by 12.3 per cent between the two years for the largest increase on record.
Rents still form a small portion of company budgets and don’t seem to be a major constraint on growth yet, said Morassutti. He noted that in the industrial sector, costs savings in transportation from better locations more than offset costs from higher rents.
Rental rates for apartments are also climbing in major centres as home ownership becomes more expensive, which has helped drive investment in the multifamily. The sector could see about $11.9 billion in investment this year, up from $8.3 billion in 2018, to see the most of any commercial sector, CBRE expects.
The upward trend in residential rental rates is however putting pressure on income inequality, said Morassutti.
“Partially because of that lack of home affordability, you have all these people becoming renters, so on the one hand that’s a good thing. On the other hand, it’s not great for society that our two major cities are becoming unaffordable, it’s not great for the income divide, which is already a large social issue.”
Along with affordability, CBRE says the lack of investment in transit infrastructure, and increasing pressures of climate change on the construction sector and land values are also structural issues of concern for the year ahead.
More immediately, the impacts of the coronavirus outbreak also loom as a big unknown, but could be short-lived if it is contained, said Richard Barkham, global chief economist at CBRE said in a statement.
“If the coronavirus outbreak is relatively contained sometime in March, impacts on the Canadian economy and most commercial real estate sectors will be noticeable in the near term but less substantive over the year.”
He noted that short-term impacts would largely hit the hotel and retail sectors. He said the global property market should be able to weather the effects of the virus as anticipated today, but that a clearer picture of the epidemic should materialize sometime in March.
This report by The Canadian Press was first published Feb. 25, 2020.
Unstable climate policy creating energy investment uncertain – CityNews
Countries must shift mindset to virus preparedness: WHO expert – EJ Insight
Bank of Canada decides against launching digital currency, but leaves door open – The Globe and Mail
Raptors’ loss to Bucks a contrast of familiar trends, concerning novelties – Sportsnet.ca
Iran anticipates renewed protests amid social media shutdown
Popular Richmond BBQ spot speaks out about coronavirus rumours after man collapses outside restaurant – Vancouver Is Awesome
Real Estate Board of Greater Vancouver reports January housing sales up 42.4 percent
- Health8 hours ago
The coronavirus is unstoppable. Now what do we do? – Science Magazine
- Real eState7 hours ago
Montreal real estate: Luxury home prices spiked in 2019, and will continue to in 2020, Royal Lepage forecasts – CTV News
- Health9 hours ago
Here's why health officials are only sharing limited details about COVID-19 patients | CTV News – CTV News
- News5 hours ago
Air Canada cancels flights to China until April as government braces for domestic coronavirus outbreak
- News23 hours ago
Chinese Canadians plead for third Canadian rescue flight from Wuhan
- Media3 hours ago
5 students arrested in social media-linked Port Moody brawl
- Politics9 hours ago
Politics Briefing: Conservatives lead national poll – The Globe and Mail
- Tech23 hours ago
Huawei P40 Pro rumors: Release date, specs, 5G support, colors and 10x optical zoom – CNET