Economy 15 Jan 2019 Fears Grow Over Global Economy

“Fears are growing over the state of the global economy after China recorded a shock fall in exports, while European factory output declined by the biggest margin in almost three years.

“In a sign that the worldwide slowdown is gathering pace, official figures showed Chinese exports were down 4.4% in December – the largest fall since 2016 – on the back of faltering demand in most of its key markets. Imports fell 7.6% to reflect waning domestic demand.

“The unexpected downturn for the biggest global exporter of manufactured products came as eurozone industrial output shrank in November.

“The EU statistics office, Eurostat, estimated industrial production slipped 1.7% in November compared with the previous month, and 3.3% on the year, reflecting the struggles facing several European economies in recent months.”

https://www.theguardian.com/world/2019/jan/14/global-economy-fears-grow-china-eurozone-slump


“Germany’s economy witnessed lackluster growth in 2018, according to flash data released Tuesday, in line with expectations… Destatis noted that the German economy had grown for the ninth year in a row, “although growth has lost momentum.””

https://www.cnbc.com/2019/01/15/germany-2018-gdp-data.html


“A no-deal Brexit would be an economic and social “catastrophe”, a senior banking industry leader has warned. Stephen Jones said leaving the European Union (EU) without an agreement could lead to a 1930s-style economic depression, with widespread job losses, homeowners unable to afford their mortgages, and mass defaults on loans.”

https://www.independent.co.uk/news/business/news/no-deal-brexit-crisis-banks-economic-social-uk-finance-theresa-may-eu-a8727901.html


“This week’s collapse of Greece’s coalition government comes at a at a delicate time for the country’s suffering financial sector.. Greece’s banks have survived the country’s economic depression but they have paid a heavy price: they are barely profitable … Not only is the eurozone economy slowing, but exports to Turkey have been hit by that country’s economic crisis. “

https://www.ft.com/content/1dad7a10-17df-11e9-b191-175523b59d1d


“Turkey’s calendar-adjusted industrial production index contracted for a third consecutive month in November and at an escalating pace of 6.5% y/y, data from national statistics office TUIK showed on January 14…

“Looking ahead to the likely December IP growth data, preliminary foreign trade figures indicated a prevailing weakness, Goksen also said.”

http://www.intellinews.com/deepening-downturn-in-turkey-indicated-by-november-industrial-output-data-154660/


“The annual inflation rate in Tunisia reached a near-30-year high in 2018, prompting questions on the viability of the country’s financial policies… Experts said the inflation rate, combined with the rapidly declining value of the Tunisian dinar, blurred lines between lower and middle class and could fuel instability.”

https://thearabweekly.com/social-discontent-fuels-concern-instability-tunisia


“Hundreds of thousands of Afghans have returned in the last year of a severe economic crisis-ridden Iran in their home.

“According to the International organization for Migration (IOM), left 2018, more than 773.000 Afghans in Iran, which borders the war-torn country. The are much more than in 2017, as well as 500,000 Afghans from Iran have returned.”

https://www.newsarticleinsiders.com/due-to-severe-economic-crisis-hundreds-of-thousands-of-afghans-in-iran-to-leave


“This financial year, 2018-19 could end up being the worst year for [India’s] farm incomes in almost two decades, government data indicates in a revelation that emphasises the gravity of the ongoing agrarian crisis.”

https://www.hindustantimes.com/india-news/worst-price-slump-in-18-years-shows-scale-of-farm-crisis/story-P2niBeuqAcaxgms3HmFCTK.html


“As previous economic heavyweights like Turkey, Brazil and South Africa face crippling inflation amid recession in pockets of the globe, Argentina, one of the world’s southernmost states, is in the grip of a serious economic crisis…

“The Argentinian peso has plunged, resulting in shooting inflation and low purchasing power. It takes more than 1,000 pesos ($27) to take a taxi from the Ezeiza International Airport in Buenos Aires to the downtown of the capital, compared to only 300 pesos five years ago.”

http://www.globaltimes.cn/content/1135727.shtml


“Venezuela is currently experiencing a major economic crisis: sustained hyperinflation, consecutive years of serious economic contraction, major shortages of basic goods and services… the risk is that escalation could lead to a catastrophic outcome.”

https://venezuelanalysis.com/analysis/14216


“Several people have been killed and some 200 arrested during protests in Zimbabwe, two days after the government raised the price of fuel in an attempt to tame the worst economic crisis in a decade.

