Daily updates on climate change and the global economy.

Economy 18 March 2019 Central Banks Can’t Fix Credit Exhaustion

“Having fixed the liquidity crisis of 2008-09 and kept a perversely unequal “recovery” staggering forward for a decade, central banks now believe there is no crisis they can’t defeat.

“China’s central bank created over $1 trillion in January alone to flood China’s faltering credit system with new credit currency.

“The pool of qualified borrowers who are willing to bet on another decade of central-bank goosed “growth at any cost” is shrinking rapidly.

“Thus will end the central banks’ bombastic hubris and the public’s faith in central banks’ godlike powers.”

https://seekingalpha.com/article/4249353-coming-crisis-fed-fix-credit-exhaustion


“China’s spending spree during the global financial crisis helped pull the world economy out of recession. This time, Beijing’s stimulus might not pack the same punch…

“Behind the more modest growth push is a realization in Beijing that China’s traditional debt-driven growth model has reached its limit… China is getting less output from its borrowing than before.”

https://www.wsj.com/articles/as-china-faces-slowdown-stimulus-will-have-smaller-global-reach-11552734000


“As China’s $9.1tn shadow lending industry cools for the first time in a decade, private corporate defaults are on the rise… Shadow funds have been the lifeblood of private companies in China for years, because as state-owned banks tend to prefer to lend to government-controlled companies.

With access to shadow funds cut off, many private companies will face financial strain and defaults are expected to rise this year…”

https://www.ft.com/content/fa026b16-492f-11e9-bbc9-6917dce3dc62


“Japan’s exports fell for a third month in February in a sign of growing strain on the trade-reliant economy, suggesting the central bank might be forced to offer more stimulus eventually to temper the effects of slowing external demand and trade frictions.”

https://uk.reuters.com/article/uk-japan-economy-trade/japans-exports-slump-again-on-weak-external-demand-puts-boj-on-notice-idUKKCN1QZ084


“Japan’s government debt in 2018 hit the US$10 trillion mark, an ominous milestone. In the same year the nation’s population saw a record decline. Despite all this, 10-year yields are -0.04%. Punters, in other words, are effectively paying Tokyo for the opportunity to hold its debt.”

https://www.asiatimes.com/2019/03/article/japans-debt-passes-250-of-gdp/


“Treasurer Josh Frydenberg has warned Australia’s housing market collapse could destroy small businesses and hit family budgets ahead of the next federal election.

“House prices have plunged by around 15 per cent in parts of Sydney and Melbourne in recent months amid fears the fall will harm the wider economy. In particular, small business owners that took out loans against the value of their houses may be badly affected.”

https://www.dailymail.co.uk/news/article-6816863/Australias-housing-market-collapse-destroy-small-businesses-hit-family-budgets.html


“The [South African] utility, which is struggling to emerge from a severe financial crisis and suffered a series of unplanned breakdowns, began rolling blackouts last week because of a shortage of generating capacity.

The situation worsened on Saturday after it lost 900 megawatts of electricity imports from Mozambique, which is cleaning up after a powerful cyclone knocked out communications and electricity pylons last week.”

https://uk.reuters.com/article/safrica-eskom/south-africas-eskom-to-continue-rolling-blackouts-this-week-idUKL8N2150JA


“British companies look set to cut investment by the most in 10 years in 2019 because of Brexit, even if Prime Minister Theresa May gets a deal to ease the country out of the bloc, an employers group said on Monday…

“Weak investment by companies drags on productivity which puts a brake on wage rises and weighs on the overall economy.”

https://uk.reuters.com/article/us-britain-eu-investment/brexit-spurs-biggest-cut-in-uk-business-investment-in-10-years-bcc-idUSKCN1QZ003


“As for Germany, over-reliance on the auto sector has left the economy cruelly exposed to the slowdown in China, by far the industry’s biggest export market.

“For Germany, a decline of just 10pc in Chinese car sales, which is what has happened, is equal to the entire size of its UK market. It would be most unwise to count on this being just a temporary setback.”

https://www.telegraph.co.uk/business/2019/03/17/brexit-could-hardly-have-come-worse-time-failing-eu-economy/


“Deutsche, the largest bank in Germany, Europe’s biggest economy, emerged unscathed from the financial crash but later lost its footing. In 2016, the International Monetary Fund called the bank the world’s biggest potential risk among peers to the financial system because of its links to other banks.

