November 4, 2019
United States:
Trump’s Re-Election Likely If Economy Stays on Course
“An enduring U.S. expansion puts President Donald Trump on course to win re-election in 2020, according to economic models with a track record of predicting who wins the White House. The forecasts from Yale University professor Ray Fair, Oxford Economics Ltd. and Moody’s Analytics Inc. are based on Trump being boosted at the ballot box by steady economic growth, an historically tight labor market and limited inflation. Such an outlook justifies Trump’s push to harness what he’s called the “greatest” economy to return him to power a year from Sunday. It challenges some opinion polls which show his disapproval rating hovering near 54% amid an impeachment inquiry and polarized politics. The economy expanded at a 1.9% pace in the third quarter and unemployment is close to its lowest in a half-century, government data showed last week. While manufacturing has been hurt by the U.S.-China trade war, consumers continue to spend in a sign voters are still confident about the economy. A Bloomberg Economics model sees the chances of an election-year recession at just 27%. The electoral models are fallible. They have erred in some past presidential cycles and most don’t take account of non-economic influences such as scandals or policy which may come to the fore as Trump seeks another term. They also assume the White House incumbent is credited with the economy’s performance which may not be the case if voters zero in on the effects of the trade war Trump is waging or relatively slow growth in middle class incomes. “We stress that non-economic factors are likely to play an outsize role in this election, including policy and political developments (such as the impeachment inquiry) as well as factors like race, gender and ‘likability’,” Gregory Daco and James Watson, economists at Oxford Economics, wrote in an October report.”
Europe:
Euro-Area Factories See Slump Worsen Amid Weak Global Demand
“Euro-zone manufacturing remained near the weakest in seven years last month, a poor start to the final quarter that raises pressure on the region’s governments to add fiscal stimulus to insulate the region from a worsening global slowdown. Factories from China to the U.S. are suffering from flagging demand. While a Purchasing Managers’ Index for the 19-nation euro region rose slightly, it shows the sector firmly in contraction. Job losses accelerated and order books deteriorated. Germany with its export-reliant industry continued to be the principal source of frailty. Italy, Spain and Austria all also weakened. “The goods-producing sector is on course to act as a severe drag on GDP again in the fourth quarter,” said Chris Williamson, chief business economist at IHS Markit. “Geopolitical concerns, ranging from Brexit to U.S. trade policy, continue to create uncertainty.” Investors nonetheless sent encouraging signals in November. A gauge for economic expectations rose to the highest level in six months, suggesting the euro area may be able to avert a deeper crisis. It’s still a long route to recovery though. An index of the outlook for China’s industry dropped in October to the lowest level since February, signaling continued contraction. Factory activity in the U.S. trailed estimates and indicated the sector shrank for a third straight month, with the weakest production level since the last recession. In the euro area, jobs were cut at the fastest pace since the start of 2013, a trend IHS Markit called “especially worrying” as it increases the risk that the downturn will spill over to households. Incoming new factory orders fell “sharply,” and demand was weak across both domestic and international markets. Services, which make over 70% of the euro-area economy, have so far proven relatively resilient. While sectors such as health care and education are generally largely immune to cyclical swings, others including transportation or technology would be among the first to suffer. “So far, there has been little sign that weaker demand has affected business services, although recent survey data point to a slowdown in growth,” the European Central Bank said in an article published Monday. Developments “need to be monitored closely in coming months for signs of spillovers from the manufacturing slowdown.” The ECB and the International Monetary Fund have urged governments to step up spending. President Mario Draghi made a last call for fiscal stimulus as he ended his term last week, and his successor Christine Lagarde is widely expected to continue the effort. The central bank rolled out a contentious new monetary stimulus package in September in an attempt to revive growth and inflation.”
Asia:
Asean Leaders Snub U.S. Summit After Trump Skips Bangkok Meeting
“Most Southeast Asian leaders skipped a summit on Monday with U.S. representatives after President Donald Trump decided to avoid the annual meetings for a second straight year. Leaders from Thailand, Laos and Vietnam were the only ones to show up from the 10-member Association of Southeast Asian Nations for the summit with National Security Adviser Robert O’Brien, who was leading the U.S. delegation. It was the lowest level representation for the U.S. at the meetings since Barack Obama upgraded ties with Asean in 2011. In remarks at the summit, O’Brien said the U.S. must defend its relationship with Asean at all costs. He read aloud a letter from Trump inviting regional leaders to join him in the U.S. for a special summit. The three leaders who attended included Prayuth Chan-Ocha of Thailand, the current chair of Asean; Thongloun Sisoulith of Laos, the coordinator between the bloc and the U.S.; and Nguyen Xuan Phuc of Vietnam, which will host the Asean meetings in 2020. Thai foreign ministry spokeswoman Busadee Santipitaks confirmed the other leaders stayed away. Video from the event showed seven foreign ministers sitting at a table usually reserved for prime ministers. Santipitaks’ statement came after a reporter questioned why only three leaders were in attendance. The U.S. had expressed concern to Asean diplomats about the “intentional effort to embarrass” Trump with the partial boycott, the Bangkok Post reported, citing an unidentified diplomat. “We are extremely concerned by the apparent decision,” the diplomat quoted a U.S. message to the bloc as saying, according to the newspaper. Commerce Secretary Wilbur Ross, who is also in Bangkok, defended U.S. strategy in Asia on Monday. He said Trump remains “fully committed” to the Indo-Pacific, citing 24 senior U.S. officials and eight government agencies represented at the meetings. “In terms of our participation here, it’s very, very fulsome,” Ross said in an interview. The U.S. and Asean made no immediate statements after the meeting. China sent Premier Li Keqiang — President Xi Jinping’s No. 2 — as it does every year. The three leaders who attended included Prayuth Chan-Ocha of Thailand, the current chair of Asean; Thongloun Sisoulith of Laos, the coordinator between the bloc and the U.S.; and Nguyen Xuan Phuc of Vietnam, which will host the Asean meetings in 2020. Thai foreign ministry spokeswoman Busadee Santipitaks confirmed the other leaders stayed away. Video from the event showed seven foreign ministers sitting at a table usually reserved for prime ministers. Santipitaks’ statement came after a reporter questioned why only three leaders were in attendance. The U.S. had expressed concern to Asean diplomats about the “intentional effort to embarrass” Trump with the partial boycott, the Bangkok Post reported, citing an unidentified diplomat. “We are extremely concerned by the apparent decision,” the diplomat quoted a U.S. message to the bloc as saying, according to the newspaper. Commerce Secretary Wilbur Ross, who is also in Bangkok, defended U.S. strategy in Asia on Monday. He said Trump remains “fully committed” to the Indo-Pacific, citing 24 senior U.S. officials and eight government agencies represented at the meetings. “In terms of our participation here, it’s very, very fulsome,” Ross said in an interview. The U.S. and Asean made no immediate statements after the meeting. China sent Premier Li Keqiang — President Xi Jinping’s No. 2 — as it does every year.”
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