By William Schomberg and Andy Bruce
LONDON (Reuters) – Britain’s economy struggled to grow in August, setting back its recovery from the coronavirus lockdown, and finance minister Rishi Sunak was due to announce more help to slow a rise in jobs losses as a second wave of COVID-19 infections hits.
Gross domestic product rose by 2.1% from July, official data showed, not even half the median forecast in a Reuters poll of economists and the slowest increase since the economy began to recover in May from a record slump.
Much of what growth there was in August was down to a one-off government restaurant subsidy programme.
Finance minister Rishi Sunak was due to announce later on Friday a plan to support jobs in businesses that may be ordered to close to slow a resurgence of COVID-19 infections. Economists said the data also raised the chance of more stimulus from the Bank of England.
“The sharp slowdown in growth indicates that the recovery may be running out of steam, with output still well below pre-crisis levels,” Suren Thiru, head of economics at the British Chambers of Commerce said.
“The increase in activity in August largely reflects a temporary boost from the economy reopening and government stimulus, including the Eat Out to Help Out Scheme, rather than proof of a sustained ‘V’-shaped recovery.”
More than half of the economy’s growth in August came from accommodation and food, where output surged by 71.4% thanks to the government’s one-month meals subsidies, more people taking holidays in Britain and the easing of lockdown restrictions.
Kate Nicholls, head of the UK Hospitality trade body, said new COVID-19 restrictions introduced in September had weighed on the hospitality sector again.
“Today’s figures show our economy has grown for 4 consecutive months, but I know that many people are worried about the coming winter months,” Sunak said.
“Throughout this crisis, my single-focus has been jobs – protecting as many jobs as possible, and providing support for people to find other opportunities where this isn’t possible. This goal remains unchanged.”
Sunak’s new jobs plan would subsidise two thirds of the wages of workers in pubs, restaurants and other businesses forced to close to slow the spread of the coronavirus, the Times reported.
His wage subsidy plan for workers across the economy expires at the end of this month and will be replaced by less generous support for employers, raising fears of a jump in job losses.
Friday’s data showed the economy – which shrank by more than any other Group of Seven nation in the April-June period – remained 9.2% smaller than its pre-the pandemic level.
Graphic: UK GDP remained 9.2% below pre-pandemic size in Aug – ONS – https://fingfx.thomsonreuters.com/gfx/polling/jznvnlydevl/Pasted%20image%201602227920047.png
The huge services sector grew by 2.4% from July, half the pace expected by economists. Growth in the smaller manufacturing and construction sectors also fell short of forecasts.
Bank of England Governor Andrew Bailey said on Thursday that risks to the economy were “very much on the downside” and the central bank was ready to use its policy firepower.
Dean Turner, an economist at UBS Global Wealth Management, said recent surveys had pointed to the economy slowing in September which could be made worse by local COVID-19 restrictions on activity.
“Sluggish progress is likely to encourage the Bank of England to increase its bond buying program at its November meeting,” he said.
Britain is also facing the risk that it fails to secure a trade deal with the European Union with negotiations still ongoing ahead of the Dec. 31 expiry of the country’s post-Brexit transition period.
(Reporting by William Schomberg and Andy Bruce; editing by Kate Holton)
China's economy accelerates as virus recovery gains strength – CBC.ca
China’s shaky economic recovery from the coronavirus pandemic is gaining strength as consumers return to shopping malls and auto dealerships while the United States and Europe endure painful contractions.
Growth in the world’s second-largest economy accelerated to 4.9 per cent over a year earlier in the three months ending in September, up from the previous quarter’s 3.2 per cent, official data showed Monday. Retail spending rebounded to above pre-virus levels for the first time and factory output rose, boosted by demand for exports of masks and other medical supplies.
Growth ‘still accelerating’
China is the only major economy that is expected to grow this year while activity in the United States, Europe and Japan shrinks.
The recovery is “broadening out and becoming less reliant” on government stimulus, Julian Evans-Pritchard of Capital Economics said in a report. He said growth is “still accelerating” heading into the present quarter.
Most Asian stock markets rose on the news of increased activity in China, the biggest trading partner for all of its neighbours. Japan’s Nikkei 225 index added 1.1 per cent while Hong Kong’s Hang Seng climbed 0.9 per cent. Markets in South Korea and Australia also rose.
China’s benchmark Shanghai Composite Index lost 0.7 per cent on expectations the relatively strong data will reduce the likelihood of additional stimulus that might boost share prices.
Warning on international economy
China, where the pandemic began in December, became the first major economy to return to growth after the ruling Communist Party declared the disease under control in March and began reopening factories, shops and offices.
The economy contracted by 6.8 per cent in the first quarter, its worst performance since at least the mid-1960s, before rebounding.
The economy “continued the steady recovery,” the National Bureau of Statistics said in a report. However, it warned, “the international environment is still complicated and severe.” It said China faces great pressure to prevent a resurgence of the virus.
Authorities have lifted curbs on travel and business but visitors to government and other public buildings still are checked for the virus’s telltale fever. Travellers arriving from abroad must be quarantined for two weeks.
Last week, more than 10 million people were tested for the virus in the eastern port of Qingdao after 12 cases were found there. That broke a two-month streak with no virus transmissions reported within China.
Industrial production rose 5.8 per cent over the same quarter last year, a marked improvement over the first half’s 1.3 per cent contraction. Chinese exporters are taking market share from foreign competitors that still are hampered by anti-virus controls.
Retail sales rose 0.9 per cent over a year earlier. That was up from a 7.2 per cent contraction in the first half as consumers, already anxious about a slowing economy and a tariff war with Washington, put off buying. Online commerce rose 15.3 per cent.
In a sign demand is accelerating, sales in September rose 3.3 per cent.
“China’s recovery in private consumption is gathering momentum,” said Stephen Innes of AxiCorp in a report.
Economists say China is likely to recover faster than other major economies due to the ruling party’s decision to impose the most intensive anti-disease measures in history. Those temporarily cut off most access to cities with a total of 60 million people.
The International Monetary Fund is forecasting China’s economic growth at 1.8 per cent this year while the U.S. economy is expected to shrink by 4.3 per cent. The IMF expects a 9.8 per cent contraction in France, 6 per cent in Germany and 5.3 per cent in Japan.
Private sector analysts say as much as 30 per cent of China’s urban workforce, or up to 130 million people, may have lost their jobs at least temporarily. They say as many as 25 million jobs might be lost for good this year.
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.
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