“German officials fear that a recession or big fine, for example, could derail the bank’s fragile recovery.”

https://uk.reuters.com/article/commerzbank-ma-deutsche-bank/explainer-why-germany-wants-a-merger-to-underpin-deutsche-bank-idUKL8N2140LF


France is sounding an alarm for the world’s advanced economies: capitalism is tearing them apart.”

https://www.bloomberg.com/news/articles/2019-03-17/france-s-message-for-capitalism-is-quite-simple-adapt-or-die


“At one point during this partnership, Cuba was receiving more than 100,000 bpd of Venezuelan crude, an analysis by Oliver Pieper for Deutsche Welle said. Now, however, this is probably down by a half as Venezuela struggles to keep its fields producing.

“Even so, Venezuelan crude is an important part of Cuba’s energy mix and its elimination from this mix would almost certainly lead to power outages for Cuba as well.”

https://oilprice.com/Energy/Crude-Oil/Cuba-Faces-Oil-Crisis-As-Venezuela-Crumbles.html


“It has been pointed out that extended periods of ultralow interest rates can have adverse effects. One of these is an increase in global debt. According to the Organisation for Economic Co-operation and Development (OECD), global outstanding debt in the form of corporate bonds issued by non-financial companies stood at almost 13 trillion U.S. dollars at the end of 2018 — more than double the amount outstanding in real terms before the 2008 global financial crisis.

“If investor sentiment turns around and a full-scale increase in interest rates resumes, then there is a risk that many companies will find it impossible to service and pay back this debt.”

https://mainichi.jp/english/articles/20190318/p2a/00m/0in/004000c


“Here’s another disaster waiting to happen: Globally, financial markets today are seeing a rebirth of “collateralized loan obligations” (CLOs), instruments broadly similar to the “collateralized debt obligations” (CDOs), which helped to blow up the financial system in 2008.

“CDOs were asset-backed instruments, a “blended” security comprised of risky mortgage-backed bonds and much of the rest from theoretically safer tranches. The theory underlying them was that the lower the investment quality, the higher the compensating yield, but in reality most turned out to be toxic junk. What distinguishes CLOs from their CDO “cousin” is that instead of repackaging mortgages, subprime and otherwise, CLOs repackage corporate loans, and consumer credit, such as car loans.

“Unfortunately, in yet another instance of lessons unlearned from 2008, the collateralized loan obligations, like the CDOs, have virtually non-existent investor protection, “with over 70 percent lacking any covenants that would allow monitoring of financial condition and early intervention to manage problem borrowers.”

https://www.alternet.org/2019/03/the-global-economy-is-a-time-bomb-waiting-to-explode/


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

Economy 15 March 2019 China Growth Mystery Scares Global Economy

“The growing mystery of where China’s rapid slowdown is headed may become the biggest risk on the horizon, even as Brexit and a solution to U.S.-China trade tensions are kicked into the long grass…

“The global economy’s in its weakest shape since the financial crisis a decade ago, Bloomberg Economics analysis shows. And the reminders are all around: China got more affirming evidence of its big slowdown, with industrial output and retail sales softening…”

https://www.bloomberg.com/news/articles/2019-03-15/china-growth-mystery-scares-global-economy-in-weakest-shape-in-years


“China’s economic slowdown deepened in the first two months of the year, pushing unemployment sharply higher from…

“Against the backdrop of slowing global demand and domestic weakness, the jump in joblessness comes just days after Premier Li Keqiang announced an “employment first” strategy as a key part of economic policy for the coming year. That will feed into policymakers’ calculations as to if and when further stimulus measures to shore up the world’s second-largest economy are needed.”

https://themalaysianreserve.com/2019/03/15/chinas-economic-slump-hits-employment/


“If you think China’s monetary policy became more lax in 2018, wait for 2019. Pushed by gloomier activity data, China’s policymakers have moved from an orthodox monetary policy to a much more heterodox one.

“The core of this more aggressive move is to exhort banks to lend more to the private sector, with specific targets on the amount of credit granted to private companies and, in particular, small and medium enterprises…”

https://www.brinknews.com/chinas-debt-is-still-piling-up-and-the-pileup-is-getting-faster/


“This round of currency intervention in Hong Kong is far from over. That’s according to analysts, who’re watching the interplay between the amount of money in the city’s financial system and local borrowing costs.

