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Yearender: US economy slows in 2019, thorny road ahead – Xinhua | English.news.cn – Xinhua

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Colorful child’s riding toys are displayed at the 116th Annual North American International Toy Fair at the Jacob K. Javits Convention Center in New York, the United States, Feb. 16, 2019. (Xinhua/Wang Ying)

The U.S. economy has maintained a moderate pace of growth, but it faces a thorny path ahead.

WASHINGTON, Dec. 24 (Xinhua) — The U.S. economy, supported by robust consumer spending and a strong job market, has maintained a moderate pace of growth as 2019 draws to a close. While worries about an immediate recession have abated, its economy still shows signs of slowing down.

With business investment falling and manufacturing sector contracting, the U.S. economic recovery has hit a lot of bumps over the past few months. It faces a thorny path ahead amid lingering trade uncertainty and a synchronized global slowdown.

MIXED PICTURE

U.S. economic growth in the third quarter expanded at an annual rate of 2.1 percent, which is slightly up from the 2 percent in the second quarter and marks a sharp deceleration from the 3.1 percent in the first quarter, according to data from the U.S. Commerce Department.

A panel of professional forecasters recently surveyed by the National Association for Business Economics (NABE) anticipated the U.S. Gross Domestic Product growth would slow from 2.9 percent in 2018 to 2.3 percent this year.

After the central bank’s latest policy meeting earlier this month, U.S. Federal Reserve Chairman Jerome Powell described the mixed picture in his words: “Household spending has been strong, supported by a healthy job market, rising incomes, and solid consumer confidence. In contrast, business investment and exports remain weak, and manufacturing output has declined over the past year.”

Personal consumption expenditures, which account for roughly 70 percent of U.S. economic output, have seen robust growth during the first three quarters — rising by 1.1 percent, 4.6 percent, and 3.2 percent respectively — partly soothing fears over the health of the world’s largest economy.

The unemployment rate, which has remained below 4 percent since the beginning of the year, dropped slightly to 3.5 percent in November, again hitting the lowest in nearly five decades. Job gains have averaged 205,000 from September to November.

Despite resilient consumer spending and a strong labor market, business investment has declined for two straight quarters — dropping by 1 percent in the second quarter and 2.3 percent in the third — acting as a drag on the overall economy.

Economic activity in the manufacturing sector, meanwhile, contracted for a fourth consecutive month in November, according to the Institute for Supply Management. The Purchasing Managers’ Index registered 47.8 percent in September, the lowest in a decade.

TRADE UNCERTAINTY

The Fed chairman, along with many economists, has repeatedly cited trade tensions as one of the factors that have been weighing on the U.S. economy.

Noting that the economy faced some “important challenges” from weaker global growth and trade uncertainty over the past year, Powell said the central bank adjusted the stance of monetary policy to “cushion” the economy from these developments and “provide some insurance against the associated risks.”

The Fed has lowered interest rates three times since July, amid growing uncertainty stemming from trade tensions, weakness in global growth and muted inflation pressures. These policy adjustments put the current federal funds rate target range at 1.5 percent to 1.75 percent.

U.S. Federal Reserve Chairman Jerome Powell speaks during a press conference in Washington D.C., the United States, on Dec. 11, 2019. (Xinhua/Sarah Silbiger)

The Business Roundtable, an association of CEOs for some of the largest companies in the United States, recently said its index of the CEOs’ economic outlook in the fourth quarter dropped to 76.7, which remains below the historical average and marks the seventh consecutive quarterly decline.

“CEOs are justified in their caution about the state of the U.S. economy. While we have achieved a competitive tax environment, uncertainty surrounding trade policy and slowing global growth are creating headwinds for business,” said Joshua Bolten, president and CEO of the Business Roundtable.

According to the NABE survey released earlier this month, trade policy continues to be the “most widely cited” dominant downside risk to the U.S. economy through 2020, with half of respondents citing it as the “greatest” downside risk.

