Recession

The Economic Innovation Group’s (EIG) Distressed Communities Index (DCI) shows a significant economic transformation (from two distinct periods: 2007-2011 and 2012-2016) that occurred since the financial crisis. The shift of human capital, job creation, and business formation to metropolitan areas reveals that rural America is teetering on the edge of collapse.

Since the crisis, the number of people living in prosperous zip codes expanded by 10.2 million, to a total of 86.5 million, an increase that was much greater than any other social class. Meanwhile, the number of Americans living in distressed zip codes decreased to 3.4 million, to a total of 50 million, the smallest shift of any other social class. This indicates that the geography of economic pain is in rural America.

“While the overall population in distressed zip codes declined, the number of rural Americans in that category increased by nearly 1 million between the two periods. Rural zip codes exhibited the most volatility and were by far the most likely to be downwardly mobile on the index, with 30 percent dropping into a lower quintile of prosperity—nearly twice the proportion of urban zip codes that fell into a lower quintile.

Meanwhile, suburban communities registered the greatest stability, with 61 percent remaining in the same quintile over both periods. Urban zip codes were the most robust—least likely to decline and more likely than their suburban counterparts to rise,” the report said.

Visualizing the collapse: Economic distress was mostly centered in the Southeast, Rust Belt, and South Central. In Alabama, Arkansas, Mississippi, and West Virginia, at least one-third of the population were located in distressed zip codes.

Prosperous zip codes were the top beneficiaries of the jobs recovery since the financial crisis. All zip codes saw job declines during the recession, each laying off several million jobs from 2007 to 2010. But by 2016, prosperous zip codes had 3.6 million jobs surplus over 2007 levels, which was more than the bottom 80% of distressed zip codes combined. It took five years for prosperous zip codes to replace all jobs lost from the financial crisis; meanwhile, distressed zip codes will never recover.

EIG shows that less than 25% of all counties have recovered from business closures from the recession.

“US business formation has been dismal in both magnitude and distribution since the Great Recession. The country’s population is almost evenly split between counties that have fully replaced (with 161 million residents) and those that have not (with 157.4 million). This divide is due to the fact that highly populous counties—those with more than 500,000 residents—were far more likely to add businesses above and beyond 2007 levels than their smaller peers. Nearly three in every five large counties added businesses on net over the period, compared to only one in every five small one,” the report said.

To highlight the weak recovery and geographic unevenness of new business formation, EIG shows that the entire country had 52,800 more business establishments in 2016 than it did in 2007.

Five counties (Los Angeles, CA; Brooklyn, NY; Harris, TX (Houston); Queens, NY; and Miami-Dade, FL. ) had a combined 55,500 more businesses in 2016 than before the recession. Without those five counties, the US economy would not have recovered.

On top of deep structural changes in rural America, JPMorgan told clients last week that the entire agriculture complex is on the verge of disaster, with farmers in rural America caught in the crossfire of an escalating trade war.

“Overall, this is a perfect storm for US farmers,” JPMorgan analyst Ann Duignan warned investors.

Farmers are facing tremendous headwinds, including a worsening trade war, collapsing soybean exports to China, global oversupply conditions, and crop yield losses in the Midwest due to flooding. This all comes at a time when farmers are defaulting and missing payments at alarming rates, forcing regional banks to restructure and refinance existing loans.

Today’s downturn of rural America is no different than what happened in the 1920s, 1930s, and the early 1980s.


Trump hit China with 25% on more than half of their exports. The stock market panicked this week. Here’s why you should celebrate…

Source: InfoWars

The Economic Innovation Group’s (EIG) Distressed Communities Index (DCI) shows a significant economic transformation (from two distinct periods: 2007-2011 and 2012-2016) that occurred since the financial crisis. The shift of human capital, job creation, and business formation to metropolitan areas reveals that rural America is teetering on the edge of collapse.

Since the crisis, the number of people living in prosperous zip codes expanded by 10.2 million, to a total of 86.5 million, an increase that was much greater than any other social class. Meanwhile, the number of Americans living in distressed zip codes decreased to 3.4 million, to a total of 50 million, the smallest shift of any other social class. This indicates that the geography of economic pain is in rural America.