“Shorting the Hong Kong dollar will remain profitable until the latter starts to go up sharply, and the monetary authority will spend at least another HK$50 billion ($6.4 billion) defending the peg before that happens…”

https://www.bloomberg.com/news/articles/2019-03-15/hong-kong-seen-spending-billions-more-to-defend-currency-peg


“The Bank of Japan kept monetary policy steady on Friday but tempered its optimism that robust exports and factory output will underpin growth, a nod to heightened overseas risks that threaten to derail a fragile economic recovery. Factories across the globe slammed on the brakes last month as demand was hit by the U.S.-China trade war, slowing global growth and political uncertainty in Europe ahead of Britain’s departure from the European Union.”

https://www.cnbc.com/2019/03/15/bank-of-japan-keeps-monetary-policy-tweaks-view-on-global-economy.html


“Axis Bank’s Shashikant Rathi says rupee debt market in ‘complete chaos’… India corporate note spreads rise to near highest since 2009. Rathi, who has dominated India’s local bond underwriting business for over a decade at Axis Bank, says the industry now faces its biggest challenge since the global financial crisis. Shock defaults since last year by shadow bank IL&FS group and a new electronic bidding platform have disrupted the $108 billion market where underwriters like Rathi help companies raise money by selling debt securities…”

https://www.bloomberg.com/news/articles/2019-03-14/king-of-indian-bond-sales-warns-of-biggest-crisis-since-lehman?utm_source=google&utm_medium=bd&cmpId=google


“Turkey’s unemployment rate jumped to 13.5 percent in the November-January period, its highest level in nine years, official data showed on Friday, in a fresh sign of the impact of last year’s currency crisis.

“The economy contracted a sharper than expected 3 percent in the fourth quarter of 2018, its worst performance in nearly a decade, indicating last year’s near 30 percent slide in the lira had tipped it into recession.”

https://uk.reuters.com/article/us-turkey-economy-unemployment/turkish-unemployment-surges-to-135-percent-highest-in-nine-years-idUKKCN1QW10B


“Australia’s housing market is on track to experience a slump bigger than both the global financial crisis and the 1980s recession.

“National dwelling (houses and units) values slumped by 6.8 per cent since their peak in October 2017, driven mainly by sharp falls in Sydney (-13.2 per cent) and Melbourne (-9.6 per cent), according to new analysis by property data company CoreLogic.”

https://thenewdaily.com.au/money/property/2019/03/14/australian-houses-fall-weaker-than-gfc/


“Canadian home values fell last year for the first time in three decades amid falling prices in some of the country’s priciest markets, even as debt burdens increased. The value of residential real estate in Canada held by households dropped C$30 billion ($22.5 billion) in the fourth quarter to C$5.10 trillion, from C$5.13 trillion in the same quarter the previous year, Statistics Canada reported Thursday. The 0.6 percent decline is the first decrease in country-wide home values in data going back to 1990.”

https://www.bloomberg.com/news/articles/2019-03-14/canada-2018-real-estate-slump-erases-c-30-bln-from-home-values


“U.S. new home sales fell 6.9 percent to a seasonally adjusted annual rate of 607,000 in January, the U.S. Census Bureau said on Thursday. Over the year, sales of new homes declined 4.1 percent, according to the U.S. Census Bureau…

Even as low mortgage rates kept boosting home buyers’ interest, housing market remained gloomy in the United States.”

http://www.xinhuanet.com/english/2019-03/15/c_137895530.htm


“The United States will strengthen military ties with Brazil to a level usually reserved for NATO allies during President Jair Bolsonaro’s visit to Washington next week, boosting growing cooperation between the Americas’ two largest militaries, two Brazilian government officials said on Thursday.”

https://in.reuters.com/article/usa-brazil-ally/us-to-upgrade-military-ties-with-brazil-during-visit-next-week-sources-idINKCN1QV37E


“Russian oil company Rosneft spent a fortune on joint ventures in Venezuela even though it suspected it was losing out on millions of dollars, documents show. It continued investing, sources say, because the Kremlin wanted to support its ally in South America…

“Rosneft has poured around $9 billion into Venezuelan projects since 2010 but has yet to break even, Reuters has calculated…”

https://www.reuters.com/investigates/special-report/venezuela-russia-rosneft/


“Argentina’s inflation quickened to 3.8% in February, 51.3% per year. Argentina’s central bank will shrink its monetary base by an extra 10 percent before the end of the year to slow inflation that has proven difficult to tame.

““We need to be persistent, understanding that there are no immediate results,” central bank President Guido Sandleris told reporters in Buenos Aires.”

https://www.bloomberg.com/news/articles/2019-03-14/argentina-inflation-spikes-in-february-defying-macri-s-plans


“Investors are closely watching the credit market for signs of strain, especially as a growing share of debt is amassed by companies with the weakest ratings.”

https://www.businessinsider.com/stock-market-investing-recommendations-tips-for-next-credit-crisis-2019-3


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

Economy 14 March 2019 Chinese Factory Output Slows to Weakest on Record

“Chinese factory output slowed to its weakest pace on record early this year, a sign that the economy remained under pressure from US tariffs and weaker domestic demand despite a series of economic stimulus measures in recent months…