U.S.-initiated trade tensions have taken a toll on the global economy. The World Trade Organization recently said that world merchandise trade volumes are expected to rise by only 1.2 percent in 2019, substantially slower than the 2.6 percent growth forecast in April.

In its latest World Economic Outlook report released in October, the International Monetary Fund lowered its global growth forecast for 2019 to 3 percent, warning that growth continues to be weakened by rising trade barriers and growing geopolitical tensions.

THORNY ROAD AHEAD

The U.S. economy is expected to further slow down next year against the backdrop of persistent trade policy uncertainty and a labor market that could be losing momentum, as well as a precarious global outlook.

Official data showed that job gains have averaged 180,000 per month so far in 2019, compared with an average monthly gain of 223,000 in 2018, indicating that the overall level of hiring has been slowing down over the past few months. Meanwhile, the pace of payroll growth has remained weak.

According to the CNBC Global CFO Council survey for the fourth quarter, 60 percent of chief financial officers expect their company’s head count to decrease over the next 12 months.

The NABE survey panelists believed the U.S. economy would slow to 1.8 percent in 2020. “The consensus forecast calls for a pickup in housing, but slower growth in business investment and consumer spending, along with larger deficits in trade and the federal budget,” said NABE President Constance Hunter, chief economist at KPMG.

The federal budget deficit, which ballooned rapidly during the Trump administration, has drawn concern from many. Powell, the Fed chairman, recently stressed the urgency for the U.S. Congress to address the issue, noting that there would otherwise be less fiscal space to support the economy in a downturn.

On the trade front, uncertainty has been the only certainty. Despite progress with Canada, Mexico and China, the United States has proposed tariffs on French products in retaliation for digital service tax, and its Boeing-Airbus aircraft subsidy dispute with the European Union has been escalating.

A worker milks a cow at a dairy farm run by Kelly D. Cunningham in rural Cass County of the U.S. state of Iowa, Oct. 16, 2019. (Xinhua/Wang Ying)

“The administration’s trade policies have left little room to maneuver,” Diane Swonk, chief economist at Grant Thornton, a major accounting firm, wrote in an analysis.

“Either the president backs off his campaign promises, holds the line on tariffs and the economy slows. Or, he risks a recession by doubling down on trade wars and heightening uncertainty,” Swonk wrote.

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China virus outbreak may wallop economy, financial markets – CTV News

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BANGKOK —
News that a new virus that has afflicted hundreds of people in central China can spread between humans has rattled financial markets and raised concern it might wallop the economy just as it might be regaining momentum.

Health authorities across Asia have been stepping up surveillance and other precautions to prevent a repeat of the disruptions and deaths during the 2003 SARS crisis, which caused $40 billion-$50 billion in losses from reduced travel and spending.

The first cases of what has been identified as a novel coronavirus were linked to a seafood market in Wuhan, suggesting animal-to-human transmission, but it now is also thought to be spread between people. As of Wednesday, some 440 people were confirmed infected and nine had died from the illness, which can cause pneumonia and other severe respiratory symptoms.

A retreat in financial markets on Tuesday was followed by a rebound on Wednesday, as investors snapped up bargains. Share benchmarks were mostly higher, with Hong Kong’s Hang Seng gaining 1.1% and the Shanghai Composite index advancing 0.4%. Japan’s Nikkei 225 jumped 0.7%.

While the new virus appears much less dangerous than SARS, “the most significant Asia risk could lie ahead as the regional peak travel season takes hold, which could multiply the disease diffusion,” said Stephen Innes, chief Asian strategist for AxiCorp. “So, while the risk is returning to the market, the lights might not turn green until we move through the Lunar New Year travel season to better gauge the coronavirus dispersion.”

The 2003 outbreak of Severe Acute Respiratory Syndrome in China, along with cases of a deadly form of bird flu, resulted in widespread quarantine measures in many Chinese cities and in Hong Kong. More than 8,000 people fell sick and just under 800 people died, a mortality rate of under 10%.

While the ordinary flu kills hundreds of thousands of people each year, such new diseases raise alarm due to the uncertainties over how deadly they might be and how they might spread. That’s especially true during the annual mass travel of the Lunar New Year festival, which begins this week.

