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Wednesday, August 31, 2022

Russian economy shrinks 0.4% in H1 but capital investment rises - Financial Post

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MOSCOW — The Russian economy shrank 0.4% in the first six months of 2022 compared with a year ago but capital investment, one of the main economic growth drivers, rose 7.8%, data from the federal statistics service Rosstat showed on Wednesday.

The export-dependent economy is plunging into recession, hit by sweeping Western sanctions for what Moscow calls “a special military operation” in Ukraine. But the depth of contraction has so far been not as big as initially thought.

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In 2022, the economy will shrink by less than 3%, a top government official said this week. His call contrasts with the earlier assumption from the economy ministry that had warned of a drop of more than 12% – which would have been the biggest fall in economic output since the mid-1990s crisis following the collapse of the Soviet Union.

In the second quarter alone, capital investment rose by 4.1% year-on-year after a 12.8% increase in the first quarter, Rosstat data showed, with mining and manufacturing sectors accounting for the bulk of the increase in the first half of the year.

(Reporting by Andrey Ostroukh; Editing by Emelia Sithole-Matarise)

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Russian economy shrinks 0.4% in H1 but capital investment rises - Financial Post
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India’s Economy Grows at Fastest Pace in a Year in April-June - BNN Bloomberg

(Bloomberg) -- India’s economy expanded at the fastest clip in a year, fueled by domestic demand that may moderate in the face of rising borrowing costs and global slowdown.

Gross domestic product rose 13.5% in the April-June period from a year ago, data released by the Statistics Ministry on Wednesday show. That’s the quickest pace since the 20.1% growth in the same quarter last year and compares with the median forecast of a 15.3% increase in a Bloomberg survey of economists. 

The GDP print was underpinned by robust domestic demand in Asia’s third-largest economy, particularly in the nation’s vast services sector, helped by looser mobility restrictions. Investment during April-June increased 20.1% from a year ago while private consumption was up 25.9%, data show. Government spending rose 1.3%.

Growth in gross value added -- which strips out tax and subsidy transfer payments -- rose 12.7% from a year ago.

“Substantial statistical base effect apart, the strong growth print is also a reflection of pent-up demand following the exit from the Omicron wave,” said Kunal Kundu, an economist with Societe Generale GSC Pvt. But there are signs of waning intensity of “tailwind generated by economic reopening,” he said. 

India’s world-beating growth may be short-lived as the impact of a broader reopening wanes and the nation grapples with higher borrowing costs, elevated inflation and unemployment, and fears of a global recession.

“The GDP print was a mixed bag, largely a story of service sector rebound,” said Madhavi Arora, an economist at Emkay Global Financial Services Ltd. “Global drags in the form of still-elevated prices, shrinking corporate profitability, demand-curbing monetary policies and diminishing global growth prospects weigh on growth outlook.”

The central bank has raised the benchmark policy rate by 140 basis points in three rates moves since May and has vowed to do more to bring inflation under its 6% target ceiling. 

With the latest number India’s GDP has crossed pre-pandemic levels, Finance Secretary TV Somanathan told reporters in New Delhi. India is on course to achieve 7% growth in the current fiscal year, he said. 

What Bloomberg Economics Says...

“Looking ahead, we see the pace of recovery slowing further in the near term. The RBI’s rapid pace of rate hikes since April has resulted in a sharp rise in borrowing costs, while the slowing global economy is likely to hamper demand for domestic goods and services.”

-- Abhishek Gupta, senior India economist

For the full note, click here

(Updates with economist reaction in sixth paragraph)

©2022 Bloomberg L.P.

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India’s Economy Grows at Fastest Pace in a Year in April-June - BNN Bloomberg
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Denmark's Economy Expands Faster Than Previously Estimated - Bloomberg

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Denmark's Economy Expands Faster Than Previously Estimated  Bloomberg
Denmark's Economy Expands Faster Than Previously Estimated - Bloomberg
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B.C.'s economy recovered faster than expected in 2021-22 | BC Gov News - BC Gov News

The B.C. government releases Public Accounts every summer to provide people with an accounting of provincial revenues and expenses from the previous fiscal year. Public Accounts 2021-22 outlines the strength of B.C.’s economic resiliency and indicates that strong social supports do not come at the cost of prudent fiscal management.