“China is ramping up assistance for the economy as 2019 growth looks set to plumb 29-year lows, but support measures are taking time to kick in.”

https://www.ft.com/content/a2c7edf8-45fb-11e9-b168-96a37d002cd3


“The downturn in China’s auto market worsened in January and February as an economic slowdown and a tariff fight with Washington chilled demand in the industry’s biggest global market. Sales of SUVs, minivans and sedans plunged 17.5 percent from a year earlier…

“The decline in sales of passenger cars in January was 15 percent… Last year’s auto sales suffered their first decline in nearly three decades, calling 4.1 percent from 2017 year to 23.7 million.”

https://abcnews.go.com/Business/wireStory/chinas-auto-sales-contraction-worsens-february-61672585


“For years, China’s biggest borrowers relied on accounting alchemy to prop up their balance sheets. Those days are over.

“Corporate perpetual bonds have almost always been recognized by Chinese auditors as equity, not debt. That enabled state-owned enterprises to borrow billions of dollars without it showing up that way.”

https://www.washingtonpost.com/business/the-spell-that-made-chinas-debt-vanish-is-broken/2019/03/13/dad47878-45e3-11e9-94ab-d2dda3c0df52_story.html


“The single most pressing economic problem in Thailand is household debt. Actually, the household debt issue is currently the world’s most important economic issue too.

“With the prevailing debt in major economies, it is difficult to see the world’s economy moving beyond a 2% annual growth rate. The household debt problem has already triggered a global financial crisis, namely the Lehman Brothers crisis in 2008. And it can trigger a similar crisis in China any time.”

https://www.bangkokpost.com/opinion/opinion/1644312/household-debt-squeezing-the-nation


“New Zealanders have a debt problem. In the past seven years, household debt has skyrocketed…Kiwis are spending more money that they don’t have. It’s a signal to economists that the foundations are shaky.

“It’s also not hard to see why borrowing is going through the roof — property prices. Houses cost more. People have to borrow more to buy them. Wages are growing more slowly than house prices. The result? Ballooning debt.”

https://www.moneymorning.co.nz/our-ticking-time-bomb-why-kiwi-debt-is-about-to-explode/2019/03/14/


“Toronto households are some of the most indebted in the country, with the average family owing more than twice the amount they bring in.”

https://www.citynews1130.com/video/2019/03/13/household-debt-worries-mounting-for-canadians/


“While the overall level of [US] consumer borrowing is rising at a steady pace, one subset of loans, those linked to car purchases, has risen sharply over the past year.

“This is particularly true in the “subprime category” — those high-risk borrowers with a FICO consumer credit score below 620 (the bare minimum score required to be approved for a conventional mortgage in the US). More striking still, defaults on those subprime auto loans appear to have surged.”

https://www.ft.com/content/1ce6d32e-4520-11e9-b168-96a37d002cd3


“Brussels has said a vote by UK MPs to block a no-deal Brexit in any circumstances is a meaningless move, with one senior EU negotiator describing it as “the Titanic voting for the iceberg to get out of the way”.

“A European commission spokesman offered a withering assessment of the decision by MPs to ignore Theresa May’s assertion that no deal was the default position unless there was a deal in place by the time of the UK’s departure.”

https://www.theguardian.com/politics/2019/mar/13/eu-extend-brexit-talks-complete-barnier-brussels-assurance


“The Swiss economy will grow less quickly than previously anticipated, hamstrung by the global downturn, and stands to lose even more pace if the international trade dispute worsens.”

https://www.bloomberg.com/news/articles/2019-03-14/switzerland-cuts-growth-outlook-feeling-pain-of-german-slowdown


““We love our city, we love our weather, we love the Greek people, but we are scared and afraid in a way, because the situation is not that good,” Dimopoulos said about him and his friends.

““We have to try harder and harder to make our own money … Sometimes we are talking (about going) abroad: If it is going to be better for us to leave Greece or if it is going to be better to stay in Greece and try harder. It is in our minds.””

https://www.cnbc.com/2019/03/14/greece-financial-crisis-still-evokes-pain-and-fear-in-athens.html


“Turkey’s industrial output shrank for the fifth month in a row in January, the clearest evidence of continued weakness in the Middle East’s largest economy after it fell into a technical recession during the last quarter of 2018.

“Combined production of Turkish manufacturers, miners and power producers slumped 7.3 percent from a year earlier…”

https://www.bloomberg.com/news/articles/2019-03-14/turkey-s-shrinking-industrial-output-shows-economy-still-weak


“Protests initially erupted on December 19 after a government decision to triple the price of bread, while irregular fuel supplies have been a common feature for months across Sudan. “The economic issues need to be solved immediately as it impacts inflation and our currency rate,” said Eila. Although the bread price rise triggered the protests, anger had mounted across the country for years over soaring inflation and an acute shortage of foreign currency.”

http://english.alarabiya.net/en/News/middle-east/2019/03/14/-Protest-hit-Sudan-unveils-new-cabinet-to-solve-economic-crisis.html


“The World Bank will lend Angola $1 billion to fund social security and water projects, the president’s office said on Wednesday.