“While the overall population in distressed zip codes declined, the number of rural Americans in that category increased by nearly 1 million between the two periods. Rural zip codes exhibited the most volatility and were by far the most likely to be downwardly mobile on the index, with 30 percent dropping into a lower quintile of prosperity—nearly twice the proportion of urban zip codes that fell into a lower quintile.

Meanwhile, suburban communities registered the greatest stability, with 61 percent remaining in the same quintile over both periods. Urban zip codes were the most robust—least likely to decline and more likely than their suburban counterparts to rise,” the report said.

Visualizing the collapse: Economic distress was mostly centered in the Southeast, Rust Belt, and South Central. In Alabama, Arkansas, Mississippi, and West Virginia, at least one-third of the population were located in distressed zip codes.

Prosperous zip codes were the top beneficiaries of the jobs recovery since the financial crisis. All zip codes saw job declines during the recession, each laying off several million jobs from 2007 to 2010. But by 2016, prosperous zip codes had 3.6 million jobs surplus over 2007 levels, which was more than the bottom 80% of distressed zip codes combined. It took five years for prosperous zip codes to replace all jobs lost from the financial crisis; meanwhile, distressed zip codes will never recover.

EIG shows that less than 25% of all counties have recovered from business closures from the recession.

“US business formation has been dismal in both magnitude and distribution since the Great Recession. The country’s population is almost evenly split between counties that have fully replaced (with 161 million residents) and those that have not (with 157.4 million). This divide is due to the fact that highly populous counties—those with more than 500,000 residents—were far more likely to add businesses above and beyond 2007 levels than their smaller peers. Nearly three in every five large counties added businesses on net over the period, compared to only one in every five small one,” the report said.

To highlight the weak recovery and geographic unevenness of new business formation, EIG shows that the entire country had 52,800 more business establishments in 2016 than it did in 2007.

Five counties (Los Angeles, CA; Brooklyn, NY; Harris, TX (Houston); Queens, NY; and Miami-Dade, FL. ) had a combined 55,500 more businesses in 2016 than before the recession. Without those five counties, the US economy would not have recovered.

On top of deep structural changes in rural America, JPMorgan told clients last week that the entire agriculture complex is on the verge of disaster, with farmers in rural America caught in the crossfire of an escalating trade war.

“Overall, this is a perfect storm for US farmers,” JPMorgan analyst Ann Duignan warned investors.

Farmers are facing tremendous headwinds, including a worsening trade war, collapsing soybean exports to China, global oversupply conditions, and crop yield losses in the Midwest due to flooding. This all comes at a time when farmers are defaulting and missing payments at alarming rates, forcing regional banks to restructure and refinance existing loans.

Today’s downturn of rural America is no different than what happened in the 1920s, 1930s, and the early 1980s.


Trump hit China with 25% on more than half of their exports. The stock market panicked this week. Here’s why you should celebrate…

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FILE PHOTO: Cranes are pictured against sunset at a construction site in Tokyo
FILE PHOTO: Cranes are pictured against the sunset at construction site in the Toyosu district in Tokyo, February 12, 2015. REUTERS/Thomas Peter/File Photo

May 24, 2019

By Leika Kihara

TOKYO (Reuters) – Japan’s government downgraded its assessment of the economy on Friday but maintained the view it was recovering, suggesting that escalating U.S.-China trade tensions have yet to hit growth enough to put off this year’s scheduled sales tax hike.

The fallout from the trade war and slowing global demand have clouded the outlook for the export-reliant economy, keeping alive market expectations that Prime Minister Shinzo Abe may postpone a twice-delayed increase in the sales tax in October.

But Economy Minister Toshimitsu Motegi shrugged off such speculation, saying Japan should proceed with the tax hike.

Japan needs revenues to pay for bulging welfare costs to support a fast-ageing population and curb the industrial world’s heaviest public debt burden.

“There’s no change to our plan to raise the sales tax as scheduled,” he told reporters after the report was issued.

