martes, 2 de diciembre de 2014

martes, diciembre 02, 2014
Economy

Fresh Signs of a Global Slump Pose a Challenge to U.S.

Low-Growth Outlook Raises Questions Whether Weak Demand Could Dent American Economy

By Nick Timiraos in New York, Brian Blackstone in Frankfurt and Takashi Nakamichi in Tokyo

Updated Nov. 28, 2014 7:51 p.m. ET

Indian economic growth slowed in the third quarter; workers make wind turbine blades at a manufacturing facility in the village of Paddhar.Indian economic growth slowed in the third quarter; workers make wind turbine blades at a manufacturing facility in the village of Paddhar. Agence France-Presse/Getty Images


Economic prospects are flagging across Europe, Japan and big emerging markets such as India, a turn that presents fresh challenges to the relatively robust U.S. economy at a time when the world needs a dependable growth engine.

Multiple strands Friday pointed to slackening economic vitality across the globe.
In Europe, consumer prices rose in November at their slowest annual pace in five years, deepening fears the continent may be tipping toward deflation. In Japan, the core consumer-price index in October rose at its slowest pace this year.

In both places the fall in energy prices has clouded a concerted push by central banks to boost the inflation rate and stoke consumer and business confidence.

The picture in emerging markets isn’t much brighter.

Economic growth in India decelerated in the third quarter, according to government data released on Friday. Figures in Brazil showed Latin America’s biggest economy had edged out of recession in the third quarter, helped by government spending, but economists warned of potentially prolonged stagnation.

The low-growth outlook is raising questions over whether weak demand could wash onto U.S. shores in the coming months, even as American businesses and consumers benefit from falling gasoline prices heading into the holiday shopping season. America’s economy has grown steadily this year after a first-quarter contraction, and employers have added more than 200,000 jobs a month for nine straight months through October.

But consumer spending and business investment in the U.S. was muted in October, suggesting the U.S. might provide insufficient demand to help buoy other economies.

Cheaper energy stands to boost both the U.S. economy and those of other oil importers, including China, by offering what amounts to a tax cut to businesses and consumers.

But in Europe, “problems go well beyond oil,” said Joel Naroff, president of Naroff Economic Advisors, an economic forecasting firm in Holland, Pa. “But the better off the U.S. is, the better off Europe is going to be. So would we rather see oil at $70 a barrel instead of $100? The answer is absolutely yes, and so would Europe.”

Economists at Oxford Economics estimated in a report Friday that oil prices at around $60 a barrel over the next two years would offer “a significant strengthening” of economic growth “for most of the major advanced and emerging economies.”

Growth could rise by 0.4 percentage point in China and the U.S. above current expectations, they said. Lower energy costs could also raise growth by 0.1 to 0.2 percentage point in Europe and Japan.

At the same time, falling inflation expectations were likely to strengthen the existing bias by central banks to ease money supplies, said economists at Barclays, providing added fuel to economies alongside lower energy prices.

The U.S. economy is better insulated from a downturn in global growth because, among the world’s major economies, it is less reliant on overseas export demand. Exports account for only about 14% of U.S. gross domestic product, —the lowest for any developed nation—and well below the 51% for Germany or 26% for China, according to the World Bank.




Other reports Friday confirmed a grim outlook for much of the eurozone’s $13.2 trillion economy, the world’s second largest after the U.S.

Unemployment across the region rose by 60,000 last month, keeping the unemployment rate at 11.5%, according to the European Union’s statistics agency Eurostat. Consumer spending fell in France and Spain. Retail sales also fell in Italy, where the jobless rate stood at 13.2%, the highest since 1977.

The benefits for Europe’s economy of cheaper oil are also diluted by the euro’s recent weakness against the dollar, which means Europeans have to pay a little more for dollar-denominated energy imports. The falling oil price this year has partly been a reflection of the fact that demand for energy in Europe, —one of the world’s biggest energy consumers, —has been weak, along with overall economic demand in Europe.

The eurozone “needs every bit of help it can get,” said Howard Archer, chief European economist at consultancy IHS Global Insight in London. “But it will need a lot more than an oil-price fall to help economic activity pick up in the eurozone,” he said.

Most analysts expect ultralow inflation to prompt the European Central Bank to purchase large amounts of government bonds in early 2015 to raise the money supply and further depress borrowing costs, following a route taken by central banks in the U.S., U.K. and Japan.

Commerzbank economists said Friday they expect eurozone inflation to hit zero by January.

“We will do what we must to raise inflation and inflation expectations as fast as possible,” ECB President Mario Draghi said last week.

Inflation in Japan is also moving further away from the Bank of Japan’s 2% target, a vital element of Prime Minister Shinzo Abe ’s efforts to defeat deflation, which is raising some economists’ expectations that the central bank will again expand its monetary easing program.

Cheaper energy prices usually offer relief for an economy—such as Japan’s—that has slipped into recession and is struggling with weak consumer spending. But Japan’s central bank is focused on stoking inflation, and changing the public’s “deflationary mind-set.”

The Japanese economy showed signs of life last month, after contracting during the previous two quarters, a common definition of recession. Industrial output improved modestly, surprising economists by rising 0.2% from a month earlier, adjusted for seasonal variations, according to data released Friday.

The labor market also offered some good news for Mr. Abe, who called a general election scheduled for Dec. 14. The unemployment rate in October fell to 3.5%, down from 3.6% in September.

In India, gross domestic product grew 5.3% from a year earlier during the three months ended September, a retreat from the 5.7% annual growth posted in the prior quarter and a departure from its recent past of headier growth.

Starting in 2003, India’s economy grew 8% a year on average for nearly a decade, lifting millions out of poverty and creating a generation of young people with middle-class aspirations.

The abrupt end of those halcyon years stirred voters’ perceptions that India’s previous government was inept and corrupt, helping to vault Prime Minister Narendra Modi into office this spring.

Half a year later, hopes for a turnaround in Asia’s third-largest economy are running high. But a series of largely incremental steps by Mr. Modi has yet to cause the Indian economy to get humming again.

The second quarter’s jump was an aberration, said Glenn Levine, senior economist at Moody’s Analytics. Exports and fixed investment, both growing from a low base a year earlier, had propelled an earlier uptick. “Neither of those looks sustainable,” Mr. Levine said.

Brazilian economy, meanwhile, expanded 0.1% in the third quarter, according to official figures released on Friday. That ended the technical recession that Brazil suffered in the first half of the year.

But the figure fell short of the 0.25% median estimate of 12 economists surveyed by The Wall Street Journal. Compared with the third quarter of 2013, when the economy shrank by 0.2%.

“The economy at least escaped the recession, but the stagnation is very deep,” said Newton Rosa, chief economist at São Paulo-based asset management firm SulAmérica Investimentos. “We are in a low-growth trap.”

Brazil’s economy was hampered in the third quarter by consumer spending, which declined 0.3% from the previous three months. That was the biggest drop since late 2008, when Brazil was suffering the effects of the global financial crisis.

Unlike 2008, though, economists say the problems facing Brazilian consumers now are mostly homegrown. Families that borrowed to help finance a recent consumption boom are now struggling to pay down their debt in an environment of high rates of inflation and interest rates.


—Raymond Zhong and Paul Kiernan contributed to this article.

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