“Police fired tear gas in the capital of Harare and second city Bulawayo, where protesters barricaded roads, burned tyres and chanted songs against President Emmerson Mnangagwa, who increased fuel prices in the hope of easing a currency shortage.”

https://www.smh.com.au/world/africa/fuel-protests-turn-deadly-as-zimbabwe-faces-unfolding-economic-crisis-20190115-p50rey.html


“Despite more than a decade of efforts to rebalance the economy and wean itself off the stimulus introduced in the wake of the 2008 financial crisis, China remains addicted to ever-higher levels of debt and construction.”

https://www.ft.com/content/328d82c8-14e6-11e9-a581-4ff78404524e


“China on Tuesday signaled more stimulus measures in the near term as a tariff war with the United States took a heavy toll on its trade sector and raised the risk of a sharper economic slowdown…

“Some analysts believe China could deliver 2 trillion yuan ($296.21 billion) worth of cuts in taxes and fees, and allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects.”

https://www.cnbc.com/2019/01/15/chinas-finance-ministry-says-to-step-up-fiscal-expenditure-this-year.html


“The US Treasury Department keeps running into a big issue as it auctions off the swelling amount of new government debt: The market just isn’t that interested… So what does this all mean? Put simply, it suggests that demand for Treasurys may struggle to keep up as the US deficit continues to grow.”

https://www.businessinsider.com/next-financial-crisis-market-flashing-scary-new-parallel-to-last-one-2019-1?r=US&IR=T


“While many investors are fretting over what stage of the business cycle we are in, the global monetary system is collapsing — with a whimper…

“Central bankers have bought growth by sacrificing financial stability.”

https://www.ft.com/content/271f4a2e-17d5-11e9-9e64-d150b3105d21


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Economy 14 Jan 2019 China Trade Data Worrying

“China’s export and import figures were much worse than expected in December, underscoring the rapid weakening of the Chinese economy…

“The December figures give the first indication of the full impact of the US-China trade war.

“Total exports fell to US$221.25 billion in December, down 1.4 per cent from November, and 4.4 per cent from the same month in 2017, according to data from China’s General Administration of Customs…

“Total imports fell to US$164.19 billion, a fall of 10 per cent from last month and down 7.6 per cent a year earlier… Analysts had expected a 4.5 per cent rise, according to the Bloomberg survey.

“The drop in imports is another bad sign for the Chinese economic outlook, indicating a rapid weakening of Chinese domestic demand.”

https://www.scmp.com/economy/china-economy/article/2181951/china-trade-data-worse-expected-bad-news-economy


“As the global economic outlook darkens, American banks have an unenviable job: Convincing a jittery public that the US economy remains strong and can keep growing…

“Bank profits suffer when the economy stumbles and businesses are scared to borrow. They become especially vulnerable when a recession hits and some customers aren’t able to pay back loans.”

https://edition.cnn.com/2019/01/13/investing/stocks-week-ahead/index.html


“TARP, the U.S. government bailout program born of the financial crisis a decade ago, lives on today as economists warn of a new recession. Congress authorized the Troubled Asset Relief Program in late 2008 to stabilize the financial system with up to $700 billion — later reduced to $475 billion. To date, about $450 billion in taxpayer money has been committed, either lent or directly invested under TARP to banks and corporations, according to Treasury Department data.”

https://www.bloomberg.com/news/articles/2019-01-12/u-s-bailout-from-last-recession-lives-on-as-downturn-risks-rise


“Jeffrey Gundlach said yet again that the U.S. economy is gorging on debt… Prolific sales of junk bonds and significant growth in investment grade corporate debt, coupled with the Federal Reserve weaning the market off quantitative easing, have resulted in what the DoubleLine Capital LP boss called “an ocean of debt.”

“The investment manager countered President Donald Trump’s claim that he’s presiding over the strongest economy ever. The growth is debt-based, he said.”

http://fortune.com/2019/01/12/jeffrey-gundlach-us-debt/


“In October last year the Bank’s financial policy committee, which monitors the health of the financial system, pointedly raised the spectre of the 2007-08 credit crunch. It said the “global leveraged loan market was larger than – and was growing as quickly as – the US sub-prime mortgage market had been in 2006”.”

https://www.theguardian.com/business/2019/jan/12/subprime-timebomb-back-companies-lighting-the-fuse


“California’s largest utility… has been scrambling for five years to reduce fire risks. It has been overwhelmed by the threat’s severity and the challenge of shoring up thousands of miles of ageing power lines and cutting and trimming millions of trees in a service area larger than Florida…

“PG&E faces billions of dollars in legal claims, the specter of bankruptcy, a federal judge forcing his way into utility operations, the possibility state regulators will break it into pieces, and potential state criminal charges including homicide, due to its continued inability to stop the fires from starting. “It’s an organization facing collapse,” said Arthur O’Donnell, a safety supervisor at the California Public Utilities Commission until late last year. “There aren’t any silver bullets that can fix things quickly.””

https://www.marketwatch.com/story/pge-now-near-collapse-blamed-for-at-least-1500-california-fires-in-recent-years-2019-01-13?reflink=zacks


“In Parliament, lawmakers are mired in gridlock over Britain’s departure from the European Union, with no clear path forward. In Washington, President Donald Trump stormed out of a meeting with congressional leaders who oppose his border wall, hardening a standoff that has shut down much of the government for longer than ever before.