“Angola, Africa’s second largest oil producer, has been pushed into an economic crisis by the fall in oil prices since mid-2014.”

https://www.reuters.com/article/angola-worldbank/world-bank-to-lend-angola-1-billion-idUSL8N2106KA


“Venezuela’s largest private food supplier says massive looting and vandalism occurred at four facilities in the city of Maracaibo during nationwide power outages, complicating efforts to distribute food and drinks to people in the area.”

https://www.japantimes.co.jp/news/2019/03/14/world/social-issues-world/venezuelan-food-supplier-reports-looting-blackouts/#.XIoeTij7TIU


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

Economy 13 March 2019 Another Global Debt Crisis Inevitable

“Global debt levels have become “higher and riskier” than that of a decade ago, meaning that “another credit downturn may be inevitable”, S&P Global Ratings has warned.

“In a report entitled Next Debt Crisis: Will Liquidity Hold?, published on Tuesday (12 March), S&P found global debt has surged by around 50% since the 2008 Global Financial Crisis, led by major-economy governments and Chinese non-financial corporates, while global debt-to-GDP ratios have risen to more than 231%, compared with 208% in June 2008.

“In the corporate space, the report found 61% of companies have aggressive or highly leveraged financial risk profiles. This is particularly the case among Chinese firms which make up around two-fifths of debt S&P categorises as “aggressive and highly leveraged”.

“S&P also noted there is now a much higher concentration of ‘BBB’ bond issuers within the investment-grade arena, with ratings trending down globally over the past decade…

“S&P Global Ratings credit analyst Terry Chan said: “Global debt is certainly higher and riskier today than it was a decade ago, with households, corporates, and governments all ramping up indebtedness.”

https://www.investmenteurope.net/research/4001300/-global-credit-downturn-inevitable-debt-skyrockets?fbclid=IwAR35IuHCTTeF0N7-EA6kYc9DKVQvSt3OYN3xlpjgGzD9JcFgphjx_RcsmjI


“Europe’s four biggest economies — Germany, France, Italy, and the UK — are close to negative growth as German industrial output dropped unexpectedly in January, which led France to outperform its larger neighbour but not replace Germany’s economic might as an engine for growth in the Eurozone.”

https://www.neweurope.eu/article/europes-four-biggest-economies-edge-towards-recession/


“Euro-area industrial production fell more than twice as much as forecast in December, raising further questions over the state of the bloc’s economy.

“The 0.9 percent drop — more than twice the 0.4 percent forecast — was driven by declines in capital and non-durable consumer goods production. From a year earlier, output plunged the most since 2009, when the economy was dealing with the fallout from the financial crisis.”

https://www.bloomberg.com/news/articles/2019-02-13/euro-industry-posts-biggest-annual-slump-since-financial-crisis


“Theresa May is facing another potentially humiliating Brexit showdown in the Commons, just 24 hours after her latest crushing defeat. MPs will vote on ruling out a no-deal Brexit, after the prime minister was forced to concede a free vote for Conservative MPs to avoid ministerial resignations. If MPs vote against no-deal, 24 hours later they will vote on extending Article 50, which if carried would mean the UK would not leave the EU on the proposed date of March 29.

“Concluding her post-vote statement to MPs, the prime minister said: “Voting against leaving without a deal and for an extension does not solve the problems we face.

“”The EU will want to know what use we mean to make of such an extension.”

https://news.sky.com/story/brexit-crisis-another-day-and-more-humiliation-looms-for-theresa-may-11663798


“Tariffs will be cut to zero on 87% of imports to the UK as part of a temporary no-deal plan to prevent a £9bn price shock to business and consumers, the government has announced.”

https://www.theguardian.com/politics/2019/mar/13/brexit-tariffs-on-87-of-uk-imports-cut-to-zero-in-temporary-no-deal-plan


“…the fact that [India’s] industrial output growth has slipped for three months in a row now shows that manufacturing hasn’t really strengthened.

“Furthermore, economic growth in the fourth quarter is expected to fall and the industrial output growth underscores such expectations.”

https://www.livemint.com/


“Japan’s core private-sector machinery orders fell for a third straight month in January, the government said Wednesday, signaling companies are becoming less willing to spend in the face of China’s economic slowdown.”

https://asia.nikkei.com/Economy/Japan-s-machinery-orders-fall-5.4-in-January


“Amid worries over China’s economy, some currencies — particularly those of commodity-producing countries — will be most vulnerable to its slowdown. Experts say that two currencies stand out as being the most exposed to China: the Australian dollar and the New Zealand dollar.