“I don’t think things are that bad. Manufacturing is affected by the U.S.-China trade dispute. But if you look at the supply side of our economy, manufacturing accounts for only 21%,” he said, adding that the service sector that makes up a bulk of the economy is doing well, with consumption “holding up”.

“Japan’s economy is recovering at a moderate pace, while weakness in exports and industrial production continues,” the government said in a monthly economic report for May.

That was a slightly bleaker view than last month, when it said the economy was recovering moderately despite “some” weakness in exports and output.

Some analysts had previously expected the report could drop the view the economy was recovering, to signal that growth was too weak to weather the hit from the higher levy.

The government also cut its view on output and capital expenditure, nodding to the growing pain from U.S.-Sino trade tensions and slowing Chinese demand.

But it stuck to the view that domestic demand remains strong enough to moderate some of the pain from overseas headwinds, helping keep Japan’s recovery intact.

“Export growth is moderating due to China’s slowdown, which is keeping output weak,” a government official told a briefing, adding that some manufacturers were putting off capital spending plans.

“But consumption and capital expenditure continue to grow as a trend. The fundamentals supporting domestic demand remain firm,” he said.

Abe has repeatedly said he would proceed with an increase in the sales tax rate to 10% from 8% in October unless the economy was hit by a severe shock. But some lawmakers have called for a postponement on concerns it could tip Japan into recession.

The government has said Japan needs the tax hike to meet ballooning social welfare costs for a rapidly aging population and to rein in public debt, which is double the size of its economy and the biggest among major countries.

But critics of the plan argue that raising the tax would hit an economy already hurt by slowing exports.

A government index measuring current economic conditions showed Japan may already be in recession, while first-quarter gross domestic product (GDP) data showed weakness in consumption and capital expenditure.

(Additional reporting by Stanley White; Editing by Sam Holmes and Jacqueline Wong)

Source: OANN

FILE PHOTO: Cranes are pictured against sunset at a construction site in Tokyo
FILE PHOTO: Cranes are pictured against the sunset at construction site in the Toyosu district in Tokyo, February 12, 2015. REUTERS/Thomas Peter/File Photo

May 24, 2019

By Leika Kihara

TOKYO (Reuters) – Japan’s government downgraded its assessment of the economy on Friday but maintained the view it was recovering, suggesting that escalating U.S.-China trade tensions have yet to hit growth enough to put off this year’s scheduled sales tax hike.

The fallout from the trade war and slowing global demand have clouded the outlook for the export-reliant economy, keeping alive market expectations that Prime Minister Shinzo Abe may postpone a twice-delayed increase in the sales tax in October.

But Economy Minister Toshimitsu Motegi shrugged off such speculation, saying Japan should proceed with the tax hike.

Japan needs revenues to pay for bulging welfare costs to support a fast-ageing population and curb the industrial world’s heaviest public debt burden.

“There’s no change to our plan to raise the sales tax as scheduled,” he told reporters after the report was issued.

“I don’t think things are that bad. Manufacturing is affected by the U.S.-China trade dispute. But if you look at the supply side of our economy, manufacturing accounts for only 21%,” he said, adding that the service sector that makes up a bulk of the economy is doing well, with consumption “holding up”.

“Japan’s economy is recovering at a moderate pace, while weakness in exports and industrial production continues,” the government said in a monthly economic report for May.

That was a slightly bleaker view than last month, when it said the economy was recovering moderately despite “some” weakness in exports and output.

Some analysts had previously expected the report could drop the view the economy was recovering, to signal that growth was too weak to weather the hit from the higher levy.

The government also cut its view on output and capital expenditure, nodding to the growing pain from U.S.-Sino trade tensions and slowing Chinese demand.

But it stuck to the view that domestic demand remains strong enough to moderate some of the pain from overseas headwinds, helping keep Japan’s recovery intact.

“Export growth is moderating due to China’s slowdown, which is keeping output weak,” a government official told a briefing, adding that some manufacturers were putting off capital spending plans.

“But consumption and capital expenditure continue to grow as a trend. The fundamentals supporting domestic demand remain firm,” he said.