“Two governments paralyzed. Two populist projects stalled. Two venerable democracies in crisis.”

https://economictimes.indiatimes.com/news/international/world-news/brexit-us-shutdown-two-governments-across-the-atlantic-in-paralysis/articleshow/67510231.cms


“Uncertainty over Brexit and the economy have led demand for Britain’s financial services to shrink for the first time in five years, with no immediate sign of an improvement, a survey by business group CBI and PwC showed.”

https://www.cnbc.com/2019/01/14/brexit-takes-a-toll-on-britains-financial-sector-outlook-weak.html


“Deutsche Bank AG held frequent talks with the government and its main domestic competitor over the past months as concern mounted that Germany’s largest lender may not be able to emerge from its crisis without outside help.

“Representatives of Deutsche Bank had 23 discussions with officials since the new government was formed in March, most of them between Deputy Finance Minister Joerg Kukies and Chief Executive Officer Christian Sewing as well as supervisory board Chairman Paul Achleitner, according to a Finance Ministry letter seen by Bloomberg.”

https://www.bloomberg.com/news/articles/2019-01-14/deutsche-bank-is-said-to-intensify-outside-talks-over-strategy


“Italy’s European Affairs Minister Paolo Savona was on the wires last minutes, via Reuters, noting that the European Union (EU) economic crisis is already underway…

“And so it begins. As we move towards the European Parliament elections in May, expect Italy to head the vocal tirade against the current administration. The rhetoric will only ramp up as populists look to make their voices heard ahead of votes.”

https://www.forexlive.com/news/!/italys-savona-says-that-eurozone-economic-crisis-is-already-underway-20190114


“Following a painful 2018 that left Argentina in recession and forced into unpopular austerity measures, President Mauricio Macri faces an uphill battle in his bid for re-election in October…

“…inflation initially calculated at 10 percent finished the year at 48 percent while an economy expected to grow by 3.5 percent shrunk by 2.7 percent, according to the World Bank.”

https://dailytimes.com.pk/343552/argentine-recession-hampers-macris-re-election-bid/


“[Australia’s] banks continue to drive down saver rates below the rate of inflation, despite increasing costs for borrowers, forcing many savers to take bigger risks to maintain income, according to analysis of rates, investment and spending.

“Saver rates will continue to come under pressure as lenders are forced to put aside more capital by regulators, wholesale rates rise and competition increases for new mortgage borrowers with lower introductory rates and bigger discounts, according to analysis.”

https://www.afr.com/business/banking-and-finance/banks-hammer-savers-as-borrowers-ready-for-higher-lending-rates-20190114-h1a15m


“Commuters were stranded in Zimbabwe’s two main cities on Monday as angry protesters reacting to the weekend more than doubling of fuel prices, burned tyres and used rocks to barricade roads and blocked buses from carrying passengers.

“President Emmerson Mnangagwa on Saturday announced a more than 100% rise in the price of petrol and diesel in a move to improve supplies as the country struggles with its worst fuel shortages in a decade.”

https://www.news24.com/Africa/Zimbabwe/zim-fuel-hike-angry-protesters-burn-tyres-block-buses-from-carrying-passengers-20190114


“Venezuelan intelligence agents have released opposition leader and congress chief Juan Guaido after briefly detaining him on the way to a political rally, a congressional official has said.

“A video posted on social media appears to show the moment Guaido was pulled from a car on a highway by the Bolivarian National Intelligence Service (Sebin) on Sunday as he was travelling out of the capital, Caracas.”

https://www.aljazeera.com/news/2019/01/venezuela-opposition-leader-juan-guaido-briefly-detained-190113161258333.html


“Trend-following investment strategies are computerized trading algorithms that base their buying and selling activity on asset price momentum. Trend-following algorithms “generally try to ride markets when they move strongly in one direction,” is how the Journal puts it.

“Trading algorithms in general have been blamed for increasing market volatility, and for making market declines more severe by creating self-reinforcing waves of selling.”

https://www.investopedia.com/why-algo-traders-see-looming-chaos-in-the-markets-4583762


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Economy 11 Jan 2019 Brexit Chaos Looms

“British lawmakers are set to vote on Prime Minister Theresa May’s much-maligned Brexit deal on Tuesday, with less than three months to go before the U.K. is set to leave the European Union.

“Remarkably, May’s template to exit the bloc faces virtually certain defeat.

