consumer

FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping meet business leaders at the Great Hall of the People in Beijing
FILE PHOTO: U.S. President Donald Trump and China’s President Xi Jinping meet business leaders at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj/File Photo

May 24, 2019

By William Schomberg

LONDON (Reuters) – It was a stark warning about the risks ahead for the global economy, even by the forthright standards of the boss of the Organisation for Economic Co-operation and Development.

“The world economy is in a dangerous place,” Angel Gurria said as the OECD announced its latest, lower forecasts for growth on May 21.

The source of his worry: the mounting trade tensions between the United States and China, which could hit the rest of the world much harder than they have to date.

“Let’s avoid complacency at all costs,” Gurria said. “Clearly the biggest threat is through the escalation of trade restriction measures, and this is happening as we speak. This clear and present danger could easily have knock-on effects.”

With much of the world economy still recovering from the after-effects of the global financial crisis a decade ago, U.S. President Donald Trump caused alarm when he raised tariffs on $200 billion worth of goods from China on May 10, prompting Beijing to say it would hit back with its own higher duties.

Trade tensions are the main reason that growth in the global economy will weaken to 3.2 percent this year, the slowest pace in three years and down from rates of about 5 percent before the financial crisis a decade ago, the OECD said.

MORE TARIFFS?

The world economy is expected to pick up slowly next year, but only if Washington and China drop their latest tariff moves.

The impact could be a lot more severe if Trump follows through on his latest threat to hit a further $300 billion of Chinese imports with tariffs and China retaliates again.

That kind of tariff escalation, plus the associated rise in uncertainty about a broadening of the trade war, could lop about 0.7 percent off the world economy by 2021-2022, the OECD said.

That would be equivalent to about $600 billion, or the loss of the economy of Argentina.

But the knock-on effects might not stop there.

A full-blown trade war, combined with an ensuing debt crisis in China and a shift away from exports to drive its economy, could cause a 2 percent hit to China’s economy, in turn knocking global growth further, the OECD said.

To be sure, that kind of worst-case scenario may well be averted, given the stakes for the United States and China.

Trump and Chinese President Xi Jinping are due to meet at a Group of 20 leaders summit in Japan on June 28-29.

Other G20 nations will be urging them to step back from the fight, chief among them Germany and Japan, two export power-houses which have much to lose from a long trade war.

For now, the effect of the trade tensions is being felt mostly among manufacturers.

By contrast, consumers, buoyed by low unemployment and weak inflation in many of the world’s rich economies, have shown little sign of alarm at the row between Washington and Beijing.

But over the longer term, a protracted trade war is likely to drag down the consumer economy too.

Global trade should normally grow at double the pace of the world economy but is expected to lag it in 2019, boding ill for investment by companies, the OECD said.

That investment would normally drive productivity growth, which is key for long-term prosperity and is urgently needed. Living standards for many workers in rich countries remain lower than before the financial crisis of 2008-09.

The frustration with lower living standards is widely seen as one of the main factors behind the rise of populist politics, including Trump’s presidential election victory in 2016.

“To put it bluntly, this cannot be the new normal,” said Laurence Boone, the OECD’s chief economist. “We cannot accept an economy that doesn’t raise people’s living standards.”

(Writing by William Schomberg; Editing by Gareth Jones)

Source: OANN

FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping meet business leaders at the Great Hall of the People in Beijing
FILE PHOTO: U.S. President Donald Trump and China’s President Xi Jinping meet business leaders at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj/File Photo

May 24, 2019

By William Schomberg

LONDON (Reuters) – It was a stark warning about the risks ahead for the global economy, even by the forthright standards of the boss of the Organisation for Economic Co-operation and Development.

“The world economy is in a dangerous place,” Angel Gurria said as the OECD announced its latest, lower forecasts for growth on May 21.

The source of his worry: the mounting trade tensions between the United States and China, which could hit the rest of the world much harder than they have to date.

“Let’s avoid complacency at all costs,” Gurria said. “Clearly the biggest threat is through the escalation of trade restriction measures, and this is happening as we speak. This clear and present danger could easily have knock-on effects.”