Abe has repeatedly said he would proceed with an increase in the sales tax rate to 10% from 8% in October unless the economy was hit by a severe shock. But some lawmakers have called for a postponement on concerns it could tip Japan into recession.

The government has said Japan needs the tax hike to meet ballooning social welfare costs for a rapidly aging population and to rein in public debt, which is double the size of its economy and the biggest among major countries.

But critics of the plan argue that raising the tax would hit an economy already hurt by slowing exports.

A government index measuring current economic conditions showed Japan may already be in recession, while first-quarter gross domestic product (GDP) data showed weakness in consumption and capital expenditure.

(Additional reporting by Stanley White; Editing by Sam Holmes and Jacqueline Wong)

Source: OANN

FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa
FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa, Ontario, Canada, May 23, 2017. REUTERS/Chris Wattie/File Photo

May 24, 2019

By Mumal Rathore

BENGALURU (Reuters) – The Bank of Canada is done raising interest rates until at least the end of next year, with a serious risk of a cut by then as policymakers become more wary of slowing growth and global trade tensions, a Reuters poll showed on Friday.

The central bank, which last raised its overnight rate in October, abandoned its tightening bias last month, putting it more in line with peers like the U.S. Federal Reserve and the European Central Bank.

All 40 economists in the latest poll taken May 21-23 said Governor Stephen Poloz and fellow policymakers would hold rates at 1.75% at the May 29 meeting.

While median forecasts show rates unchanged from here on, forecasters were split in three directions starting from the fourth quarter of this year. By end-2020, about two-thirds who provided a view said rates would be either unchanged or lower.

While the BoC cut its near-term growth outlook in last month’s quarterly monetary policy review, it expects the economy to rebound in the second half of this year.

But not everyone is convinced that is about to happen.

“We see little impetus for policymakers to resume rate hikes over our forecast horizon, as sluggish growth and lingering slack in the economy will continue to warrant leaving some policy accommodation in place,” wrote Morgan Stanley economists in a note.

“If growth fails to show any convincing signs of a rebound in 2H19, we think the risks of rate cuts will increase, and given our sluggish outlook, we place a subjective 40% probability that the BoC will deliver at least one 25 basis point rate cut over the next 12 months.”

Asked about the probability of a cut by the end of this year, the median from a smaller sample of economists in the Reuters poll put it at 23%. But that rose to 40% by the end of 2020, with nearly a third predicting more than 50% chance of a cut by then.

Chances of a rate cut this year are a little less than 20 percent, according to market speculators.

One major concern is the U.S.-China trade war, which has heated up over the past month. A Reuters poll taken earlier in May found the risk of recession in the U.S., Canada’s largest trading partner, had risen this month. [ECILT/US]

“If they (the BoC) cut, it is more likely to be on global weakness – generated by U.S.-China tensions most likely – than weakness specifically in Canada,” said David Sloan, senior economist at Continuum Economics, a consultancy.

But there are still some forecasters who expect the BoC to raise rates again. Out of the 30 contributors who provided an end-2020 view, 11 forecast a hike by the end of next year, including four respondents who expect two.

“The Canadian economy faces tail risks, but its labor market is historically tight and the Bank of Canada’s policy rate sits below trend real GDP growth,” said William Adams, senior economist at PNC Financial Services.

“The Bank of Canada’s next move will be a hike unless the U.S. or Canada fall into recession in the next 12 months.”

Chances of a recession in Canada in 12 months were 20%, rising to 27.5% in the next two years, a Reuters poll taken in April found. [ECILT/CA]

Separately, a Reuters survey of property market experts published earlier this week showed Canada’s housing market will stay stuck in the doldrums, with average prices stagnating this year and then rising 1.7% next year. [CA/HOMES]

(Polling by Sujith Pai and Indradip Ghosh; Editing by Ross Finley)

Source: OANN

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WASHINGTON, D.C. — Sixty-seven percent of Americans believe that now is a good time to find a quality job in the U.S., the highest percentage in 17 years of Gallup polling. Optimism about the availability of good jobs has grown by 25 percentage points since Donald Trump was elected president.