“The cost to the global economy can be quite staggering in negative GDP terms if this outbreak reaches epidemic proportions as until this week, the market was underestimating the potential of the flu spreading,” Innes said in a report.

In China, health officials stepped up screening for fevers. “We ask the public to avoid crowds and minimize the public gatherings to reduce the possibility of cross infection,” Li Bin, deputy director of the National Health Commission, said Wednesday.

Just as with SARS, though, the impact of the disease is likely to fall heaviest on specific industries, such as hotels and airlines, railways, casinos and other leisure businesses and retailers, analysts said. Most declined Tuesday but rebounded on Wednesday as investors locked in profits ahead of the Lunar New Year holiday. The outbreak is a boon, meanwhile, for pharmaceutical companies and makers of protective masks and other medical gear.

“If the pneumonia couldn’t be contained in the short term, we expect China’s retail sales, tourism, hotel & catering, travel activities likely to be hit, especially in the first and second quarters,” said Ning Zhang of UBS. Government efforts to offset the shock would help, but growth will likely rebound less than earlier forecast, Zhang said.

As of Jan. 17, the World Health Organization had not recommended any international restrictions on travel but urged local authorities to work with the travel industry to help prevent the disease from spreading while warning travellers who fall ill to seek medical attention.

The illness is yet another blow for Hong Kong, whose economy is reeling from months of often violent anti-government protests. The wider concern is China, where the economy grew at a 30-year low 6.1% annual pace in 2019. An interim trade pact between Beijing and Washington had raised hopes that some pressure from tensions between the two biggest economies might ease, and the latest data have showed signs of improved demand for exports.

The virus outbreak raises the risk such optimism might be premature.

“According to our analysis of the spread of the SARS virus, which so far appears very similar to 2019-nCoV (the new virus), we expect increased downward pressure on China’s growth, particularly in the services sector,” Ting Lu and other analysts at Nomura in Hong Kong said in a commentary.

The growing number of global travellers has contributed to the spread of various diseases in recent years, including Middle East respiratory syndrome, the Ebola and Zika viruses, the plague, measles and other highly contagious illnesses.

The World Economic Forum estimates that pandemics — cross-border outbreaks like the flu that killed 50 million people a century ago — have the potential to cause an $570 billion in annual economic losses.

The 2014-16 Ebola virus epidemic caused losses amounting to over $2.2 billion, according to the World Bank. That includes a 40% decrease in the number of working Liberians at the height of the crisis, lower exports and harvests, and costs for combating the disease.

Apart from the human tragedy, such crises gobble up resources needed for other government spending, exacting a harsh toll on the poorest economies. In Africa, the loss of health care workers to Ebola resulted in thousands more deaths of mothers and babies, hindered work on other diseases such as preventing and treating malaria, HIV/AIDS and tuberculosis, reduced vaccination rates and fewer surgeries, the World Bank said in a report.

Many survivors, meanwhile, suffer from lingering effects of the illnesses and the powerful drugs used to save their lives, becoming more vulnerable to hunger and other risks.

At the same time, increasingly sophisticated tools for collecting data and analyzing are aiding efforts to prepare for and cope with severe disease outbreaks.

In 2016, the World Bank set up a $500 million rapid response insurance fund, working with the WHO and insurance companies, to combat pandemics in developing countries. The fund uses “cat bonds,” or catastrophe bonds, whose principal will be lost if the funds are needed to help deal with an outbreak. Private insurers have followed with products of their own meant to hedge against risks from such disasters.

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South Korea's economy grew at decade-low pace in 2019 – Aljazeera.com

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Sagging exports and global trade tensions pulled South Korea’s annual growth rate last year to its lowest level since 2009, but a surge in government spending may have given the economy a boost in the last three months of 2019.

The slowdown comes as President Moon Jae-in’s administration increases fiscal spending and as the Bank of Korea (BOK) considers further stimulus to shield the economy from a global slowdown.