Fiscal highlights

  • For calendar year 2021, the 6.2% growth in B.C. real gross domestic product (GDP) was better than the national average growth of 4.9%.
  • B.C.’s unemployment rate for 2021 reduced to 6.5%, continuing to be lower than the national rate of 7.5%.
  • Investments of $6 billion were made in taxpayer-supported infrastructure.
  • These investments continued while keeping taxpayer-supported debt affordable.
  • The Province’s taxpayer-supported debt-to-GDP ratio is the lowest in Canada at 17.9%. 
  • B.C.’s credit rating remains strong and is the best among provinces.
  • The Province’s strong rating keeps the cost of borrowing low.

Capital spending

The Province spent $6 billion on taxpayer-supported capital projects to build schools, roads, public transit and hospitals – an increase of $574 million from the 2020-21 fiscal year.

This includes:

  • $1.9 billion to build, upgrade and modernize kindergarten to Grade 12 and post-secondary schools;
  • $1.4 billion in B.C.’s transportation network; and
  • $1.6 billion on key health facilities.

Investing in capital infrastructure supports the needs of communities throughout the province while supporting economic recovery and a stronger B.C. Taxpayer-supported capital investments were $2.5 billion lower than budgeted due to a range of factors, such as supply chain delays and labour shortages associated with large projects currently in construction across all sectors. This highlights the effects of the COVID-19 pandemic and heavy rains in November 2021 on supply chains, as well as the need to ensure that the Province continues to invest in people and training, so skilled workers are available to meet demand.

Scheduling changes for 2021-22 do not represent a reduction in capital spending, which has been moved to future years within the provincial capital plan.

COVID-19 spending

Spending on pandemic and recovery programs totalled $3.8 billion in 2021-22:

  • Vaccines were available for all British Columbians.
  • Small and medium-sized businesses could pay their rent or continue to grow through the Business Recovery Grant program.
  • Businesses that had to let workers go during the COVID-19 pandemic were able to apply for the increased employment incentive grants to help hire staff and continue to recover.
  • Care homes could hire COVID-19 screeners to help keep residents safe without drawing on limited staff resources.
  • Help was available for the hardest-hit sectors, including $100 million to the tourism industry, allowing municipalities to adapt and diversify their tourism infrastructure, and to support local Indigenous tourism businesses.
  • Support was available for 14,000 restaurants, bars, breweries, wineries, gyms and fitness centres, with more than $50 million through Circuit Breaker Business Recovery Grants.

Alongside skills training, community infrastructure, CleanBC and supports for vulnerable populations, including meals and temporary housing, government also invested in services that were crucial to protect the health, safety and livelihoods of all British Columbians.

Top three expense areas

Total spending on programs and services in health, education and social services increased by $2.3 billion.

Health

  • Total spending of $27.6 billion.
  • A total investment of $2 billion more than previous year.
  • Health care accounts for about 40% of all spending.
  • Since 2015-16, spending on health care has increased by 44%.
  • Spent on salaries, healthauthority operating costs and pandemic recovery programs.

Education

  • $15.8 billion in education funding.
  • Spent on salaries, benefits and increased operating costs as programs resumed from pandemic.

Social services

  • Total spending of $7.3 billion.
  • Investments have grown from 8.7% of the overall spending in 2016-17 to 11.5% in 2020-21, which is when social supports, including COVID-19 programs, hit $7.8 billion.
  • Investment in these supports remains higher than pre-pandemic levels at $7.3 billion spent in 2021-22, compared to $5.9 billion in 2019-20.

Debt levels

When calculating provincial debt, the Province adds to its financial statement debt all debt guarantees and the debt directly incurred by self-supported Crown corporations, reduced by sinking fund assets. This balance is referred to as the total provincial debt.

Taxpayer-supported debt increased by $2.6 billion in 2021-22. This amount includes $4.1 billion to fund capital investments for future program delivery, while the operating debt was reduced by $1.5 billion.

Self-supported debt increased by $975 million, mainly for investments in power projects. The key measure of taxpayer-supported debt-to-GDP ended the year at 17.9%, significantly lower than the 22.8% forecast in Budget 2021.

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Tuesday, August 30, 2022

The Economy Is Sluggish But Poised To Return To Positive Growth - Forbes

As China’s property crisis grows, is the global economy at risk? - Al Jazeera English

China’s property market is in the midst of a slow-moving crisis.