Gallup has asked Americans to say whether it is a good time or bad time to find a quality job monthly since August 2001. Prior to 2017, the percentage saying “good time” never reached 50%, but since Trump took office in January that year, the percentage has stayed at or above 50% and has been higher than 60% in eight of the past nine months.

During the presidency of Trump’s predecessor Barack Obama, the percentage of Americans who thought it was a bad time to find a quality job outweighed the percentage who thought it was a good time until the final weeks he was in office. However, Obama took office in the midst of the Great Recession of 2007-2009, when only 13% thought it was a good time to get a quality job, and the percentage almost quadrupled during his eight years in office.

The question was first asked in August 2001, the eighth month of George W. Bush’s presidency, as Americans were losing confidence in the economy following the bursting of the dot-com bubble. At that time, 39% said it was a good time to find a quality job, but the percentage dropped to 25% when it was asked again in October that year, a month after the Sept. 11 terrorist attacks on New York City and Washington, D.C. Optimism grew slowly over the next five years of Bush’s term, peaking at 48% in January 2007 before a two-year slide that ended with the 13% “good time” response in January 2009.

Read More:
https://news.gallup.com/poll/234587/optimism-availability-good-jobs-hits-new-heights.aspx

Photo Credit: Aaron Josefcyuk/UPI

Last week we highlighted the rising level of auto loan delinquencies and the growing number of student loan borrowers who can’t make their payments.

This week, we got some more bad news for lenders. Subprime credit card charge-offs remain at levels reminiscent of the Great Recession.

In the first quarter of this year, credit card charge-off rates at all but the largest 100 banks remained above 7% for the sixth quarter in a row. During the peak of the recession, the charge-off rate at these banks was above 7% for just four quarters, and not consecutively.

The Q1 charge-off rate ticked down slightly to 7.37%, but that wasn’t a big enough drop to push it below that 7% level.

The credit-card charge-off rate at the largest 100 banks rose to 3.78%, according to the latest data released by the Federal Reserve. That’s the highest level since the first quarter of 2013. For all commercial banks combined, the charge-off rate rose to 3.83%, the highest since Q4 2012.

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Smaller banks hold much of the subprime credit card debt. In order to compete with the bigger banks, small financial institutions need to take on greater risk to build their credit base. As a result, delinquency rates and charge-offs tend to run higher for these small-bank credit cards.

Delinquency rates at all but the 100 smallest banks declined to 5.43%, after having spiked to 6.2% in the third quarter. This is a function of banks cleaning up their books and charging off bad accounts. But at 5.43%, the delinquency rate is still historically high. It topped out at 5.9% at the peak of the Great Recession.

As WolfStreet put it, “Some smaller banks that have gone way out on the subprime limb are now getting bogged down in losses on their credit-card loan books.”

America’s small banks hold only a small fraction of credit card balances, so the rising delinquency rates don’t pose any real threat to the banking system. But they should still raise concern.

Currently, Americans carry over $1 trillion of credit card debt, and total consumer debt rose $10.3 billion in March, hitting a record-setting total of $4.05 trillion.

(Photo by Chris Potter, Flickr)

In other words, Americans are loaded up on debt. And it looks like this economic “boom” was built on credit. What happens when the credit cards are completely maxed out? Consider that the last time subprime credit card delinquency rates were this high, the economy was in the midst of a massive recession with unemployment spiraling toward 10%. Today, we’re supposedly enjoying a robust economy with unemployment near historic lows.

WolfStreet gave a pretty good overview of what will likely happen as Americans begin to hit their credit limits.

“Credit card losses already have an impact on the economy, on retail sales, and on the most vulnerable consumers – and this is just the beginning. As banks tighten their lending standards in response to the rising losses, and as more credit-card accounts become delinquent and prevent their holders from buying on credit, the credit flow to the most vulnerable consumers gets throttled. And they have less money to spend. And so they will spend less. This is already the case with subprime auto loans that are now blowing out and that have forced lenders to tighten their lending standards, which is causing a decline in new vehicle sales that is now in its third year.”

