US economists more pessimistic, citing trade as major risk: survey

President Donald Trump’s grinding trade war with China and increasing tensions with Europe are stoking fears about the health of the US economy. (AFP)
Updated 07 October 2019

US economists more pessimistic, citing trade as major risk: survey

  • Nearly half of panel surveyed by the National Association for Business Economics expect a recession before the end of next year
  • Growth expected to fall below 2 percent for the first time since 2016, the survey shows

WASHINGTON: Economists have become more concerned about US growth prospects, citing trade friction as the major worry, but recession risks have receded slightly, according to a survey released Monday.
Nearly half of the panel surveyed by the National Association for Business Economics expect a recession before the end of next year, down from 60 percent in the prior survey.
The panel expects the world’s largest economy to slow, with growth falling below 2 percent for the first time since 2016, the survey showed.
Recent data have shown the US labor market remains strong, but manufacturing is in recession while the larger services sector is slowing, giving rise to fears about the health of the US economy, especially amid President Donald Trump’s grinding trade war with China and increasing tensions with Europe.
The NABE panel “turned decidedly more pessimistic about the outlook over the summer, with 80 percent of participants viewing risks to the outlook as tilted to the downside,” said Gregory Daco, the group’s survey chair and chief US economist at Oxford Economics.
“The rise in protectionism, pervasive trade policy uncertainty, and slower global growth are considered key downside risks to US economic activity,” he said in a statement on the findings in the quarterly survey.
Looking further out, 69 percent of the panel expects a recession by mid-2021.
The Federal Reserve has cut interest rates twice this year and many market analysts expect more stimulus to be announced later this month, but the NABE panel was less convinced.
Daco said over 40 percent anticipate at least one more rate cut this year, while three-quarters of respondents expect at least one rate cut by the end of 2020.
The median forecast by the panel is for growth of 2.3 percent this year, slowing to 1.8 percent next year after 85 percent of the panel cut their real GDP projections.


Crude prices surge as OPEC+ agrees to extend cuts

Updated 06 June 2020

Crude prices surge as OPEC+ agrees to extend cuts

  • The eagerly awaited gathering comes as oil exporters globally are hurt by low prices

DUBAI: Crude oil prices on Friday surged on international markets after the OPEC+ alliance, led by Saudi Arabia and Russia, reached a deal to continue supply limits at their present historic level.

After a week of negotiation, a virtual meeting of the Organization of the Petroleum Exporting Countries (OPEC) was expected to take place on Saturday to formally seal the agreement to keep combined cuts at 9.7 million barrels per day (bpd) for at least another month.

Last-minute worries about Iraq, which had held out over committing to its share of the cuts, were overcome with a pledge by Baghdad to stick to the agreed limits and to make up any shortfall in the coming months, according to an official from one of the OPEC delegate countries.

In a speech in Washington, D.C., US President Donald Trump praised the work of OPEC+ in rebalancing the oil market. “We saved that industry (US oil) in a short period of time, and you know who helped us? Saudi Arabia and Russia and others. We got them to cut back substantially,” he said.

The deal struck in April to cut an unprecedented 9.7 million bpd, reinforced by an extra 1 million bpd voluntary cut by Saudi Arabia and smaller amounts by the UAE and Kuwait, has been credited with pulling global oil markets back from the brink of collapse.

Brent crude, the global benchmark, jumped nearly 6 percent in European trading, to stand above $42 per barrel. Oil prices have more than doubled since “Black Monday” on April 20, when West Texas Intermediate (WTI), the American benchmark, fell briefly into negative territory largely because of trading technicalities.

WTI was trading at more than $39 on Friday, raising the possibility that some of the US production lost due to well shut-ins and corporate failures might come back onto the market.

Saudi Energy Minister Prince Abdul Aziz bin Salman was due to address the OPEC+ meeting in his capacity as co-chairman of the joint ministerial monitoring committee (JMMC).

“The conditions right now warrant hopefully successful meetings. Coordination is under way to hold OPEC and OPEC+ meetings tomorrow afternoon,” Prince Abdulaziz bin Salman was quoted as saying by Reuters.

According to an official, the prince was expected to stress the need for vigilant monitoring by OPEC+ of supply limits.

UAE Energy Minister Suhail Al-Mazrouei, urged producers to improve their compliance with agreed cuts.

“As a representative of the UAE, I find it disappointing and unacceptable that some of the largest producers with capacity like (Saudi Arabia) and Russia comply 100 percent or more while other major producers do less than 50 percent,” he wrote in the letter seen by Reuters.

Iraq and Nigeria have been regarded as the biggest laggards on compliance in the OPEC+ partnership, both arguing that their financial needs required them to sell as much oil as possible. Last week Nigeria indicated its willingness to adhere to the limits.

Wrangling with Iraq continued into Friday until a breakthrough was finally reached, and Baghdad promised to abide by the terms of the original deal and stick to compliance agreements.

Monthly meetings of OPEC’s JMMC will take place until the end of the year to monitor compliance levels among OPEC+ countries, and to assess the overall state of the market.

There has been no decision as yet on whether Saudi Arabia and other Gulf countries will continue the extra 1 million bpd cuts, which could expire at the end of this month.

Oil-market sentiment was also lifted by a surprise fall in American unemployment, taken as a sign that the US economy could recover more strongly than expected.

Global oil exporters have come under intense pressure this year as the pandemic stifles the beginning of a recovery in energy investment that had started to materialize.

At the start of the year, global energy investment was expected to rise 2 percent in 2020, its biggest growth in six years, the International Energy Agency (IEA) had predicted. Instead, the Paris-based organization now expects global investment in energy to plunge by 20 percent this year — the equivalent of $400 billion.

 

(With Reuters)