Real estate prices have plummeted as authorities seek to rein in unsustainable debt and market speculation. Hundreds of thousands of homebuyers are refusing to pay their mortgages for pre-sold properties as developers struggle to complete housing projects on time.

With property accounting for 15-30 percent of China’s gross domestic product (GDP), the market’s woes spell trouble for the world’s second-largest economy – and potentially global growth as well.

Why is China’s property market in crisis?

China’s property troubles are, in part, the result of deliberate policy decisions. In August 2020, Beijing rolled out a “three red lines” policy aimed at carefully deflating a huge housing bubble that had been decades in the making.

The policy had twin goals: lessening the economy’s over-reliance on property and tamping down on speculation that had put house prices out of reach for many middle-class Chinese.

Under the policy, developers were required to meet strict markers of financial health, including a 100-percent cap on net debt to equity, to borrow from banks and other financial institutions.

Many developers, it turned out, had been operating far outside the “three red lines” and were saddled with enormous debts. Suddenly unable to borrow under the new rules, the sector was met with a severe cash crunch.

In December, Evergrande, one of China’s biggest developers, defaulted on interest payments due to its offshore bondholders, followed shortly after by Kaisa Group Holdings.

Property prices declined for an 11th-straight month in July and are down as much as 30 percent compared with last year.

“What China is experiencing right now is a policy-induced crisis,” Gabriel Wildau, the managing director of risk analysis company Teneo, told Al Jazeera.

“What I mean by that is, people have been warning about a housing bubble for many years, and for good reason, but the acute stress that the market is under right now is the direct result of very draconian restrictions on lending to developers that were imposed about a year and a half ago.”

Xi JIngping looks on before a meeting in Beijing
Chinese President Xi Jinping has sought to rein in China’s property sector, saying ‘houses are for living in, not for speculation’ [File: Lintao Zhang/Reuters]

The sector’s troubles have spiralled since then as cash-strapped developers have struggled to complete projects on schedule.

After beginning in the southeastern city of Jingdezhen earlier this year, protests by buyers of pre-sale properties have spread to almost 100 cities and grown to involve some 300 homeowners’ groups.

Deutsche Bank has estimated that the value of the mortgages affected by the boycotts amounts to 1.8 to two trillion Chinese yuan ($270bn-300bn), or about 5 percent of all mortgage lending.

“The crux of the problem is that property developers have insufficient cash flows – whether because of debt-servicing costs, low housing sales, or misuse of funds – to continue with projects,” Tommy Wu, the lead economist at Oxford Economics, said in a note earlier this month.

“Resolving this problem will rebuild homebuyers’ confidence in developers, which will help support housing sales and, in turn, improve developers’ financial health.”

Could this drive a global economic crash?

China’s property woes pose a substantial risk to its economy, which is already under strain due to Beijing’s harsh “zero-COVID” policies and slowing global growth. By some estimates, real estate accounts for 30 percent of GDP – about twice the equivalent share in the United States.

While some analysts believe the market has reached the bottom, the sector’s woes are expected to persist for some time. In July, S&P Global Ratings estimated that property prices would decline 30 percent this year – a worse decline than during the 2008 financial crisis.

“That’s just a huge chunk of the economy that’s kind of underwater now,” Teneo’s Wildau said. “Even continuing on the pace we are on is, I think, unsustainable. It would mean growth was substantially below target for this year if it continues like this.”

Since Chinese property developers hold relatively small amounts of overseas debt, the global economy is not considered to be at a high risk of the kind of financial crisis sparked by the collapse of Lehman Brothers in the United States, said Alicia GarcĂ­a-Herrero, the chief Asia Pacific economist at Natixis in Hong Kong.

But the size of China’s economy, which accounts for almost one-fifth of global GDP, means a major slowdown could still have a serious effect on global growth.

“The global impact is mostly due to very low growth from China, it’s not so much a financial impact,” GarcĂ­a-Herrero told Al Jazeera.

“Of course, if Chinese banks finally can’t swallow this shock and their non-performing loans increase massively and there’s a financial crisis in China – which I don’t think will happen immediately – it will be more like Japan in the 80s and 90s. So saddled with bad loans, no credit, the economy doing very poorly, deflation – this is, I think, the scenario. So not an immediate Lehman type event.”

The World Economic Forum has estimated that every 1 percentage-point decline in China’s GDP results in a 0.3 percent reduction in global GDP.

