WASHINGTON — The U.S. economy grew at an annual rate of 2.1% in the final quarter of last year, but damage from the spreading coronavirus is likely depressing growth in the current quarter and for the rest of the year.
The overall pace of growth in the October-December quarter was unchanged from its initial estimate a month ago, though the components were slightly altered, the Commerce Department said Thursday. A slowdown in business restocking was less severe than first believed. But a cutback in business investment in new equipment was more of a drag on growth than initially thought.
Economists have been downgrading their forecasts for the first quarter of this year as fears of the impact of the virus has escalated. Stock markets have plunged this week on news that the number of coronavirus cases worldwide has now topped 81,000.
On Thursday, the Dow Jones Industrial Average plunged 4.4%, intensifying a weeklong market rout as investors worried that the coronavirus outbreak will seriously damage the global economy.
The virus, which started in Wuhan, China, has spread to more than 30 countries, including the United States, Italy and South Korea.
Vital supply chains from China that companies in the United States and elsewhere depend on have been disrupted, and that problem is expected to worsen. Microsoft and Apple have warned about adverse impacts from the supply chain disruptions.
U.S. companies with sizeable operations in China are being impacted directly. McDonald’s has closed hundreds of stores there. Starbucks has closed more than half of its locations. While it’s begun to open stores in China where the outbreak has abated, it is now spreading faster outside of China.
In a report to investors Thursday, Goldman Sachs said the fallout from the virus would likely wipe out all the earnings growth it had been predicting for 2020 if the virus continues to spread. David Kostin, a strategist for the firm, said his baseline estimate is now for zero growth in S&P 500 earnings per share this year, down from an earlier forecast of 5.5% earnings growth.
The rising fears about the economic damage the virus can do have inflicted the worst losses on U.S. stocks in two years, less than a week after Wall Street was hitting record highs. To try to demonstrate the government’s resolve to deal with the spread of the virus, President Donald Trump announced Wednesday that he was appointing Vice-President Mike Pence to take the lead in co-ordinating U.S. actions.
But economists are warning that if the virus turns into a global pandemic, the impact could be severe enough to push the global economy and the U.S. economy into recessions.
“The global economy was already very weak because of the trade war, and it would not take much to shove it on its heels,” said Mark Zandi, chief economist at Moody’s Analytics.
Zandi said his baseline forecast, which optimistically assumes that the outbreak remains largely contained in China and dissipates by spring, projects that global growth will slow to 2.4% this year — 0.4 percentage point lower because of the virus.
He expects the annual pace of U.S. growth to slow to 1.3% in the current quarter, down by 0.6 percentage point because of the virus. He said for the year, he is forecasting U.S. growth of 1.7%. That would be the slowest annual growth of the Trump presidency and far below the 3%-plus growth that Trump had promised to deliver during the 2016 campaign.
Because of the market turbulence and the rising potential of adverse effects from the virus, expectation of interest rate cuts by the Federal Reserve have risen. The CME Group tracker of investment sentiment has put the possibility of a quarter-point cut as early as March at 37%, up from just 7% a week ago.
Diane Swonk, chief economist at Grant Thornton, said the possibility of two rate cuts this year “has gone up dramatically” because of the virus threats.
Until recently, many economists had expected that the Fed could keep rates unchanged the whole year after three rate cuts last year, when it was struggling to cushion the impact of Trump’s trade war with China and a slowing global economy.
The estimated 2.1% annual growth pace in the October-December quarter followed an identical gain in the third quarter. For 2019 as a whole, the economy grew by 2.3%, the slowest pace since a 1.6% increase in 2016.
Trump is counting on a strong economy to propel him to re-election in November. But for each year of his presidency, economic expansion has fallen below the levels he had promised to deliver during the campaign, when he derided the growth rates achieved under President Barack Obama.
While growth did jump to 2.9% in 2018, propelled by the 2017 tax cut and increased government spending, it returned last year to near the average achieved by Obama.
Thursday’s report from the Commerce Department was its second of three estimates of economic growth for the October-December quarter. It showed that consumer spending, which accounts for 70 per cent of economic growth, grew at a 1.7% annual rate in the fourth quarter, down from an initial estimate of 1.8% growth.
Business investment on new plants and equipment was also lower, falling at a 2.3% rate, worse than the initial estimate of a 1.5% drop. These weaker numbers were offset by more business restocking of store shelves and upward revisions to residential investment and federal government spending.