“That leaves the prospect of a complete collapse of government, a disorderly exit from the bloc or even the entire Brexit process being scrapped altogether over the coming weeks.”

https://www.cnbc.com/2019/01/11/brexit-vote-parliament-set-to-decide-outcome-of-mays-withdrawal-deal.html


“France’s response to “yellow vest” protests could be a turning point for euro zone bond markets if it kicks off an era of increased public borrowing in the bloc and loads additional debt on to a market already nervous over the removal of ECB stimulus.”

https://www.reuters.com/article/us-eurozone-bonds-fiscal-analysis/frances-yellow-vest-protests-could-shake-up-euro-zone-bond-markets-idUSKCN1P50IJ


“Italy’s far-right interior minister, Matteo Salvini, has said that Italy and Poland could trigger a “European spring” that could break the dominant “Germany-France axis” as he strives to forge far-right alliances before the European parliamentary elections in May.”

https://www.theguardian.com/world/2019/jan/09/matteo-salvini-says-italy-and-poland-could-build-new-europe


““The repercussions and consequences of the economic crisis today are at their highest,” said Ali Hassan Khalil, Lebanon’s Finance Minister.”

https://www.ft.com/content/05686f12-14e4-11e9-a581-4ff78404524e


“According to retail sales data released by FADA, passenger vehicle sales in India during the first three quarters of the current fiscal (April to December) declined 2% year-on-year…”

https://www.livemint.com/Auto/jyBIgAxD4nR3PCxduP8UDJ/NBFC-liquidity-crisis-hits-Indias-auto-industry-hard.html


“China is adding more challenges to the global economy this year, beyond the trade conflict that’s rattling financial markets.

“Economists now see the threat of deflation in the manufacturing nation after producer price inflation slowed sharply in December… That would not only squeeze corporate profitability at home, but would also put pressure on global price gains…”

https://www.marketwatch.com/press-release/china-chinas-rekindled-deflation-fears-add-to-global-growth-concerns-2019-01-10


“Australia’s construction activity has slowed to the weakest in five-and-a-half years as tighter lending conditions and falling prices weigh on the nation’s housing market.

“The downturn in Sydney’s property market is set to deepen as tighter lending standards and the worst slump in values since the late 1980s cause nervous buyers to sit on the sidelines. Apartment approvals fell the most in a decade in November in another sign of investors pulling back.”

https://www.bloomberg.com/news/articles/2019-01-10/another-sickly-australian-property-gauge-shows-sector-wide-slump


““Most of the attacks along the coast of Trinidad occur just before sunset, so that pirates under cover of darkness can disappear without being disturbed,” testify the victims of this type of theft…

““Sometimes, they rob our people, but in other cases they are kidnapped in Venezuela and a ransom is demanded for their freedom, ” said Esook Ali, leader of the local fishing association, to The Telegraph.”

http://www.maritimeherald.com/2019/are-venezuelans-becoming-pirates-due-to-the-economic-crisis/


“This time I think bonds will peak at around $8 trillion and then lose about $3 trillion in value. That’s 38 percent. Failing U.S. subprime loans triggered the last global debt crisis. This next one is likely to come from failing emerging market corporate debts, followed by the U.S. and developed country defaults and bond devaluations…”

https://born2invest.com/articles/trend-global-debt-more-concerning/


“…investment-grade and high-yield corporate bonds have registered over US$65 billion net outflow in the 10 weeks to Dec. 31. That marks a record high. In other words, investors are dumping corporate bonds.

“Many countries, especially emerging markets, have posted staggering credit expansion after the 2008 financial crisis.

“The credit to private non-financial sectors in developed and developing markets surged above US$160 trillion in the first quarter of last year. It accounts for 244.9 percent of GDP. Both figures hit a record high. That shows private non-financial sectors are having extremely high leverage, and the bubble is building up.”

http://www.ejinsight.com/20190111-high-debt-levels-fed-tightening-may-trigger-another-crisis/


“Cracks are already forming. In December, borrowing in the high-yield bond market came to a standstill. Deals in the leveraged loan market are also delayed from a lack of interest from mutual funds and collateralized loan obligation managers, the largest buyers of leveraged loans. These events signal trouble ahead for highly indebted companies seeking more financing.

“Wall Street banks have significant exposure to corporate debt… In a crisis, these exposures could serve as a channel for contagion in a highly interconnected financial system dominated by large banks.”

https://www.nytimes.com/2019/01/10/opinion/shutdown-economy-recession.html


“The US government has been partially shuttered since late December as President Donald Trump has refused to sign a budget agreement unless Congress agrees to allocate US$5 billion for a border wall. About 800,000 federal workers, including air traffic controllers and members of the Coast Guard, have been without pay for three weeks.”

https://www.straitstimes.com/business/economy/longer-us-government-shutdown-will-hit-economy-says-fed-chief


“Federal Reserve Chairman Jerome Powell is concerned about the ballooning amount of United States debt… Wall Street’s “bond king” and respected financial prognosticator Jeffrey Gundlach said in December that the Fed seems to be on a “suicide mission,” raising rates while the government deficit increases as a share of GDP. Normally when the deficit is expanding, the Fed would be lowering interest rates.”