In a 2019 study by the United States Federal Reserve, economists estimated that an 8.5 percent fall in China’s GDP would result in a 3.25 percent drop in advanced economies and nearly 6 percent decline in emerging economies.

china property
Hundreds of thousands of Chinese homebuyers are threatening to refuse to pay their mortgages on pre-sold, unfinished properties [File: Qilai Shen/Bloomberg]

China’s economy is unlikely to experience an economic meltdown of that severity. But it could be on track for a protracted slump that drags on global growth in the coming years, according to analysts.

Teneo’s Wildau said that Chinese policymakers have tools not readily available in more capitalistic countries to avert a full-blown financial crisis.

“Chinese leaders have a much greater degree of control over the financial system and the real economy than US policymakers did in 2008. So they have the tools to stave off an acute crisis,” he said.

“They have the tools to stave off financial contagion and a complete collapse in credit flows because they can simply order the banks to lend. They can work outside the legal bankruptcy system to keep everyone liquid, to avoid disorderly chains of default.”

But Wildau said China could still be looking at years of economic stagnation, which would feel like a recession to many Chinese after decades of strong growth.

“We could just see an extended period of slow growth, something more like a Japan scenario, a sort of grinding slowdown over many years even absent acute financial distress or panic in the market,” he said.

What is China doing about the crisis?

Beijing has signalled that supporting the property market is an important task despite its determination to reduce the economy’s reliance on the sector.

At a meeting of China’s top decision-making body in July, officials said there was a need to “stabilise” the real estate market while emphasising that local governments should take responsibility to ensure pre-sold homes are finished.

Earlier this month, Chinese media outlet Caixin reported that Beijing was preparing to issue 200 billion yuan ($29.3bn) in loans to complete unfinished housing projects.

Beijing has also taken measures to boost the economy more generally, such as lowering interest rates and rolling out stimulus, including the announcement last week of 300 billion yuan ($44bn) in new credit through its state-run policy banks.

“We expect additional funding will be arranged to support the completion of unfinished houses,” Wu, the Oxford Economics economist, said in a note.

“Indeed, the statement from July’s Politburo meeting stresses the need to stabilise the property market and to ensure the delivery of houses. We think these efforts are unlikely to come directly from the central government. Instead, authorities will likely ask local governments, banks, and property developers to coordinate and ensure that unfinished housing projects are completed.”

China’s efforts to prop up the market may ultimately be limited, with Beijing widely expected to stick to its “three red lines” and Chinese President Xi Jinping’s mantra that “houses are for living in, not for speculation”.

Wildau said China’s policymakers now faced the dilemma of whether to press ahead with their crackdown on real estate or reverse course for the sake of growth.

“If they were to embark on a bailout now, it would be rowing back and retreating on those gains,” he said.

“It would also be politically embarrassing because it would look like a reversal or an admission of error. So that’s why I think we’ve seen policy be relatively lacklustre. We haven’t seen a housing bailout that a lot of investors have been hoping for.”

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As China’s property crisis grows, is the global economy at risk? - Al Jazeera English
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Monday, August 29, 2022

Russia says economy to contract by less than 3% in 2022 - Yahoo Canada Finance

MOSCOW (Reuters) -Russia's economy will shrink by less than 3% in 2022, a much shallower contraction than initially expected, while inflation will be below earlier projections, First Deputy Prime Minister Andrei Belousov said on Monday.

Russia's economy took a hit from sweeping Western sanctions that followed Moscow's move to send tens of thousands of troops into Ukraine on Feb. 24. But the economic aftermath has proved not to be as painful as initially feared.

Belousov said Russia's gross domestic product (GDP) would fall by "a little more than 2%" this year, followed by a decline of "no more than 1%" in 2023.

The latest set of forecasts from the economy ministry in mid-August suggested GDP would contract 4.2% this year, having earlier warned of a drop of more than 12% - which would have been the biggest fall in economic output since the mid-1990s crisis following the collapse of the Soviet Union.

Despite unprecedented sanctions and many foreign companies leaving Russia, the government saw no signs that the labour market situation is worsening, Belousov said, although there were risks that it could.

The unemployment rate stood at 3.9% in June, the lowest since the statistics service started publishing the figure in 1992, according to the Eikon database.

After soaring to a 20-year high of 17.8% in April after the rouble collapsed to a record low, full-year inflation will be 12-13%, Belousov said.