“China is the biggest trading partner of both countries, with 24.9 percent of New Zealand’s exports and about a third of Australian exports going to the Asian giant.”

https://www.cnbc.com/2019/03/13/aussie-dollar-new-zealand-dollar-most-vulnerable-to-china-slowdown.html


“A growing number of Australians are worried about losing their jobs following soft economic growth numbers, as a slide in consumer sentiment matches the loss in business confidence and conditions… The Unemployment Expectations Index recorded an 8.9 per cent jump, indicating more consumers expect unemployment to rise in the year ahead.”

https://www.afr.com/news/economy/employment/consumer-sentiment-on-housing-lowest-on-record-westpac-mi-20190313-h1cbb2


“Each hour that passes without power in Venezuela brings more havoc and stress to a country already on edge. The blackout has lasted several days and with poverty levels already high and 40C heat, how is the country coping?”

https://www.bbc.co.uk/news/av/world-latin-america-47545055/venezuelan-crisis-running-out-of-food-power-and-cash-in-blackout


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

Economy 12 March 2019 Global Economy Sharply Loses Speed

“The global economy’s sharp loss of speed through 2018 has left the pace of expansion the weakest since the global financial crisis a decade ago, according to Bloomberg Economics.

“Its new GDP tracker puts world growth at 2.1 per cent on a quarter-on-quarter annualised basis, down from about 4 per cent in the middle of last year. While there’s a chance that the economy may find a foothold and arrest the slowdown, “the risk is that downward momentum will be self-sustaining,” say economists Dan Hanson and Tom Orlik…

“In their report, Hanson and Orlik admitted the pace of the slowdown has been a surprise.

“”The cyclical upswing that took hold of the global economy in mid-2017 was never going to last. Even so, the extent of the slowdown since late last year has surprised many economists, including us.””

https://www.smh.com.au/business/the-economy/global-economy-hits-weakest-spell-since-the-financial-crisis-20190312-p513fd.html


“China’s top statistics official on Tuesday sought to allay concerns over the health of the world’s second-largest economy, and defended the integrity of its data.

“The comments came days ahead of China’s release of key readings on industrial output, retail sales and investment, which are being closely watched by global investors for clues on the extent of the country’s economic slowdown.”

https://uk.reuters.com/article/uk-china-economy/chinas-economy-shows-improving-trend-in-january-february-statistics-bureau-chief-idUKKBN1QT0BW?il=0


“Japan’s biggest manufacturers say current business conditions are at the worst in nearly three years, the latest indication the nation’s export-dependent economy is taking a battering in the current quarter.

“The Finance Ministry’s quarterly business survey, released Tuesday, showed a reading of minus 7.3 for conditions among Japan’s largest manufacturers, the worst result since the second quarter of 2016.”

https://www.bloomberg.com/news/articles/2019-03-12/japan-s-manufacturers-say-business-conditions-the-worst-in-years


“Dubai’s non-oil trade was worth AED1.3 trillion ($354bn) last year, according to figures released over the weekend.

“That was down very slightly on the year before but, more importantly, it also marked the sixth consecutive year of slow or no growth. Indeed, the emirate’s international trade is now worth slightly less than it was in 2013 and 2014.”

https://www.forbes.com/sites/dominicdudley/2019/03/11/dubais-trade-growth-has-stalled-value-of-imports-and-exports-at-a-standstill-for-six-years-running/#1fc7b396846b


“Australia’s economic slowdown is likely to become more entrenched with business conditions and confidence falling further last month. The sharp decline in business conditions and confidence late last year continues into 2019.

“Forward looking indicators such as orders and capacity utilisation continue to weaken Retail, and in particular household goods and car sales, are the weakest sectors overall…”

https://www.abc.net.au/news/2019-03-12/business-conditions-and-confidence-fall/10892224


“The value of new mortgages slipped another 2.1 per cent in January, marking Australia’s largest annual decline since the global financial crisis. The value of dwelling commitments excluding refinancing slipped to $17.12 billion in January, according to seasonally adjusted figures released on Tuesday by the Australian Bureau of Statistics.”

https://www.news.com.au/finance/business/breaking-news/household-lending-dropped-24-in-january/news-story/1c59ffbd7cafbdb8b46a5d078590f42d


“Monday morning [UK] government blues have been replaced by Tuesday morning nervous hopes.