https://www.cnbc.com/2019/01/10/fed-chairman-powell-says-he-is-very-worried-about-growing-amount-of-us-debt.html


“The odds of a recession have grown to the highest level in seven years, according to a monthly poll by The Wall Street Journal. Economists surveyed by the Journal are seeing on average a 25 percent chance of a recession within the next 12 months… The outlook for 2020 is even dimmer with 56.6 percent of the economists foreseeing a downturn to start in the presidential election year.”

https://www.cnbc.com/2019/01/10/probability-of-a-recession-rises-to-highest-in-7-years-wsj-survey.html


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Economy 10 Jan 2019 China Car Sales Slump 6% in 2018

“China’s automobile market, the world’s largest, recorded its first annual decline in more than two decades last year as new car sales slumped amid a slowing economy and rising trade tensions between Washington and Beijing.

“The China Passenger Car Association said Wednesday that sale fell 6% over the whole of 2018 to just over 22.7 million units. That figure is firmly ahead of the 17.5 million tally recorded in the U.S., but shows the first year-on-year decline since the early 1990s.”

https://www.thestreet.com/investing/stocks/china-car-sales-post-first-annual-decline-in-two-decades-14828741


“Chinese policy makers are continuing their piecemeal approach to arresting the slowdown in the world’s second-largest economy, as further details emerged of measures to ensure credit to small businesses and ease their tax burden.

“Late Wednesday, state media announced a package of tax cuts for small and micro-sized businesses — the backbone of the economy — worth 200 billion yuan ($29 billion) per year over the next three years.”

https://www.bloomberg.com/news/articles/2019-01-09/china-rolls-on-with-tax-credit-tweaks-amid-sharpening-slowdown


“China is adding more challenges to the global economy this year, beyond the trade conflict that’s rattling financial markets.

“Economists now see the threat of deflation in the manufacturing nation after producer price inflation slowed sharply in December…”

https://www.bloomberg.com/news/articles/2019-01-10/china-s-rekindled-deflation-fears-add-to-global-growth-concerns


“Three days of trade negotiations between midlevel American and Chinese officials ended in Beijing on Wednesday afternoon with progress in identifying and narrowing the two sides’ differences but little sense of when they might reach a deal.”

https://www.nytimes.com/2019/01/09/business/us-china-trade-talks-beijing.html


Morgan Stanley:

The worst housing downturn in Australia for 35 years.”

“We think the steep downturn in house prices exposes Australia to the risk of recession, particularly in the context of an exogenous shock such as slowdown in Chinese growth.”

“Our models show that Australian households are most exposed of any G10 country to a housing slump and face a period of deleveraging, leaving growth heavily reliant on public spending on health, education and infrastructure.”

https://www.fxstreet.com/news/australias-house-price-slide-poses-threat-to-economy-morgan-stanley-201901100431


““The outlook for the global economy in 2019 has darkened.”

“That conclusion came from a new report from the World Bank, citing a variety of data… One of the key backdrops to this assessment is the rate tightening from the U.S. Federal Reserve. “Advanced-economy central banks will continue to remove the accommodative policies that supported the protracted recovery from the global financial crisis ten years ago,” the World Bank report said.”

https://oilprice.com/Energy/Energy-General/Darkening-Outlook-For-Global-Economy-Threatens-Crude.html


“The president of the Federal Reserve Bank of St. Louis said he’s concerned that any more interest-rate increases could push the U.S. economy into a recession.

““We’ve got a good level of the policy rate today” and there’s no urgent need to go higher, James Bullard, a voting member this year on the Federal Open Market Committee, said in an interview with the Wall Street Journal published Wednesday…”

https://www.bloomberg.com/news/articles/2019-01-09/bullard-warns-of-a-u-s-recession-if-fed-keeps-raising-rates


“U.S. non-financial firms are increasingly having difficultly earning enough to make interest payments on their debt, which is expanding faster than the economy, according to a report from the Institute of International Finance.

“While Federal Reserve officials acknowledge the possibility of a pause in monetary policy tightening this year, U.S. companies have already begun to have trouble servicing their debt.”

https://uk.reuters.com/article/usa-debt-corpbonds/interest-expenses-weigh-as-us-corporate-debt-grows-faster-than-economy-iif-idUKL1N1Z91MC


“British retailers failed to increase their Christmas sales for the first time since the depths of the global financial crisis a decade ago, adding to signs of an economic slowdown ahead of Brexit.