Non-commodity exports this year will fall by 17% as Russia has lost access to European markets, Belousov told a televised government meeting. Imports of consumer goods have, however, nearly recovered thanks to new trade routes and parallel imports.

"Imports are a key issue, since limiting imports is one of the tools, the levers of the whole logic of sanctions on our country," he said.

Russia has included a wide range of products from foreign carmakers, technology companies and consumer brands in the parallel imports scheme, aimed at shielding consumers after regular imports slumped.

Investment imports have suffered more, Belousov said, predicting a decline of up to a fifth this year.

"The situation remains quite difficult due to both restrictions on imports of investment equipment and other sanctions," Belousov said, predicting the decline in capital investment to reach its maximum level in the fourth quarter this year and early next year.

(Reporting by Andrey Ostroukh; Editing by Kirsten Donovan)

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Russia says economy to contract by less than 3% in 2022 - Yahoo Canada Finance
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India's Economy Faces Resilience Test Amid Rising Interest Rates - Bloomberg

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India's Economy Faces Resilience Test Amid Rising Interest Rates  Bloomberg
India's Economy Faces Resilience Test Amid Rising Interest Rates - Bloomberg
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The Economy Is Not In A Recession - Forbes

India's status as world's fastest growing major economy to be short-lived- Reuters poll - SaltWire NS

By Arsh Tushar Mogre

BENGALURU (Reuters) - India likely recorded strong double-digit economic growth in the last quarter but economists polled by Reuters expected the pace to more than halve this quarter and slow further toward the end of the year as interest rates rise.

Asia's third-largest economy is grappling with persistently high unemployment and inflation, which has been running above the top of the Reserve Bank of India's tolerance band all year and is set to do so for the rest of 2022.

Growth this quarter is predicted to slow sharply to an annual 6.2% from a median forecast of 15.2% in Q2, supported mainly by statistical comparisons with a year ago rather than new momentum, before decelerating further to 4.5% in October-December.

    The median expectation for 2022 growth was 7.2%, according to an Aug. 22-26 Reuters poll, but economists said that the solid growth rate masks how rapidly the economy was expected to slow in coming months.

"Even as India remains the fastest-growing major economy, domestic consumption will perhaps not be strong enough to drive growth further as unemployment remains high and real wages are at a record low level," said Kunal Kundu, India economist at Societe Generale.

"By supporting growth through investment, the government has only fired on one engine while forgetting about the impetus which domestic consumption provides. This is why India's growth is still below its pre-pandemic trend."

The economy has not grown fast enough to accommodate some 12 million people joining the labour force each year.

Meanwhile the RBI, a relative laggard in the global tightening cycle, is set to raise its key repo rate by another 60 basis points by the end of March to try to bring inflation within the tolerance limit. [ECILT/IN]

That follows three interest rate rises this year totalling 140 basis points, and would take the repo rate to 6.00% by end-Q1 2023.

While the central bank's mandated target band is 2%-6%, inflation was expected to average 6.9% and 6.2% this quarter and next, respectively, before falling just below the top end of the range to 5.8% in Q1 2023. That is roughly in line with the central bank's projection.

"Despite signs of a cool-off in price pressures ... it is premature to go easy on the inflation fight given considerable uncertainties from geopolitical risks and hard landing risks in major economies," said Radhika Rao, senior economist at DBS.

The economy is also enduring inflation pressure from a weak rupee, which for months has been trading close to 80 to the U.S. dollar, a level the central bank has been defending in currency markets by selling dollar reserves.

The latest Reuters poll also showed India's current account deficit swelling to 3.1% of gross domestic product this year, the highest in at least a decade, which may put further pressure on the currency.

(For other stories from the Reuters global long-term economic outlook polls package:)

(Reporting by Arsh Tushar Mogre; Polling by Anant Chandak, Devayani Sathyan and Vivek Mishra; Editing by Hari Kishan, Ross Finley)

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India's status as world's fastest growing major economy to be short-lived- Reuters poll - SaltWire NS
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Sunday, August 28, 2022

India's status as world's fastest growing major economy to be short-lived- Reuters poll - SaltWire Halifax powered by The Chronicle Herald

By Arsh Tushar Mogre

BENGALURU (Reuters) - India likely recorded strong double-digit economic growth in the last quarter but economists polled by Reuters expected the pace to more than halve this quarter and slow further toward the end of the year as interest rates rise.