“The government does not suddenly expect its Brexit deal to be ushered through at speed, cheered on by well-wishers. It does, however, believe that Monday night’s double act in Strasbourg by Theresa May and Jean Claude Juncker puts it, to quote one cabinet minister, “back in the races”.”

https://www.bbc.co.uk/news/uk-politics-47533500


“New findings from the New York Federal Reserve reveal that millennials have now racked up over US$1 trillion of debt.

“This troubling amount of debt, an increase of over 22% in just five years, is more than any other generation in history. This situation may leave you wondering how millennials ended up in such a sorry state.”

https://www.businessinsider.com/millennials-1-trillion-debt-more-than-any-other-generation-in-history-2019-3?r=US&IR=T


“The whole world went on a corporate debt spree. What with low interest rates it was a no-brainer. In the U.S., much of that cheap money went to buying back stock to leverage earnings; a move that will look stupid when companies most need cash to survive the greatest shake-out of our lifetimes during the next several years…

“…consumer credit – cards and car loans – are up 53% [since 2009]. And a subprime auto credit crisis is rearing its ugly head, with defaults a major – and growing – concern.”

https://www.fxstreet.com/analysis/were-overdosing-on-the-debt-opioid-201903112250


Two key bond trends are nearing levels last seen during the financial crisis, signalling a recession could be on the cards.

“The spread between the 2-year and 10-year US treasury bonds, known as the yield curve, has narrowed to just 17 basis points, its lowest level since June 2007. Further declines would result in an inverted yield curve, with the 2-year bond trading higher than the 10-year bond. An inverted yield curve has preceded every recession in the past 60 years.”

https://www.businessinsider.com/us-yield-curve-and-european-bonds-are-close-to-crisis-levels-2019-3?r=US&IR=T


“Quantitative easing does not work and central banks should be prohibited from using it, Raghuram Rajan, a former chief economist at the International Monetary Fund, has said.

“Mr Rajan, seen as a potential successor to Mark Carney as governor of the Bank of England, said it was his “strong conjecture” that QE “works by depreciating the exchange rate [and] stealing demand from other countries”. In doing so, it inflames international tensions without generating growth. “I think this should be off the table,” Mr Rajan said.”

https://www.thetimes.co.uk/edition/business/central-banks-need-to-ease-up-on-qe-warns-the-man-who-anticipated-crisis-0ln7sgcw0


“The primary source of systemic risk outlined in the Cambridge report stems from rising global temperatures and untenable losses to insurers as a result. For example, the authors warn that if climate change is left unchecked, the world will witness the tripling of catastrophic losses on property investments over the next 30 years.

“While this is a shocking and extremely disturbing finding, there are other equally troubling ways that the intersection of insurance and climate change could produce global financial systemic risk. That’s due to the transformation of risk into securities which are then sold to capital market investors.”

https://phys.org/news/2019-03-echoes-climate-global-financial-crisis.html


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

Economy 11 March 2019 Turkey Enters Recession

“The Turkish economy contracted a sharper than expected 3.0 percent in the fourth quarter of 2018, its worse performance in nearly a decade, in the clearest sign yet that last year’s currency crisis is tipping it into recession.

“Turkey, a major emerging market once seen as a star performer by international investors, achieved growth of more than 7 percent in 2017. But last year it was battered by a 30 percent slide in the value of the lira.

“The year-on-year quarterly contraction compared with a median forecast of a 2.7 percent decline in a Reuters poll, and it was the worst performance since 2009.”

https://uk.reuters.com/article/us-turkey-economy-gdp/turkish-fourth-quarter-gdp-contracts-3-percent-worst-performance-in-nine-years-idUKKBN1QS0MT


Mexico slowdown threaten’s Lopez Obrador’s honeymoon:

“Manuel León gazed longingly at a big-screen television in a Mexico City department store. “I’m only spending on the necessary — food and rent. For a luxury like a TV, this isn’t the time.” It is a common complaint.”

https://www.ft.com/content/302b372a-3f05-11e9-b896-fe36ec32aece


“Furious Venezuelans lined up to buy water and fuel on Sunday as the country endured a fourth day of a nationwide blackout that has left already-scarce food rotting in shops, homes suffering for lack of water and cell phones without reception.

“Authorities have managed to provide only patchy access to power since the outage began on Thursday in what President Nicolas Maduro called an act of U.S.-backed sabotage…”

https://uk.reuters.com/article/uk-venezuela-politics/nerves-fray-tempers-flare-as-venezuela-blackout-hits-fourth-day-idUKKBN1QR0MM?il=0


“China has an inflation problem. It’s too low and likely to get lower still. The slowing pace of consumer price increases isn’t sexy like a bad purchasing managers’ number, a collapse in car sales or a stock-market swoon.