“Consumer spending appears to be fading fast after a summer surge as concerns among shoppers about the outlook for 2019 outweigh the benefit from weaker inflation and a modest pick-up in wages.”

https://uk.reuters.com/article/uk-britain-economy-retail/uk-retailers-suffer-worst-christmas-in-a-decade-brc-idUKKCN1P4007?il=0


“Britain’s biggest carmaker Jaguar Land Rover (JLR) is set to announce “substantial” job cuts in the thousands, a source told Reuters, as the company faces double-digit drops in demand in China and a slump in sales for diesel cars in Europe.”

https://www.reuters.com/article/us-jaguarlandrover-jobs/jaguar-land-rover-to-make-substantial-job-cuts-after-china-diesel-slump-source-idUSKCN1P40LJ


“The U.K.’s departure from the European Union is fast approaching and as politicians prepare to vote on the divorce terms agreed upon by Prime Minister Theresa May and Brussels, opinion polls show the public remains just as divided over Brexit.

“That has major implications for all parties especially if, as expected, May can’t secure parliamentary backing for her deal.”

https://www.bloomberg.com/graphics/2019-brexit-deal-public-sentiment/


“Venezuelan President Nicolas Maduro begins another six years in power Thursday with a collapsing economy that shows no sign of bottoming out and a threat from some Latin American neighbors who say they will not recognize his government.

And still, there are few in or outside of Venezuela who are predicting Maduro’s downfall in 2019 or beyond.”

https://edition.cnn.com/2019/01/09/americas/nicolas-maduro-venezuela-economy-free-fall/index.html


“The double whammy of biting fuel shortages and steep transport fares is leaving thousands of commuters stranded — forcing many of them to hitch precarious rides on lorries and pick-up trucks, in the latest desperate scenes to afflict long-suffering Zimbabweans…

“Zimbabwe has, for a long time now, been struggling to pay its foreign suppliers of fuel and other commodities — due to its dire finances which economists say has been worsened by corruption and mismanagement.”

https://nehandaradio.com/2019/01/09/travellers-stranded-as-fuel-crisis-grows/


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Economy 9 Jan 2019 Recession May Loom for Germany

“Europe’s largest economy [Germany] may be in recession for the first time since the region’s debt crisis.

“A shock plunge in industrial output in November suggests Germany may have suffered a second consecutive quarter of economic contraction at the end of 2018.

“Industrial production in Germany plummeted 1.9% compared to the previous month, according to data published Tuesday. That’s much worse than the 0.3% uptick economists polled by Reuters had expected…

“”The big picture is that the German economy — and the eurozone more generally — has clearly shifted down a gear,” said Jack Allen, senior European economist at Capital Economics.

“A recession in Germany would be another major worry for investors who have been unnerved by the prospect of weaker economic growth this year in the United States and China…

“The slowdown could create a major headache for the European Central Bank, which completed a huge stimulus program in December and was planning to start raising interest rates later this year.

“If growth slows further, it will have to reconsider.”

https://edition.cnn.com/2019/01/08/economy/germany-economy-recession-fears/index.html


“Italy’s populist government has offered to shore up an ailing bank with public money, in a sharp U-turn after attacking mainstream politicians for years for bailing out banks with taxpayers’ money.

“The country’s embattled banking sector will provide a delicate test for the new government, as Italian lenders—whose bondholders include many ordinary savers—struggle to digest billions in bad loans accumulated during the financial crisis and shore up their fragile finances.”

https://www.wsj.com/articles/italy-offers-bank-bailout-despite-past-pledges-11546954204


“A smiling construction worker, a grinning farmer and a jolly pensioner: these are the cartoon faces the government is using to try to reassure Britons that the country can cope with a no-deal Brexit.

“A cheery illustrated banner on a new government website sits atop links to information on how to prepare for a no-deal Brexit that critics have said could cause food and medicine shortages, long border delays and widespread economic disruption.

“On Tuesday, the government launched the eu exit campaign site with a low-key public information campaign consisting of adverts on commercial radio stations and tweets from some government departments.”

https://uk.reuters.com/article/uk-britain-eu-adverts/brexit-with-a-smile-uk-launches-eu-exit-preparedness-campaign-idUKKCN1P215A


“Vincent is one of 44 million Americans burdened with student loans. Together, they owe a total of $1.5 trillion, a record sum only exceeded by mortgages.

“Student loans make up almost 7 percent of the United States’ aggregate debt. Add to this the $64.2 billion in private student loans, issued by banks and other institutions.”

https://www.dw.com/en/student-debt-may-inch-us-toward-next-financial-crisis/a-46985713


“On average, the six largest U.S. banks have less than $7 in equity for each $100 in assets. That’s more than they had before the 2008 crisis, but probably not enough to avoid distress in a similar situation.