Asia's third-largest economy is grappling with persistently high unemployment and inflation, which has been running above the top of the Reserve Bank of India's tolerance band all year and is set to do so for the rest of 2022.

Growth this quarter is predicted to slow sharply to an annual 6.2% from a median forecast of 15.2% in Q2, supported mainly by statistical comparisons with a year ago rather than new momentum, before decelerating further to 4.5% in October-December.

    The median expectation for 2022 growth was 7.2%, according to an Aug. 22-26 Reuters poll, but economists said that the solid growth rate masks how rapidly the economy was expected to slow in coming months.

"Even as India remains the fastest-growing major economy, domestic consumption will perhaps not be strong enough to drive growth further as unemployment remains high and real wages are at a record low level," said Kunal Kundu, India economist at Societe Generale.

"By supporting growth through investment, the government has only fired on one engine while forgetting about the impetus which domestic consumption provides. This is why India's growth is still below its pre-pandemic trend."

The economy has not grown fast enough to accommodate some 12 million people joining the labour force each year.

Meanwhile the RBI, a relative laggard in the global tightening cycle, is set to raise its key repo rate by another 60 basis points by the end of March to try to bring inflation within the tolerance limit. [ECILT/IN]

That follows three interest rate rises this year totalling 140 basis points, and would take the repo rate to 6.00% by end-Q1 2023.

While the central bank's mandated target band is 2%-6%, inflation was expected to average 6.9% and 6.2% this quarter and next, respectively, before falling just below the top end of the range to 5.8% in Q1 2023. That is roughly in line with the central bank's projection.

"Despite signs of a cool-off in price pressures ... it is premature to go easy on the inflation fight given considerable uncertainties from geopolitical risks and hard landing risks in major economies," said Radhika Rao, senior economist at DBS.

The economy is also enduring inflation pressure from a weak rupee, which for months has been trading close to 80 to the U.S. dollar, a level the central bank has been defending in currency markets by selling dollar reserves.

The latest Reuters poll also showed India's current account deficit swelling to 3.1% of gross domestic product this year, the highest in at least a decade, which may put further pressure on the currency.

(For other stories from the Reuters global long-term economic outlook polls package:)

(Reporting by Arsh Tushar Mogre; Polling by Anant Chandak, Devayani Sathyan and Vivek Mishra; Editing by Hari Kishan, Ross Finley)

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India's status as world's fastest growing major economy to be short-lived- Reuters poll - SaltWire Halifax powered by The Chronicle Herald
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Warren Says Fed Policies Could Tip US Economy into Recession - Financial Post

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

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(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

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Senator Elizabeth Warren took aim at the Federal Reserve’s inflation-fighting game plan on Sunday, saying she was worried the central bank will tip the US economy into a recession.

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“Do you know what’s worse than high prices and a strong economy?” the Massachusetts Democrat asked on CNN’s “State of the Union.” “It’s high prices and millions of people out of work. I’m very worried that the Fed is going to tip the economy into recession.”  

Warren renewed her criticism of Fed Chair Jerome Powell’s monetary tightening policies, saying she doesn’t believe increasing interest rates can contain current inflationary pressures.

“Things like the fact that Covid is still shutting down parts of the economy around the world, that we still have supply chain kinks, that we still have a war going on in Ukraine that drives up the cost of energy,” Warren said. “There is nothing in raising interest rates, nothing in Jerome Powell’s toolbag, that deals directly with those.” 

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Powell, in a highly anticipated speech from Jackson Hole, Wyoming, on Friday, signaled the Fed was going to continue its aggressive series of interest rate hikes, and keep rates elevated for a time, to try to tamp down demand and get inflation under control. He warned of slowing growth and “some pain” to households and businesses to get there.  

Warren said his comments indicate that jobs will be lost and small businesses hurt.

Fed officials and their European counterparts, also dealing with decades-high inflation, are pushing back against suggestions they will reverse course if their economies falter while price pressures remain too high. 

Atlanta Fed President Raphael Bostic told Bloomberg Television last week the economy has to weaken first before inflation starts to move down, and that such a shift would typically require the Fed to hold rates at higher levels for 18 months to two years.

An analysis by the Federal Reserve Bank of New York found that a majority of US pandemic-era inflation came from a surge in demand and a move away from services to goods, but supply-chain constraints such as worker shortages and logistics bottlenecks stoked it further. 

