Global economy

German exports and industrial output fell sharply in April, triggering fresh fears that trade tensions and continued Brexit uncertainty are weighing on the global growth outlook. Industrial production in Europe’s largest economy fell 1.9%, which was the worst monthly fall in almost four years, according to Germany’s statistics office. It was much worse than the 0.4% decline forecast by economists. Exports fell by 3.7% in April compared with the previous month, while imports also fell. German industry, the powerhouse of the European economy, has suffered in the past year as trade tensions between the US and China have put the brakes on global trade growth. The German car sector, a major exporter, has also been hit by a decline in demand for vehicles in the EU and China. The export fall in April was in part driven by a sharp 8.7% year-on-year fall in exports to the EU’s non-eurozone economies – the largest of which is the UK. Exports to the UK fell by €1.6bn … [Read more...] about German trade decline raises fears over global economy

German industrial production has suffered its biggest annual decline in nine years after the escalating trade war between the US and China took its toll on exports. Europe’s economic engine, which has increasingly relied on exports to Asia to bolster factory output, was left teetering on the edge of recession in the second quarter after a 1.5% fall in industrial production in June, which is expected to be repeated in July. Output fell across the three months to June by 1.8% compared with the first quarter of the year, driven by steep drops in metal production, machinery and automobile manufacturing, the economy ministry said. “Industry remains in an economic downturn,” the ministry said. Production in construction fell 1.1% in the second quarter while energy output dropped 5.9% in the same period. Analysts blamed the slump largely on a decline in sales of machine parts and cars to China and the far east, where falling currency values have made imports more expensive. … [Read more...] about German recession fears after big decline in industrial production

The simmering trade tensions between the United States and China have threatened to spark a full-blown currency war after Beijing allowed the yuan to drop below a level it had previously defended with sustained vigour. China’s central bank allowed the yuan to sink below the sensitive seven-to-one dollar level for the first time since 2008 in what one expert called a “weaponisation” of the currency. In the wake of Monday’s news, Asian shares slumped to a six-month low. Beijing has consistently advocated the need for a higher yuan despite accusations from Donald Trump that it was deliberately keeping its currency low in order to flood America with cheap products. But Monday’s move suggests that Beijing does not see any prospect of reaching an agreement in its trade dispute with Washington in the light of the US president’s threat last week to impose more tariffs on Chinese goods. The currency weakened to 7.0240 by late Monday morning local time with … [Read more...] about China’s yuan sinks amid fears Beijing may give up on US trade talks

Neil Woodford was once the man with the Midas touch, the darling of the investor community. His record of picking winners was such that money flowed like torrents into his funds. As time went by, picking winners became more difficult and some of Woodford’s growth stocks turned out to be duds. A few eyebrows were raised. Eventually, as investors started to contemplate big losses, many of them asked for their money back. The demands for redemptions became so great that trading in Woodford’s flagship fund was suspended for 28 days. Or, to put it in old-fashioned terms, capital controls were imposed. If Woodford’s predicament sounds familiar, then it should. Picture a fast-growing emerging market economy that is proving a magnet for foreign investment. Office blocks, financed by overseas money, are going up everywhere in the capital city. The stock market is red hot because American, European and Japanese investors think the potential returns look a lot better than they … [Read more...] about Woodford’s demise illustrates the value of capital controls

If the president of the United States, a non-European, feels entitled to air his views about Brexit, I see no reason why the outgoing president of the European council, Donald Tusk – a much more agreeable Donald – should not air his. Quoting Hannah Arendt, Tusk said: “Things only become irreversible when people start to think so.” Tusk, who rightly thinks the very idea of Brexit is, to quote another US observer, Michael Bloomberg, “a mistake”, says: “Don’t give up.” The whole thrust of Boris Johnson’s and his ally (up to a point) Nigel Farage’s approach is to make people think the result of the 2016 referendum is “irreversible”. It isn’t. But it is important that Remainers should try to make a better fist of the advantages of EU membership than they have managed so far. The impression given by the hard-core “alt-right” is that we have been kicked around over the years by … [Read more...] about Brexit will make all the election spending promises hard to keep