“Economists at the Minneapolis Fed, for example, have estimated that banks need more than twice as much equity to make the probability of government bailouts as low as it should be… If the central bank’s rules prevent [Fed officials] from acting, they should change them. By the time investors are sure the system has a problem, it will be too late.”

https://www.bloomberg.com/opinion/articles/2019-01-08/federal-reserve-should-learn-from-great-recession-on-bank-capital


“What will crash the market again this month? It’s not President Trump and Nancy Pelosi in their made-for-TV tug of war over government funding. BlackRock knows what it is: If it’s not the Fed, it will be flawed China trade talks this week and market fears of a semi-hard landing there. The Fed and China are the biggest things on Wall Street’s mind.”

https://www.forbes.com/sites/kenrapoza/2019/01/08/forget-government-shutdown-for-investors-the-fed-and-china-only-things-that-matter/#60504ac72ba7


“It is becoming ever clearer that the smartphone market is in a recession.

“The contraction trend first became apparent in November… According to the state-run China Academy of Information and Communications Technology (CAICT), 2018’s smartphone shipments in the country were down by a worrisome 15.5%. As reported by Reuters, shipments were down 17% year-on-year.”

http://fortune.com/2019/01/08/china-smartphone-shipments-2018/?xid=gn_editorspicks


“As China’s household debt continues to build up despite government-led deleveraging efforts, experts are warning against an accumulation of risks similar to the 2008 subprime mortgage crisis in the U.S. that led to the Great Recession…

“Research by Industrial Securities also found a correlation between consumer loan growth and housing sales. Despite tightening controls on mortgage loans to rein in a property price surge, down payments made by Chinese home buyers increased by 70% in 2017 from the previous year. During the same period, consumer borrowing nearly quadrupled to 3.9 trillion yuan, the research found.”

https://www.caixinglobal.com/2019-01-09/subprime-risks-are-rising-in-china-experts-warn-101367820.html


“Sixty-five million apartments, one in five, lie empty in China’s cities…

“The development of a housing glut, driven by a slowdown in speculative purchasing, a slowdown in rural-to-urban transition, and the continuing construction of massive apartment complexes therefore has serious practical implications for the Chinese people and the general Chinese economy. The stagnation and in many cases decline of property values has devastated consumer confidence in China.”

http://www.thesaint-online.com/2019/01/the-chinese-housing-crisis/


“South Korea saw the highest number of jobless last year since statistics guidelines were revised in 2000 with job additions being the lowest since the aftermath of 2008-2009 global financial crisis…

“Thinning working population, listless manufacturing sector and streamlining in services area led to the poor job data, the office said.”

https://pulsenews.co.kr/view.php?year=2019&no=17957


“The outlook for the global economy in 2019 has darkened… advanced-economy central banks will continue to remove the accommodative policies that supported the protracted recovery from the global financial crisis ten years ago. Also, simmering trade disputes could escalate. Higher debt levels have made some economies, particularly poorer countries, more vulnerable to rising global interest rates, shifts in investor sentiment, or exchange rate fluctuations.

“In addition, more frequent weather events raise the possibility of large swings in food prices, which could deepen poverty.

““At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead,” said World Bank Chief Executive Officer Kristalina Georgieva.”

https://www.worldbank.org/en/news/immersive-story/2019/01/08/storm-clouds-are-brewing-for-the-global-economy


Read the previous ‘Economy’ thread here and visit my Patreon page here.

Economy 8 Jan 2019 Time to Prepare for Recession

“…credit spreads have widened considerably, commodity prices have softened and investors have started demanding higher yields for short-term US bonds than for those with longer terms. Unlike equity markets, “yield curve inversions” have not historically tended to produce false recession predictions. The overall judgement of financial markets is that recession is significantly more likely than not in the next two years.

“Real economic indicators for the world’s largest economies, China and the US, also suggest considerable cause for concern. Almost every Chinese indicator in the last few months has come in below expectations.

“Perhaps the US economy will enjoy a soft landing… But… given that we are starting from very high debt levels and low unemployment, a recession is the more likely outcome.

“It is almost inconceivable that the global economy will remain healthy in the face of serious economic problems in both China and the US, even leaving aside their conflicts over trade and technology. Europe lacks economic energy and the uncertainties associated with Brexit, French protests, German political transition and Italian populism mean the continent is more likely to be a source of problems than a solution.

“The Fed should signal that it is determined to avoid a downturn that would assure another decade of below target inflation. The People’s Bank of China and other central banks should also make clear that they recognise that avoiding another recession is the most important thing they can contribute to financial stability.

“Fiscal policymakers should realise the very low real yield on government bonds is a signal that more debt can be absorbed. It is not too soon to begin plans to launch large-scale infrastructure projects if a downturn comes. The largest economies should try to limit trade frictions and signal that they are committed to co-operating to support global growth by assuring adequate capital flows to emerging markets and avoiding a cycle of protectionism.