With much of the world economy still recovering from the after-effects of the global financial crisis a decade ago, U.S. President Donald Trump caused alarm when he raised tariffs on $200 billion worth of goods from China on May 10, prompting Beijing to say it would hit back with its own higher duties.

Trade tensions are the main reason that growth in the global economy will weaken to 3.2 percent this year, the slowest pace in three years and down from rates of about 5 percent before the financial crisis a decade ago, the OECD said.

MORE TARIFFS?

The world economy is expected to pick up slowly next year, but only if Washington and China drop their latest tariff moves.

The impact could be a lot more severe if Trump follows through on his latest threat to hit a further $300 billion of Chinese imports with tariffs and China retaliates again.

That kind of tariff escalation, plus the associated rise in uncertainty about a broadening of the trade war, could lop about 0.7 percent off the world economy by 2021-2022, the OECD said.

That would be equivalent to about $600 billion, or the loss of the economy of Argentina.

But the knock-on effects might not stop there.

A full-blown trade war, combined with an ensuing debt crisis in China and a shift away from exports to drive its economy, could cause a 2 percent hit to China’s economy, in turn knocking global growth further, the OECD said.

To be sure, that kind of worst-case scenario may well be averted, given the stakes for the United States and China.

Trump and Chinese President Xi Jinping are due to meet at a Group of 20 leaders summit in Japan on June 28-29.

Other G20 nations will be urging them to step back from the fight, chief among them Germany and Japan, two export power-houses which have much to lose from a long trade war.

For now, the effect of the trade tensions is being felt mostly among manufacturers.

By contrast, consumers, buoyed by low unemployment and weak inflation in many of the world’s rich economies, have shown little sign of alarm at the row between Washington and Beijing.

But over the longer term, a protracted trade war is likely to drag down the consumer economy too.

Global trade should normally grow at double the pace of the world economy but is expected to lag it in 2019, boding ill for investment by companies, the OECD said.

That investment would normally drive productivity growth, which is key for long-term prosperity and is urgently needed. Living standards for many workers in rich countries remain lower than before the financial crisis of 2008-09.

The frustration with lower living standards is widely seen as one of the main factors behind the rise of populist politics, including Trump’s presidential election victory in 2016.

“To put it bluntly, this cannot be the new normal,” said Laurence Boone, the OECD’s chief economist. “We cannot accept an economy that doesn’t raise people’s living standards.”

(Writing by William Schomberg; Editing by Gareth Jones)

Source: OANN

FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Shanghai
FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Shanghai, China July 6, 2018. REUTERS/Aly Song/File Photo

May 24, 2019

(Reuters) – 1/THE MONTH OF MAY

Theresa May stepped into 10 Downing Street in July 2016 with the express aim of taking Britain out of the European Union. She will depart as prime minister this summer having failed in that ambition. No one can say she didn’t try — after three attempts to get her EU withdrawal bill through parliament, she finally had to admit it was dead in the water.

Speculation about her departure has been rife all month. Now it’s wait and see if her successor will fare any better with the withdrawal deal, or if he or she steers Britain towards a no-deal Brexit. What’s clear is that risks of crashing out of the EU without a transition period have risen, given the eurosceptic Boris Johnson is favorite to succeed May. The other risk is a new election, and possibly, a hung parliament. That means sterling could suffer more losses; it has fallen almost 3% this month against the dollar and euro.

May will remain in charge as the Conservatives elect a new leader. Her last task as prime minister — welcoming U.S. President Donald Trump to Britain — will hopefully be easier than trying to deliver Brexit.

Trade-weighted sterling interactive http://tmsnrt.rs/2hwV9Hv

Graphic on Brexit and sterling: https://tmsnrt.rs/2WW8QBb

2/GAME OF PHONES

The Sino-U.S. trade war has morphed from a tariff spat into a battle over who controls global tech. Washington has banned U.S. firms from doing business with Chinese telecommunications giant Huawei. Essentially that cripples the company’s ability to make new chips for its future smartphones.

As chipmakers and companies including Panasonic and ARM fell into line behind the U.S. ban and others like Toshiba scrambled to check their exposure, the widespread impact of the move on complex global supply chains is becoming clear.