This is the proverbial tip of the iceberg. Riskier borrowers with less stable financial positions feel the pain first. Then the problems climb up the ladder. The growing number of people struggling to pay their bills could be a canary in the coal mine.

Alex explains he has seen many globalists make the same face behind the scenes.

Source: InfoWars

Russia once again added to its growing gold reserves in April, buying another 15.55 tons of the yellow metal. According to a press release from the Central Bank of Russia, it now holds 2,183.46 tons of gold.

Russia has expanded its gold holdings by 71.53 tons through the first four months of 2019. Russian gold reserves increased 274.3 tons in 2018, marking the fourth consecutive year of plus-200 ton growth. Meanwhile, the Russians sold off nearly all of its US Treasury holdings. According to Bank of America analysts,  the amount of US dollars in Russian reserves fell from 46% to 22% in 2018.

In an appearance on RT, Peter Schiff said he thinks the Russians are preparing for an impending dollar crisis.

As Peter explained, the world has been on a dollar standard ever since the US led the world off the gold standard.

“That was fine when the dollar was backed by gold, but now the dollar is backed by nothing. So, if you’re backing your currency with a currency that’s backed by nothing, well, then your currency is backed by nothing.”

Peter said this wasn’t a problem when people perceived value in the dollar, but he thinks that’s going to change.

“I think the next recession when the Fed goes back to zero and when we launch QE4, I think the dollar’s role as a reserve currency is going to be questioned, and central banks need an alternative. And the only viable alternative to back up their own currency is real money, which is gold.”

Peter also talked about the fact that the US uses the dollar as a weapon.

“Other countries don’t like this, and to the extent that they can move away from the dollar, well then they kill two birds with one stone. And one way of doing that is to increase their gold reserves now while gold is still cheap. Because when the dollar really starts to tank, the price of gold is going to soar. Russia, right now, obviously wants to buy as much gold as it can while the price is still relatively cheap. That allows it to build up a bigger hoard of gold to replace the diminished value that the dollar is going to play as a reserve currency.”

(Photo by Andrzej Barabasz / Wikimedia Commons)

China has also been buying gold. Peter said this is one way for the Chinese to gain leverage in the trade war. They can strengthen the yuan by selling dollarsand buying gold.

“That would help increase the value of the yuan and that would help increase the purchasing power of their own citizens while really dealing a fatal blow to the dollar and the US economy at the same time.”

The RT anchor asked if it was really possible for other countries to actually ditch the US dollar. Peter said it’s not only possible, it’s inevitable.

“Ultimately, the US won’t have any leverage at all … This [the dollar as the reserve currency] was an exorbitant privilege that the US has enjoyed for decades, but it has abused that privilege dramatically, even more so recently with the sanctions. So, I think that privilege is going to be lost and with it will go the artificially high standard of living that came along with it in the United States.”

Alex Jones explains how MSM hid the real march of globalism until after Hillary lost the election.

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European Union flags flutter outside the European Central Bank (ECB) headquarters in Frankfurt
European Union flags flutter outside the European Central Bank (ECB) headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach

May 23, 2019

FRANKFURT (Reuters) – European Central Bank policymakers are concerned that economic growth in the euro zone is even weaker than feared, eroding their confidence in a long-projected recovery in the second half of the year, the accounts of their April 10 meeting showed on Thursday.

With growth unexpectedly weak for months now, the ECB has raised the prospect of more support for the economy but argued that more analysis was needed to see if the rapid loss of economic momentum is persistent or temporary.

But action is all but certain in June, with the ECB expected to support growth by giving banks very generous terms at its upcoming tender of ultra cheap loans to ensure that credit continues to flow to the economy.

“It was acknowledged that some recent data had turned out even weaker than expected,” the accounts of the meeting showed. “There was now somewhat less confidence in the baseline scenario (for growth) and that the range of other possible outcomes had widened.”

Policymakers said that the terms of the new banks loans, called targeted longer-term refinancing operations or TLTROs, would be decided at one of the upcoming meetings but the accounts provided few details about their thinking.

