United States:
Krugman Sees Possible U.S. Recession With Little Fed Wiggle Room
Nobel laureate Paul Krugman said the U.S. economy may be heading into a recession at a time when the Federal Reserve doesn’t have the firepower to properly combat a slump. “There seems to be an accumulation of smaller problems and the underlying backdrop is that we have no good policy response,” he said in a Bloomberg Television interview in Dubai. The headwinds facing the economy prompted the Federal Reserve to this month to halt its interest-rate hiking cycle, which Krugman said was never “grounded in the data” to begin with. “Continuing to raise rates was really looking like a bad idea,” he added. Krugman isn’t alone in seeing a gloomy outlook for the world’s biggest economy. U.S. chief financial officers in a Duke University survey published in December overwhelmingly said they expect a recession within two years. “I wouldn’t be as definitive, but it seems pretty likely,” Krugman said. While Krugman doesn’t expect a crisis of the magnitude of 2008, he said policy makers in Washington would struggle to contain large shocks. The economist, a vocal critic of the Trump administration, said it was hard to see the U.S. leadership “respond in any kind of a nimble way.” “We’re clearly in worse shape,” he said, citing lower public debt in 2008 and “lots of room” to lower interest rates back then. “And we came into the last crisis with pretty remarkable leadership.” “Let’s put it this way, our current Treasury Secretary is no Hank Paulson,” he said.
Europe:
EU Kicks Off ECB Board Debate as Irish Candidate Goes on Tour
Philip Lane is about to secure his appointment to one of the European Central Bank’s most influential positions. The 49-year-old head of the Irish central bank is the only candidate to replace ECB Chief Economist Peter Praet. Euro-area finance ministers are set to discuss his nomination Monday, before approving it on Tuesday. That day, Lane will address a closed luncheon at the Hong Kong stock exchange, before returning to his native Dublin on Wednesday for a European Financial Forum event organized by the Financial Times. The Harvard-trained economist is no stranger to the realm of global finance, regularly attending events such as the International Monetary Fund meetings. But since he emerged as a candidate for promotion, Lane has gradually raised his number of public appearances — especially across Europe — according to a tally provided to Bloomberg by his central bank. In 2018 he delivered 20 official public speeches in at least seven different countries. During Tuesday’s meeting of finance ministers, Lane will need the support of at least 14 of the currency bloc’s 19 member states representing at least 65 percent of region’s population. Governments will then make the final appointment when EU leaders gather in Brussels for a summit in March, after consultations with the European Parliament and the Governing Council of the ECB. Praet’s eight-year term on the Executive Board in Frankfurt ends on May 31. Lane will be Ireland’s first representative on the board.
Asia:
China’s Holiday Spending Slows, Underlining Tough Start to 2019
The downward pressure on China’s consumption persisted over the Lunar New Year holiday, the annual festival when people travel, shop, and give gifts or money. People in China spent 1.01 trillion yuan ($149 billion) at restaurants, shopping malls and online outlets over the the week-long holiday, according to the Ministry of Commerce. That was 8.5 percent higher than during last year’s festive period, but the slowest increase since at least 2011. Increasingly frugal Chinese consumers are sending chills through global investors, with the pullback in spending hitting the profits of companies such as Apple Inc., Swatch Group AG and luxury car makers. Weaker growth, the trade war with the U.S., and a crackdown on debt all undercut momentum in 2018, sending auto purchases into contraction for the first time in almost three decades and retail sales growth to the slowest pace since 2002. “We believe household consumption will likely be sluggish, ” wrote Lu Ting, chief China economist at Nomura Holding Inc., citing the quick buildup of household debt, lackluster income growth outlook amid the economic slowdown and the cooling property sector. “We expect the government to rely more on infrastructure investment to stabilize economic growth, but it may take time for infrastructure investment projects to start.” Spending at tourist venues rose 8.2 percent to 513.9 billion yuan, the state broadcaster CCTV reported, citing data from the Ministry of Commerce, slower than the 12.6 percent rise last year. Domestic box office revenue was 1 percent higher than in 2018, according to a report in The Paper, which cited statistics from a cinema ticketing service platform of Alibaba Pictures.
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