Accordingly, shares have tumbled worldwide. Among others, the potential loss of business from the Chinese smartphone giant has hit Europe’s AMS and STMicroelectronics. Taiwan Semiconductor, which Bernstein analysts calculate makes around 11% of revenues from Huawei, sank too.

The Philadelphia semiconductor index, widely seen as a bellwether for world chipmakers, has lost around 18% in just a month since hitting a record high on April 24.

However, some telecoms equipment firms such as Nokia and Ericsson could benefit if the Huawei clampdown diverts business to them.

Trump’s latest claim that Huawei could be part of a trade deal has injected some hope into markets, but unless further talks are announced investors will remain unconvinced.

(For a graphic on ‘Chips tank worldwide as trade tensions return’ click https://tmsnrt.rs/2X6l0Yq)

3/EM TANTRUM WITHOUT THE TAPER?

Markets have a funny way of repeating themselves and exactly six years on from the ‘taper tantrum’, when investors freaked at the sudden realization the U.S. Fed wanted to end money printing, some are wondering whether something similar is brewing again.

A conviction the U.S.-China trade war will force the Fed to cut interest rates have pushed benchmark government bond yields that drive global borrowing costs to the lowest in years. But just like in 2013, the Fed is flagging something different.

It has signaled it may sit on its hands “for some time”. So if yields do start to spring back up, things could get scary.

Emerging markets in particular have painful memories of the taper tantrum. Economic surprises in the developing world are the most negative now in six years, according to an index compiled by Citi. And nearly $4 billion fled EM equities last week, EM equities have dropped around 10% so far this month and the premiums investors demand to hold EM bonds have spiked.

Clearly, many investors are not hanging around to find out what happens next.

(For a graphic on ‘EM stocks having a tantrum without the taper’ click https://tmsnrt.rs/2EtdQG4)

(For a graphic on ‘EM economic surprises most negative in six years’ click https://tmsnrt.rs/2YEM2q6)

4/MODI-NOMICS TO THE TEST After a stunning win in the world’s biggest election, Indian Prime Minister Narendra Modi begins to put together a new cabinet and a 100-day action plan. Focus is on who becomes finance minister — Arun Jaitley, a key troubleshooter for years — is said to be out of the race due to ill-health.

Modi’s re-election reinforces a global trend of right-wing populists sweeping to victory, from the United States to Brazil and Italy. Energised by his brand of Hindu nationalism, voters gave less weight to his failure to create jobs — a key campaign promise at the last election. In fact, a complex tax reform and a flash demonetization pushed millions out of work.

Credibility issues aside, upcoming growth data will be a reminder that while investors gave Modi a big thumbs up and pushed Indian stocks to record highs, the economy is less cheerful. Corporate earnings have in fact disappointed in the years Modi has been in office. And small businesses, low-income farmers, jobseekers and liquidity-starved banks will demand more of him in his second mandate.

(For a graphic on ‘Corporate India Earnings’ click https://tmsnrt.rs/2D7eato)

5/ON THE ROAD AGAIN

The U.S. summer vacation season begins, unofficially, with the Memorial Day weekend, and travel volumes across the United States should be the second-highest on record this year, according to the American Automobile Association (AAA). Despite high fuel prices, nearly 43 million Americans will be traveling over the long weekend, and 37.6 million will be driving, making this holiday travel season the busiest since 2005, the AAA predicts.

But gasoline supplies are tight on the U.S. East and West Coasts, leaving both regions vulnerable to potential price spikes at the pump, just as the peak summer driving season kicks off. High fuel prices cut into people’s discretionary spending though, so the question is what impact there will be on the U.S. consumer.

Consumer spending — which includes spending on services such as travel — jumped in March by the most in nearly a decade, following small increases in the previous two months. But even though first-quarter U.S. growth was a healthy 3.2% on an annual basis, consumer spending grew less. In coming months, the economy is widely seen decelerating; the question is what role consumer and travel spending will play.