“Some arguments were put forward in favor of pricing the new operations so they would primarily serve as a backstop, providing insurance in times of elevated uncertainty,” the accounts showed.

“Other arguments supported the view that the TLTRO-III operations should be seen as a potential tool for adjusting the monetary policy stance,” the ECB added.

In any case, the pricing will take into account economic growth and how well banks transmit the ECB’s policy stance to the real economy, the minutes showed.

But policymakers did not appear to have any significant discussion about the impact of negative rates on banks and the need for compensation.

One form of mitigation, the introduction of a multi-tier deposit rate, could help banks with abundant excess reserves but policymakers speaking on and off the record have not voiced any enthusiasm for such a scheme.

Indeed, the minutes only showed a discussion about the need for a future discussion on whether the side effects of negative rates need to be mitigated.

In a possible hint about the direction of such a conversation, policymakers noted that the negative ECB deposit rates was still contributing to increased lending volumes in all loan categories.

Although fresh ECB measures could prop up the economy, the ECB’s problem is that the bloc’s troubles are largely outside its sphere of influence.

With global trade slowing on the ripple effects of the trade war between the United States and China, the bloc’s troubles are largely imported, contributing what ECB chief Mario Draghi called “pervasive uncertainty”.

Indeed, fresh business data on Thursday pointed to increasing weakness in the manufacturing sector, suggesting that its recession is persistent, and analyst predict even more pain.

“The global outlook remained subject to the continued risk of an escalation of trade conflicts and the uncertainty surrounding the withdrawal of the United Kingdom from the EU,” the ECB said in the minutes.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa)

Source: OANN

A worker of German steel manufacturer Salzgitter AG stands in front of a furnace at a plant in Salzgitter
FILE PHOTO: A worker of German steel manufacturer Salzgitter AG stands in front of a furnace at a plant in Salzgitter, Germany, March 1, 2018. REUTERS/Fabian Bimmer

May 23, 2019

BERLIN, (Reuters) – Activity in Germany’s services and manufacturing sectors fell in May, a survey showed on Thursday, reflecting the toll that unresolved trade disputes are having on Europe’s largest economy.

IHS Markit’s flash Purchasing Managers’ Index for manufacturing fell to 44.3 from 44.4 in April, the fifth monthly reading in a row below the 50 mark that separates growth from contraction.

Markit economist Chris Williamson said the slight fall suggested that a recession in the sector, which is more vulnerable to trade frictions than services, was bottoming out.

Markit’s flash services PMI fell to 55.0 from 55.7 in the previous month. The first fall after four straight rises indicates that the sector, which has been providing the economy with growth impetus as manufacturing cools, was showing signs of stress.

“It looks like the manufacturing downturn has passed its peak and is moving toward a period of stabilization but there is still a long way before we return to growth in the manufacturing economy,” Williamson said.

Signs that the worst may be over for German manufacturers were evident in a slower contraction in output, new orders and export sales, the survey showed.

As a result, IHS Markit’s flash composite Purchasing Managers’ Index (PMI), measuring activity in the services and manufacturing sectors that together account for more than two-thirds of the economy, rebounded to 52.4, a three-month high.

After nine successive years of growth, the German economy is facing headwinds from trade disputes between major trading blocks that manufacturers rely on for export growth.

This has prompted the German government to slash its growth forecast for this year for the second time in three months. It has halved its 2019 growth estimate to 0.5 percent.

The economy grew by 0.4 percent in the first quarter after stagnating in the last three month of last year. Private spending and construction were the main drivers of growth.

Williamson said the PMI data pointed to a growth rate of 0.2 percent in the second quarter.

But the survey showed that both manufacturers and services providers were pessimistic about their business outlook.

“It is manufacturers who remain the most downbeat about the outlook amid lingering global trade tensions, though the survey highlights that fears of a slowdown may have started to spread to services, where confidence is now at its joint-lowest since 2014,” said Phil Smith, principal economist at IHS Markit.

(Reporting by Joseph Nasr; Editing by Catherine Evans)

Source: OANN


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