“Lowflation tends to happen slowly. That doesn’t make it less of a concern. Once it gets hold of an economy, it can be devilishly tricky to shake.”

https://www.bloomberg.com/opinion/articles/2019-03-11/china-s-inflation-problem-it-s-too-low-and-going-lower


“Weaker-than-expected Chinese loan and money supply data raised expectations of further action to spur the slowing economy. The 885.8 billion yuan ($132 billion) in new loans in February was below forecasts and much lower than the 3.23 trillion yuan in new lending in January.”

https://www.marketwatch.com/story/asian-markets-mixed-as-worries-of-a-global-slowdown-accelerate-2019-03-10


“China’s automobile sales fell 13.8 percent in February from the same month a year earlier, the country’s biggest auto industry association said on Monday, marking the eighth consecutive month of decline in the world’s largest auto market.

“The China Association of Automobile Manufacturers (CAAM) said sales fell to 1.48 million vehicles. That followed declines of 16 percent in January and 13 percent in December.”

https://uk.reuters.com/article/uk-china-autos/china-auto-sales-fall-14-percent-in-february-mark-eighth-month-of-decline-idUKKBN1QS0LS


“Downing Street has described the Brexit talks in Brussels as “deadlocked” after negotiations over the weekend failed to find a breakthrough on the Irish backstop.

“Theresa May and Jean-Claude Juncker, the European commission president, spoke on the telephone on Sunday evening, but plans for the prime minister to visit the Belgian capital to sign off on any compromise are on hold.”

https://www.theguardian.com/politics/2019/mar/11/brexit-talks-deadlocked-says-downing-street


“February saw the 15 consecutive month of footfall decline, and suffered a deeper plunge than the previous year when footfall was down 0.2 per cent, British Retail Consortium (BRC) and Springboard figures showed.”

http://www.cityam.com/274428/february-retail-footfall-hits-five-year-low


“Beneath the headline figures showing a strong British labour market, the ebb and flow of jobs and businesses being created and destroyed is showing a pattern associated with the onset of recession, research suggested on Monday.”

https://uk.reuters.com/article/uk-britain-economy-jobs-recession/pre-recession-signals-lurk-in-uk-jobs-data-research-idUKKBN1QS007


“German industrial production dropped in January, missing forecasts, and exports were flat, a sign that Europe’s largest economy continues to flounder.

“The Federal Statistical Office, Destatis, said Monday that total industrial output–comprised of output in manufacturing, energy and construction–declined 0.8% from the month before. The outcome misses economists’ forecast of a 0.4% gain.”

https://www.marketwatch.com/story/german-industrial-output-drops-in-january-2019-03-11


“Extraordinary efforts by the U.S. Federal Reserve to foster an economic recovery from the financial crisis through asset purchases and rock-bottom interest rates have provided essential support for the market during its bull run.

“Sweeping corporate tax cuts passed by President Donald Trump fueled market gains for much of 2018, before a steep sell-off starting in September that raised fears the bull run was coming to the end.”

https://uk.reuters.com/article/usa-stocks-bull/rpt-wall-streets-oldest-ever-bull-market-turns-10-years-old-idUKL1N20V1RJ


“It wasn’t supposed to be this way. Zero per cent interest rates and trillions of dollars of cash injections were supposed to be a temporary fix, a massive jolt to the heart of capitalism to revive the global economy. The problem is that no-one has figured out how to remove the medicine, how to unwind the stimulus without causing a major downturn and economic chaos.”

https://www.abc.net.au/news/2019-03-11/global-economy-blew-up-interest-rates-reserve-bank/10887958


“Federal Reserve Chairman Jerome Powell said on Sunday the U.S. central bank does “not feel any hurry” to change the level of interest rates again as it watches how a slowing global economy affects local conditions in the United States. Rates are currently “appropriate,” Powell said in a wide-ranging interview with CBS’s 60 Minutes news show in which he called the current rate level “appropriate” and “roughly neutral,” meaning it is neither stimulating or curbing the economy.”

https://www.euronews.com/2019/03/11/powell-fed-not-in-any-hurry-to-change-rates-amid-global-risks


“The US economy has seen the biggest one-month surge in recession risk in three decades as consumers start to buckle under higher credit costs, top economists have warned.

“The probability of a contraction in the US has jumped to 73pc from 24pc in December, a model by UBS has revealed. The sudden surge was driven by a collapse in spending on durable goods such as cars, furniture and kitchen appliances, the “strongest recession predictive power”, it said.”

https://www.telegraph.co.uk/business/2019/03/09/us-economy-faces-real-risk-recession/


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