Page 25 - ARUBA TODAY

BUSINESS Monday 26 august 2019
A25

As global economic picture dims, solutions seem out of reach

By PAUL WISEMAN enjoying a record-break-
DAVID McHUGH ing 10-year expansion, still
JOSH BOAK shows resilience. American
Associated Press consumers, whose spend-
WASHINGTON (AP) — As ing accounts for 70% of U.S.
global leaders gather on economic activity, have
two continents to take ac- driven the growth.
count of a darkening eco- Retail sales have risen
nomic outlook, this is the sharply this year, with peo-
picture they face: ple shopping online and
Factories are slumping, spending more at restau-
many businesses are para- rants. Their savings rates are
lyzed, global growth is sput- also the highest since 2012,
tering and the world's two which suggests consumers
mightiest economies are aren't necessarily stretch-
in the grip of a dangerous ing themselves thin.
trade war. But Trump's tariffs loom over
Barely a year after most of the U.S. economy. The im-
the world's major countries port taxes he plans to im-
were enjoying an unusual pose on China on Sept. 1
moment of shared prosper- and again on Dec. 15 are
ity, the global economy likely to hit Americans more
may be at risk of returning Tourists walk on the beach promenade as French police officers stand guard ahead of the up- than the earlier rounds of
to the rut it tumbled into coming G7 Summit in Biarritz, France, Saturday, Aug. 24, 2019. tariffs.
after the financial crisis of Associated Press Already, companies are
2007-2009. delaying investments be-
Worse, solutions seem ular, on whatever message this year — the weakest that bosses don't foresee a cause they don't know
far from obvious. Central Federal Reserve Chairman since 1990 — and just 6% pickup. where to put new facto-
banks can't just slash inter- Jerome Powell sends in a next year. Trump's trade In Europe's economic pow- ries, seek suppliers or find
est rates. Rates are already speech Friday in Jackson war is certainly a factor. erhouse, Germany, the customers until they have a
ultra-low. And even if they Hole. The president has imposed economy shrank 0.1% in better idea where the trade
did, the central banks The dour global outlook tariffs on $250 billion in Chi- the second quarter from disputes are going. "Un-
would risk robbing them- partly reflects U.S. President nese imports and is set to the quarter before. If out- certainty is high," said Eric
selves of the ammunition Donald Trump's combative tax nearly $300 billion more put should fall for a second Lascelles, chief economist
they would need later to trade conflicts with China before year's end. China's straight quarter, Germany at RBC Global Asset Man-
fight a recession. High gov- and other countries. A re- slowdown is also being or- would find itself in a reces- agement. "Businesses ev-
ernment debts make it po- alization has taken hold chestrated in part by the sion. erywhere are sitting on their
litically problematic to cut that Trump will likely keep officials in Beijing, who are Some of Germany's trou- hands." For all the gloom,
taxes or pour money into deploying tariffs — and trying to contain lending to bles originate closer to Lascelles said policymak-
new bridges, roads and in some cases escalating control the country's run- home. Major automakers ers aren't without options.
other public works projects. them — to try to beat con- away debts. have had to sink billions Even with short-term inter-
"Our tools for fighting reces- cessions out of trading part- And an economic chill in into technology to meet est rates near zero, central
sion are no doubt more lim- ners. China sends shivers into stricter emissions tests. BMW banks can aggressively
ited (than) in the past," said "The trade uncertainty is the many countries — from lost money on its car busi- buy bonds to pump money
Karen Dynan, an econo- here to stay," said Madhavi copper-producing Chile to ness for the first time in a into the financial system —
mist at Harvard University's Bokil, senior credit officer at iron ore-making Australia — decade in the first quarter. it's what the Fed, ECB and
Kennedy School. Moody's. that feed Chinese factories Daimler posted its first net Bank of Japan did to revive
The International Monetary Squeezed by protection- with raw materials. loss since 2009 in the sec- growth during and after
Fund and the World Bank ism, global trade is likely to Then there's Europe. In ond quarter. the financial crisis.q
have downgraded the out- grow just 2.5% this year, its the 19 countries that use Brexit is another risk for Eu-
look for world growth. On slowest pace in three years, the euro currency, growth rope. Prime Minister Boris
Thursday, Moody's Inves- the IMF says. Manufactur- slowed in the second quar- Johnson says the U.K. will
tors Service said it expects ers, whose fortunes are ter to an anemic annual leave the 28-country Eu-
the global economy to closely tied to trade, are rate of 1.1%, or 0.2% from ropean Union and its free-
expand 2.7% this year and struggling. J.P. Morgan's the quarter before. The trade zone on Oct. 31, with
next — down from 3.2% the global manufacturing in- eurozone, which maintains or without a divorce deal.
previous two years. And it dex dropped in July for a close trade ties with the U.S. Not knowing what will hap-
issued a dark warning: Get third straight month, hitting and China, has been side- pen is a nagging source of
used to it. the lowest level since 2012. swiped by the collision be- uncertainty.
"The new normal will likely The global funk also re- tween Trump and President Facing such risks, the Euro-
continue for the next three flects the pull of gravity: Xi Jinping. And Trump has pean Central Bank has sig-
to four years," the credit rat- The economies of Europe threatened to impose sig- naled it could launch new
ing agency said. and Japan, fueled by cen- nificant tariffs on European monetary stimulus as early
Concerns are rising just as tral banks' easy-money auto imports. as next month. As recently
central bankers meet in policies, overexerted them- Even more than the tariffs, as December, the ECB had
Jackson Hole, Wyoming, selves a couple of years uncertainty over trade dis- been confident enough
and leaders of the Group ago and are now returning putes is chilling investment in the economy to halt a
of Seven advanced econ- to their more typical state: and purchasing. Despite nearly four-year, $2.6 tril-
omies gather this weekend Sluggishness. cheap borrowing costs lion-euro ($2.9 trillion) bond
in the resort town of Biarritz The IMF expects China's from central bank stimulus, purchase program. That
in southwestern France. A economy, the world's sec- investment in new plants is optimism has vanished.
spotlight will shine, in partic- ond-biggest, to grow 6.2% lagging, an ominous sign The U.S. economy, now