(For a graphic on ‘Summer Gas Season’ click https://tmsnrt.rs/2EuvqcP https://tmsnrt.rs/2EuvqcP)

(Reporting by Sujata Rao, Helen Reid and Marc Jones in London; Marius Zaharia in Hong Kong and Jennifer Ablan in New York)

Source: OANN

Brazil's President Michel Temer arrives to a ceremony at the Planalto Palace in Brasilia
Brazil’s President Michel Temer arrives to a ceremony at the Planalto Palace in Brasilia, Brazil July 27, 2017. REUTERS/Adriano Machado

May 24, 2019

BRASILIA (Reuters) – More Brazilians disapprove of far-right President Jair Bolsonaro’s government than those who approve, a survey on Friday showed, the first time this has happened since the former Army captain was sworn into office on January 1.

The first five months of Bolsonaro’s term have been marked by a weak economy, which likely contracted in the first quarter, failure to cultivate political support for his reform agenda, controversy, and some high-profile gaffes.

According to the latest XP Investimentos/Ipespe poll, which surveyed 1,000 Brazilians on May 20-21, 36% think Bolsonaro’s government is bad or terrible. That’s up 5 percentage points from the previous survey earlier this month.

The number of those who think the government is good or great slipped to 34% from 35%. The margin of error is 3.2 percentage points, XP Investimentos said.

Brazilian markets have wobbled in recent weeks as political infighting and divisions have put the brakes on Bolsonaro’s pension reform bill’s progress through Congress. Approval of the bill is seen as vital to boosting investor, consumer and business sentiment, and bringing Brazil’s economy back to life.

The overwhelming majority of Brazilians blame previous governments and “external factors” for the current economic situation. But the number of those blaming Bolsonaro’s government doubled to 10% from the previous poll only three weeks earlier, the survey showed.

Brazilians’ confidence in the government’s future path is also eroding, according to this poll, which shows the gap between the optimistic and pessimistic outlooks for the remainder of his term narrower than ever.

Some 47% of those surveyed said the rest of Bolsonaro’s term will be good or great, down from 51% earlier this month, while the number of those saying it will be bad or terrible rose to 31% from 27%.

(Reporting by Jamie McGeever; Editing by Nick Zieminski)

Source: OANN

Brazil's President Michel Temer arrives to a ceremony at the Planalto Palace in Brasilia
Brazil’s President Michel Temer arrives to a ceremony at the Planalto Palace in Brasilia, Brazil July 27, 2017. REUTERS/Adriano Machado

May 24, 2019

BRASILIA (Reuters) – More Brazilians disapprove of far-right President Jair Bolsonaro’s government than those who approve, a survey on Friday showed, the first time this has happened since the former Army captain was sworn into office on January 1.

The first five months of Bolsonaro’s term have been marked by a weak economy, which likely contracted in the first quarter, failure to cultivate political support for his reform agenda, controversy, and some high-profile gaffes.

According to the latest XP Investimentos/Ipespe poll, which surveyed 1,000 Brazilians on May 20-21, 36% think Bolsonaro’s government is bad or terrible. That’s up 5 percentage points from the previous survey earlier this month.

The number of those who think the government is good or great slipped to 34% from 35%. The margin of error is 3.2 percentage points, XP Investimentos said.

Brazilian markets have wobbled in recent weeks as political infighting and divisions have put the brakes on Bolsonaro’s pension reform bill’s progress through Congress. Approval of the bill is seen as vital to boosting investor, consumer and business sentiment, and bringing Brazil’s economy back to life.

The overwhelming majority of Brazilians blame previous governments and “external factors” for the current economic situation. But the number of those blaming Bolsonaro’s government doubled to 10% from the previous poll only three weeks earlier, the survey showed.

Brazilians’ confidence in the government’s future path is also eroding, according to this poll, which shows the gap between the optimistic and pessimistic outlooks for the remainder of his term narrower than ever.

Some 47% of those surveyed said the rest of Bolsonaro’s term will be good or great, down from 51% earlier this month, while the number of those saying it will be bad or terrible rose to 31% from 27%.

