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Friday 16 august 2019

Weak global growth likely to mean US slowdown, not recession

AP Business Writers appear to be either in a re-
WASHINGTON (AP) — How cession or on the verge of
fragile is the global econ- a downturn, said Joe Bru-
omy? The U.S.-China trade suelas, chief economist for
war is weakening business- the consultancy RSM. The
es in both countries, Ger- best possible boost for U.S.
many's economy shrank in factories would be if Trump
the second quarter, and pulled back on trade
Britain appears headed for hostilities with China and
a disruptive exit from the achieved a trade deal,
European Union this fall. Brusuelas said.
Those trends have ham- "Right now, the recession
mered American manufac- risks are more policy-driv-
turers and caused global en, and if policy does not
financial markets to plunge change or the trade and
on fears that the world's finance war with China
largest economy could slip escalates, then the manu-
into a recession. facturing recession will
Yet most analysts expect become a broader and
the U.S. economy to power deeper contraction that
through the rough patch, threatens to spill over into
at least in the coming other areas of the econo-
months, on the strength of my," he said.
solid consumer spending Trump, who promised vot-
and a resilient job market. In this Tuesday, March 5, 2019, file photo, an employee in protective clothing works with a steel ers a manufacturing renais-
The U.S. stock market plum- pouring ladle during a guided media tour at the steel producer Salzgitter AG in Salzgitter. sance, has yet to acknowl-
meted earlier this week edge the sector's bleak
when the bond market, pand much more slowly consumers aren't fretting in turn, pummeled Ger- condition.
spooked by the global tur- in the coming months. The about bond yields. Sales at many's economy, because "We're restoring the glory of
moil, sent a possible early shift has preceded at least U.S. stores and restaurants Germans export industrial American manufacturing,"
warning sign of a recession the last five U.S. recessions, jumped in July by the most equipment to China. Ger- the president said Tuesday
ahead: The yield on the though as much as two in four months. Online sales many's economy actually in Pennsylvania, a state
benchmark 10-year Trea- years can pass before a re- soared to their best show- shrank in the second quar- that has lost 5,600 factory
sury note slipped briefly be- cession actually hits. ing since January. Spend- ter. jobs so far this year.
low 2-year Treasury yields. Still, most economists were ing at restaurants is a sign Other global headwinds In fact, many economists
That is an unusual shift that buoyed by a robust retail of confidence, given that remain a threat. Simon say they're nervous that the
indicates investors expect sales report Thursday that most people eat out when MacAdam, global econo- government has fewer op-
the U.S. economy to ex- suggested that American they feel they have money mist at Capital Econom- tions to juice the economy
to spare. ics, said the chances of a than it has in the past. The
"With the rest of the world "no-deal" Brexit have risen short-term interest rate that
sliding into the abyss, the sharply since Boris Johnson the Fed controls is barely
July retail sales figures show replaced Theresa May as above 2%, giving it far less
a resurgent U.S. consumer British prime minister last room to stimulate growth
riding to the rescue," said month. Johnson "is dead in the event of a downturn.
Michael Pearce, senior U.S. keen on leaving the EU" by Before the Great Recession
economist at Capital Eco- Oct. 31, the deadline for in 2007, the Fed's rate was
nomics, a consulting firm. any deal, MacAdam not- more than twice that level.
If anything, it's the Trump ed. And the widening budget
administration's trade war An abrupt exit would deficit, on track to hit $1 tril-
that has been harming the most likely lower the Brit- lion by 2022, also leaves the
world economy. President ish pound, raising inflation government with little room
Donald Trump has imposed and cutting into British con- to maneuver.
25% tariffs on $250 billion of sumer spending. Supply "It is very uncharacteristic
imports from China, along chains for British manufac- — very unusual — to be
with duties on most steel turers and retailers would running larger budget defi-
and aluminum imports. He also probably be disrupted cits every year," said Tim
has also threatened to hit as the country reinstates its Quinlan, an economist at
the remaining $300 billion customs procedures. Wells Fargo. "The federal
worth of Chinese imports One of the U.S. economy's government is not in a very
with 10% tariffs, though he biggest weak spots is man- strong position to offer a fis-
has delayed that increase ufacturing, which is suffer- cal response in the event
on about half of those ing from the trade war and that it's needed."
items to avoid raising prices global growth strains. Fac- Consumers could also pull
for U.S. holiday shoppers. tory output has sunk over back on spending later
Still, the tariffs — and Bei- the past 12 months. Manu- this year if hiring slows and
jing's retaliatory duties on facturing job growth has wage gains slow. Employ-
$110 billion of U.S. goods tapered off during the past ers have already reduced,
— have dragged down year. Surveys of manufac- on average, the number
China's growth to its slowest turers indicate that the un- of hours worked for em-
pace in 26 years. That slow- certainty from tariffs is hurt- ployees in the second
down in the world's sec- ing their businesses. quarter, which cuts into
ond-largest economy has, American manufacturers paychecks.q