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The gross domestic product (GDP) increased by a seasonally adjusted 1.2 percent in the fourth quarter of 2019 compared with the previous three months, the BOK said on Wednesday.

It was the fastest expansion since the third quarter of 2017 and outperformed the median estimate of 0.8 percent in a survey by Reuters news agency.

“Government spending definitely was a boost as exports was a drag,” said Park Chong-hoon, an economist at Standard Chartered Bank in Seoul. “The prospect for exports is better this year with the US-China signing of the trade deal, and as China continues with its expansionary fiscal policies.”

Robust government spending on public infrastructure combined with better private consumption improved growth in the fourth quarter, but that did little to help exports, which made no contribution to the 1.2 percent expansion.

In the fourth quarter, private consumption increased 0.7 percent from three months earlier while construction investment jumped 6.3 percent.

Exports declined 0.1 percent in volume terms, reflecting the extended slump in shipments, which declined for a 13th consecutive month through December in year-on-year terms.

For the whole of 2019, the economy grew by 2 percent, the slowest pace in 10 years and matching the central bank’s projection.

“Of the 2 percent, the net government contribution to growth came to 1.5 percentage points, the biggest portion since 2009 but that didn’t change the fact that it was a hard year for Korea in terms of exports,” a central bank official said.

In a press briefing held after the GDP data release, another BOK official said the outbreak of a virus from central China has emerged as a fresh risk that could hurt consumer spending.

“With the case of the Middle East Respiratory Syndrome (MERS), people didn’t go out much and travelled less, so spreading of the new virus may shrink consumption in that regard,” Park Yang-su, a director general at the BOK, said in response to a question about the virus.

South Korea in 2015 drew up a supplementary budget to help the economy cope with the effects of the outbreak of the MERS.

The virus in China, originating in the central city of Wuhan at the end of last year, has spread to Beijing, Shanghai and elsewhere, with cases also confirmed in the United States, Thailand, South Korea, Japan and Taiwan.

Nine deaths and 440 cases had been reported as at Wednesday morning in Asia.

SOURCE:
Reuters news agency

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Quebec can develop its economy and fight climate change, Legault says – Montreal Gazette

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Thunberg or Trump? Premier skates around question about whom he sides with as he heads off to economic summit in Davos.

QUEBEC — Don’t ask Premier François Legault to choose which climate change vision he believes in — the one backed by Greta Thunberg’s or that of U.S. President Donald Trump?

He’d rather not take sides.

Moments before taking a flight Tuesday to Davos, Switzerland — where Thunberg and Trump are already sparring over climate change at the World Economic Summit — Legault said he sees Quebec as somewhere in the middle of the kerfuffle.

“I am in the balanced clan,” Legault told reporters when asked whom he prefers. “I think we need to be able to create wealth in Quebec because we have some catching up to do, but we must make more effort to reduce our greenhouse gas emissions.

“I think we have to find a balance.”

The Coalition Avenir Québec was criticized during the 2018 election campaign for barely mentioning the environment and climate change. On Tuesday, Legault said industrialized countries like the United States and Asia must do more to save the planet.

Legault made the remarks just hours before heading to Davos. Quebec premiers have attended the summit for the last 30 years in an attempt to stimulate foreign investment in the province.

Legault’s economic pledge during the election campaign was to double private investment in Quebec. In a statement released after his departure Tuesday, Legault said he wants to make Quebec “the best place in the world to invest.”

The theme of the conference is Stakeholders for a Cohesive and Sustainable World.

Thunberg and Trump are already there, both making waves in their own manner.


Swedish climate change activist Greta Thunberg leaves the stage during a session at the 50th World Economic Forum annual meeting in Davos, Switzerland.

DENIS BALIBOUSE /

REUTERS

In her remarks to the world’s business elite, Thunberg accused those gathered of being all talk, no action on climate change.

Her remarks contrasted with those of Trump. He used his speech to tout the benefits of soaring American oil and gas production and make a thinly veiled attack on those who warn about looming environmental catastrophe.

Legault will be at the summit until Jan. 24.

pauthier@postmedia.com

twitter.com/philipauthier

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