(Reporting by Jamie McGeever; Editing by Nick Zieminski)

Source: OANN

A shopper loads a basket in a supermarket in London
A shopper loads a basket in a supermarket in London, Britain April 11, 2017. REUTERS/Neil Hall

May 24, 2019

LONDON (Reuters) – British retailers reported the weakest sales performance for the time of year in over a decade this month, and plan the least investment on record, a survey by the Confederation of British Industry showed on Friday.

The CBI distributive trades survey’s retail sales balance slumped to -27 in May from +13 in April, below all forecasts in a Reuters poll and the lowest since October 2017.

Adjusted for the time of year, sales were the weakest since March 2009, the CBI said.

“This month’s survey paints a dismal picture of business conditions for retailers, who face a grim combination of tough trading conditions, Brexit uncertainty and a burdensome outdated business rates regime,” CBI economist Anna Leach said.

A quarterly measure of retailers’ investment intentions sank to its lowest since the survey began in 1983.

Official data earlier on Friday showed British shoppers paused for breath in April after months of strong buying, according to official data that showed continued underlying strength of consumer spending during the Brexit crisis.

(Reporting by David Milliken, editing by Alistair Smout)

Source: OANN

A shopper loads a basket in a supermarket in London
A shopper loads a basket in a supermarket in London, Britain April 11, 2017. REUTERS/Neil Hall

May 24, 2019

LONDON (Reuters) – British retailers reported the weakest sales performance for the time of year in over a decade this month, and plan the least investment on record, a survey by the Confederation of British Industry showed on Friday.

The CBI distributive trades survey’s retail sales balance slumped to -27 in May from +13 in April, below all forecasts in a Reuters poll and the lowest since October 2017.

Adjusted for the time of year, sales were the weakest since March 2009, the CBI said.

“This month’s survey paints a dismal picture of business conditions for retailers, who face a grim combination of tough trading conditions, Brexit uncertainty and a burdensome outdated business rates regime,” CBI economist Anna Leach said.

A quarterly measure of retailers’ investment intentions sank to its lowest since the survey began in 1983.

Official data earlier on Friday showed British shoppers paused for breath in April after months of strong buying, according to official data that showed continued underlying strength of consumer spending during the Brexit crisis.

(Reporting by David Milliken, editing by Alistair Smout)

Source: OANN

A shopper loads a basket in a supermarket in London
A shopper loads a basket in a supermarket in London, Britain April 11, 2017. REUTERS/Neil Hall

May 24, 2019

LONDON (Reuters) – British retailers reported the weakest sales performance for the time of year in over a decade this month, and plan the least investment on record, a survey by the Confederation of British Industry showed on Friday.

The CBI distributive trades survey’s retail sales balance slumped to -27 in May from +13 in April, below all forecasts in a Reuters poll and the lowest since October 2017.

Adjusted for the time of year, sales were the weakest since March 2009, the CBI said.

“This month’s survey paints a dismal picture of business conditions for retailers, who face a grim combination of tough trading conditions, Brexit uncertainty and a burdensome outdated business rates regime,” CBI economist Anna Leach said.

A quarterly measure of retailers’ investment intentions sank to its lowest since the survey began in 1983.

Official data earlier on Friday showed British shoppers paused for breath in April after months of strong buying, according to official data that showed continued underlying strength of consumer spending during the Brexit crisis.

(Reporting by David Milliken, editing by Alistair Smout)

Source: OANN

Steam is emitted from factories at Keihin industrial zone in Kawasaki
FILE PHOTO: Steam is emitted from factories at Keihin industrial zone in Kawasaki, Japan February 28, 2017. REUTERS/Issei Kato

May 24, 2019

TOKYO (Reuters) – Japan’s factory output likely picked up in April, reversing the decline seen in the previous month, a Reuters’ poll found on Friday, although the U.S.-China trade war is expected to prevent a more meaningful recovery in months ahead.

Industrial production was forecast to rise 0.2% in April from the previous month after a 0.6% fall in March, the poll of 16 economists showed.

The expected small gains in the data were supported by firms’ front-loading some production ahead of Japan’s 10-day holiday from late April to early May to celebrate the accession of the new emperor, analysts said.

But falls in demand for IT-related products such as electronics parts and devices weighed on the factory output, they also said.