“Even if my recession fears are excessive, a shift towards emphasising growth will contribute to bringing inflation up to target levels and can be reversed. If I am proved right, the costs of delay in the policy response could be catastrophic. It is the irony of our moment that prudence requires the rejection of austerity.”

https://www.ft.com/content/226a58e0-125b-11e9-a168-d45595ad076d


“As we limp into 2019, about the most upbeat line the pros can spin is that, hey, the recession probably won’t hit until next year.”

https://www.bostonglobe.com/business/2019/01/07/the-wall-street-forecast-you-might-not-want-know/lWQZIKrqpf0CfB50lrXvUJ/story.html


“In developing our forecast for the industry for 2019, the outlook appears grim. Economic indicators are pointing to contraction for the entire auto industry, which can be magnified if trade conditions worsen.

“The question will be less about how the industry will perform, but rather how automakers should respond to market conditions.”

https://www.forbes.com/sites/forbesfinancecouncil/2019/01/07/why-automakers-must-start-planning-for-a-challenging-year-in-2019/#1044e4c8ca24


“Home purchase contracts in the U.S. fell 7.7 per cent in November, according to a National Association of Realtors index. Consumer confidence dropped in December.

“And a gauge of U.S. manufacturing plunged by the most since 2008, only a day after Apple cut its sales outlook, prompting investor worries about a global growth slowdown.”

https://business.financialpost.com/real-estate/housing-bear-who-called-2018-slowdown-says-worst-yet-to-come


“Brexit hasn’t happened yet but it’s already shrinking the United Kingdom’s financial services industry. Banks and other financial companies have shifted at least £800 billion ($1 trillion) worth of assets out of the country and into the European Union because of Brexit, EY said in a report published Monday. Many banks have set up new offices elsewhere in the European Union to safeguard their regional operations after Brexit, which means they also have to move substantial assets there to satisfy EU regulators.”

https://edition.cnn.com/2019/01/07/investing/brexit-banks-moving-assets/index.html


“The two leaders of Italy’s ruling populist coalition on Monday threw their support behind the “yellow vest” protesters roiling neighbouring France.

“Yellow vests, do not weaken!” Deputy Prime Minister Luigi Di Maio, who heads the anti-establishment Five Star Movement (M5S), wrote on his party’s blog.

“He denounced the French government for protecting the elite and the privileged, saying “a new Europe is being born. Of the ‘yellow vests’, of movements, of direct democracy” ahead of European parliamentary elections in May.

“Matteo Salvini, his counterpart from the far-right, the anti-immigrant League, also backed the “yellow vest” protesters.”

https://au.news.yahoo.com/italy-populist-leaders-back-france-yellow-vest-protests-153355130–spt.html


“Turkey’s economic growth under the AKP relied on foreign funds, mainly external borrowing of some $460 billion, with the funds used mostly for domestic consumption.

“When the inflow of funds decreased before grinding to a halt in 2018, the crisis became inevitable.”

https://www.al-monitor.com/pulse/originals/2019/01/turkey-istanbul-flashpoint-of-elections-amid-economic-crisis.html


“Millions are set to walk out across India tomorrow as a two-day national strike begins against the neoliberal policies of Prime Minister Narendra Modi’s right-wing regime…

“Farmers and agricultural workers promised to block roads across the country, bringing India to a standstill amid growing anger over poverty and rising prices.”

https://www.peoplesworld.org/article/millions-to-strike-across-india-against-modis-neoliberal-economic-crisis/


“China’s market is facing a slowdown, as car sales have declined at the fastest rate in seven years. This has been attributed to the economic slowdown and the trade war… Auto sales fell fourteen percent in November year-on-year, following two months of twelve percent declines. Many car manufacturers’ production and sales data in November was not optimistic.”

https://seekingalpha.com/article/4231852-chinas-auto-industry-slowdown-signals-economic-woes


“If China is indeed entering an economic winter, then the chill will spread around the globe.”

https://www.theguardian.com/business/2019/jan/05/china-economy-slowdown-us-tariffs-trade-war


“A public transport employee who doesn’t earn enough to feed himself, a doctor who watches his patients die for lack of medicines, a lawmaker without a legislature, three generations of one family emigrating – the list of victims of Venezuela’s crisis is long.

“They come from all walks of life and dread the prospect of another six years under the man who has overseen it, President Nicolas Maduro.”

https://www.channelnewsasia.com/news/world/victims-of-venezuela-crisis-despair-at-prospect-of-second-maduro-term-11097432


“Investors are dumping stocks and corporate bonds at the fastest pace ever. Mutual funds invested in equity and bonds lost a record $152 billion in December, while U.S. equity exchange-traded funds just had their first back-to-back weekly outflows since July 2018, shedding $7.1 billion in the last two weeks, according to TrimTabs Investment Research.”

https://www.cnbc.com/2019/01/07/investors-flee-stock-and-bond-funds-in-record-numbers-amid-equity-panic-in-december.html


“We live in a highly integrated world – people talk about food value chains, and they are chains, because when you break a link in the chain, the whole thing falls apart, and that could be very disruptive for food supplies.”

https://www.chathamhouse.org/expert/comment/managing-global-food-insecurity


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