Martin Crutsinger, The Associated Press
Mindset Matters: The Responsibility Of Corporate Behavior In Magnifying The Disability Economy – Forbes
Through a series of columns starting with the previous Mindset Matters piece, the hope is to open a dialogue around the significance of the emerging Disability Economy and discover some of the intricacies that are key to its very growth. As we mine deeper into this burgeoning economy of identity it is critical to recognize that this very concept is not static, but rather filled with complexity and nuances that must be explored further. If companies are going to truly embrace disability inclusion as a key stakeholder within their leadership strategy and a central theme to their long-term business success, then they must integrate key areas of knowledge that are essential to adopting a framework that radiates true disability confidence.
Corporations who choose to participate in this budding Disability Economy must understand the holistic nature of what needs to be done. A good starting point is to acknowledge the fact that the disability community is diverse, that the lived experience of disability cannot be seen through one lens, rather it must be seen through a diversity of perspectives that offer organizations a multitude of opportunities. Corporate leadership should have an awareness that while the Disability Economy is continuing to grow, it is ephemeral, in that it will continually change with each generation and each situation demanding new requirements that necessitate innovative ways of thinking and operating. It is this very awareness that will be critical for organizations to foster greater economic opportunities within this uncharted space.
So, what do businesses need to know? Corporate leadership must understand that to honestly immerse themselves within the Disability Economy in an authentic way they must identify with the value of needs. It is this understanding that must become the fundamental building block for corporate leaders to work on as they move forward while embracing disability into their business strategy. The value of needs is based on the notion that amplifying soft skills such as listening, trust, and empathy are central to pushing past barriers that are critical to gaining access to this new marketplace.
The adage “Nothing About Us, Without Us” cannot be far from the mind of any corporate leader who is engaging in the disability space. For any corporate leader to be involved in the Disability Economy, one must begin with a level of trust. No matter what the product or service, having buy-in from the disability community is essential to the process. Understanding the communities’ needs is imperative, but it is also the first salvo in starting an ongoing dialogue between corporate entities and the disability community themselves. It is through this process that the potential for real evolution can happen, and new products and services can have real meaning within this growing market.
As corporate leaders realize the value of need, the next step is making them habitual. The role of need must become an essential calling card for any organization doing business within the Disability Economy. It is not only critical for larger corporations but has value across many other branches of the emergent Disability Economy from entrepreneurship, social investors, to nonprofit organizations, and even government and educational institutions. These are topics that we will investigate further in future columns, but for the moment it is important to acknowledge the role behaviors play in expanding economic opportunities by celebrating the value of both the individual and the collective to shape the reality of the future.
Corporate leaders say they want to “do the right thing”, yet the question lies not just in the want, but the how. It is time for organizations and their leadership teams to be vulnerable and recognize that it is okay not to know. By identifying the needs of others to become a part of the habit of daily business life gives corporate leaders the flexibility to not only be prepared for change but move beyond a level of unconscious bias that offers a continuous mode of learning that will impact business both socially and economically creating opportunities for true disruption that can recalibrate the culture of business for the next century.
Japan economy contracts 3.6% in 3Q as virus hits spending – Yahoo Canada Finance
TOKYO (AP) — Japan’s economy contracted at a 3.6% annual rate in July-September as a wave of coronivirus infections crimped travel and other activities, the government said Wednesday.
The estimate for the last quarter, downgraded from an earlier report of a 3.0% contraction, reflected weakness in consumer spending and trade, the government said.
In quarterly terms, the measure used for most economies, the economy contracted 0.9%, compared to the earlier estimate of a 0.8% contraction.
The world’s third-largest economy was in a slump before the pandemic hit. Its recovery has been fitful thanks to precautions taken to curb COVID-19 infections. Troubles with supply chains, especially for computer chips used in autos, have also taken a toll.
Japan’s latest big coronavirus outbreak, in the late summer, has receded for now with a sharp drop in cases. But it hit during the usually busy summer travel season, with calls for restricted business activity and travel hurting restaurants, hotels and other service sector industries.
Consumer spending is recovering and will likely drive a recovery in the current quarter, Norihiro Yamaguchi of Oxford Economics said in a commentary.
“With supply chain disruptions easing in the auto sector, production and exports are also projected to recover, albeit at a moderate pace,” he said.
The latest data showed a lower level of private inventories than earlier reported and weaker government and consumer spending. It also showed wages contracted by 0.4%, instead of growing by 0.1% as earlier reported.
Japan’s Cabinet has approved a record 56 trillion yen, or $490 billion stimulus package, including cash handouts and aid to ailing businesses, to help the economy out of the doldrums worsened by the coronavirus pandemic. Parliamentary approval of the plan is expected this month.
The Associated Press
The global economic transition to a green economy – Lombard Odier
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