“Firms may cut their production or draw down an inventory in May, so it requires to examine manufacturers’ production forecasts to see the trend,” said Koya Miyamae, senior economist at SMBC Nikko Securities.

“Also we expect an adverse impact from an escalating U.S.-China trade war will appear in the data.”

The most recent trade data showed Japan’s exports contracted for the fifth month in April due to a slump in shipments of chip-making equipment to China.

The trade ministry will publish April factory output and manufacturers’ production forecasts for May and June at 8:50 a.m. May 31, Japan time (2350 GMT May 30).

Retail sales data, also due 8:50 a.m. May 31, will likely show sales grew 0.8% in April from a year earlier, helped by a recovery in auto sales, from a 1.0% gain in March, the poll showed.

The poll also showed Tokyo’s core consumer prices (CPI) index, which includes oil products but excludes fresh food prices, was expected to have risen 1.2% in May from a year earlier, compared with a 1.3% increase in April.

A slowdown in electricity and gas price rises capped gains in the index, while an increase in package tour fee and accommodation expenses due to the nation’s long holiday helped Tokyo’s core CPI, analysts said.

The jobless rate likely improved to 2.4% in April from 2.5%in March, and the jobs-to-applicants ratio was seen steady at 1.63.

Tokyo’s core CPI and jobs data will be released at 8:30 a.m. on May 31 (2330 GMT on May 30).

The economy in the first quarter grew unexpectedly accelerated but the surprise expansion was mostly caused by imports declining faster than exports, showing both external and domestic demand were weak.

(Reporting by Kaori Kaneko; Editing by Sam Holmes)

Source: OANN

Steam is emitted from factories at Keihin industrial zone in Kawasaki
FILE PHOTO: Steam is emitted from factories at Keihin industrial zone in Kawasaki, Japan February 28, 2017. REUTERS/Issei Kato

May 24, 2019

TOKYO (Reuters) – Japan’s factory output likely picked up in April, reversing the decline seen in the previous month, a Reuters’ poll found on Friday, although the U.S.-China trade war is expected to prevent a more meaningful recovery in months ahead.

Industrial production was forecast to rise 0.2% in April from the previous month after a 0.6% fall in March, the poll of 16 economists showed.

The expected small gains in the data were supported by firms’ front-loading some production ahead of Japan’s 10-day holiday from late April to early May to celebrate the accession of the new emperor, analysts said.

But falls in demand for IT-related products such as electronics parts and devices weighed on the factory output, they also said.

“Firms may cut their production or draw down an inventory in May, so it requires to examine manufacturers’ production forecasts to see the trend,” said Koya Miyamae, senior economist at SMBC Nikko Securities.

“Also we expect an adverse impact from an escalating U.S.-China trade war will appear in the data.”

The most recent trade data showed Japan’s exports contracted for the fifth month in April due to a slump in shipments of chip-making equipment to China.

The trade ministry will publish April factory output and manufacturers’ production forecasts for May and June at 8:50 a.m. May 31, Japan time (2350 GMT May 30).

Retail sales data, also due 8:50 a.m. May 31, will likely show sales grew 0.8% in April from a year earlier, helped by a recovery in auto sales, from a 1.0% gain in March, the poll showed.

The poll also showed Tokyo’s core consumer prices (CPI) index, which includes oil products but excludes fresh food prices, was expected to have risen 1.2% in May from a year earlier, compared with a 1.3% increase in April.

A slowdown in electricity and gas price rises capped gains in the index, while an increase in package tour fee and accommodation expenses due to the nation’s long holiday helped Tokyo’s core CPI, analysts said.

The jobless rate likely improved to 2.4% in April from 2.5%in March, and the jobs-to-applicants ratio was seen steady at 1.63.

Tokyo’s core CPI and jobs data will be released at 8:30 a.m. on May 31 (2330 GMT on May 30).

The economy in the first quarter grew unexpectedly accelerated but the surprise expansion was mostly caused by imports declining faster than exports, showing both external and domestic demand were weak.

(Reporting by Kaori Kaneko; Editing by Sam Holmes)

Source: OANN


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