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'Slower burn.' Russia dodges economic collapse but the decline has started - CNN

London (CNN Business)Six months after invading Ukraine, Russia is bogged down in a war of attrition it didn't anticipate but it is having success on another front — its oil-dependent economy is in a deep recession but proving far more resilient than expected.

"I'm driving through Moscow and the same traffic jams are there as before," says Andrey Nechaev, who was Russia's economy minister in the early 1990s.
The readiness of China and India to snap up cheap Russian oil has helped, but Nechaev and other analysts say Russia's economy has started to decline and is likely facing a prolonged period of stagnation as a consequence of Western sanctions.
On the surface, not much has changed, bar a few empty storefronts that once housed Western brands that have fled the country in their hundreds. McDonalds (MCD) is now called "Vkusno i tochka", or "Tasty, and that's it" and Starbucks (SBUX) cafes are now gradually reopening under the barely disguised brand Stars Coffee.
The streets of Moscow are as busy as ever.
The exodus of Western businesses, and wave after wave of punishing Western sanctions targeting Russia's vital energy exports and its financial system, are having an impact, but not in the way many had expected.
Nechaev, who presided over some of Russia's most turbulent economic times and helped steer its transition to a market economy, credits some of this to the central bank.
The ruble did crash to a record low to the US dollar earlier this year in the wake of the invasion as the West froze about half of Russia's $600 billion foreign currency reserves. But it's bounced back since to its strongest level against the US dollar since 2018. (Remember President Joe Biden's threat of reducing it to "rubble"?)
That's largely the result of aggressive capital controls and rate hikes back in the spring, much of which have now been reversed. Interest rates are now lower than before the war, and the central bank says inflation, which peaked at almost 18% in April, is slowing and will be between 12% and 15% for the full year.
The central bank has also revised up its GDP forecast for the year, and now expects it to shrink by 4% to 6%. In April, the forecast was for an 8% to 10% contraction. The International Monetary Fund also now predicts a 6% contraction.
Moscow had been trying to build a 'fortress economy' since annexing Crimea in 2014.
It helped that the Kremlin had eight years to prepare, spurred by the sanctions the West imposed after Moscow annexed Crimea in 2014.
"The exit of Mastercard, Visa, it barely had an impact on domestic payments because the central bank had its own alternative system of payments," says Nechaev.
Russia set up the Mir credit card, and its own transaction processing system in 2017.
And there's a reason Russian fans of McDonalds and Starbucks are still able to get their fast-food fix, says Chris Weafer, founding partner of Macro Advisory Ltd, a consultancy advising multinational businesses in Russia and Eurasia.
Since 2014, many Western brands in Russia caved to government pressure and localized some or all of their supply chains. So when these companies left, it was relatively easy for Russian buyers to buy them and keep running them simply by changing the wrapper and packaging.
"Same people, same products, same supply," says Weafer.
It's not an entirely watertight strategy, though.
The re-branded McDonald's stores reported a shortage of French fries in mid-July, when Russia's potato harvest fell short, and foreign suppliers wouldn't fill the gap due to sanctions.

Can Russia's energy boom continue?

Fast food continuity is one thing. Russia's longer term stability rests on its energy sector, still by far the biggest source of government revenues.
To say high energy prices have so far insulated Russia would be an understatement.
The International Energy Agency says Russia's revenues from selling oil and gas to Europe doubled between March and July this year, compared to an average of recent years. That's despite declining volumes. IEA data shows gas deliveries to Europe are down by about 75% over the past 12 months.
Oil is a different matter. The IEA's March prediction that 3 million barrels a day of Russian oil would come off the market from April because of sanctions, or the threat of them, has not materialized. Exports have held up, though Rystad Energy analysts note a slight drop over the summer.
The major factor has been Russia's ability to find new markets in Asia.
According to Houmayoun Falakshali from commodities consultancy Kpler, most of Russia's seaborne oil exports have gone to Asia since the start of the war. In July, the share was 56%, compared to just 37% in July 2021.
Russian seaborne oil exports to Asia have soared this year.
Between January and July this year, China increased its seaborne imports of heavily-discounted Russian Urals crude by 40%, compared to the same period last year, according to Kpler data. That's despite China's initial efforts to avoid the appearance of taking sides in Russia's war on Ukraine. India's seaborne imports from Russia are up more than 1,700% over the same period, according to Kpler. Russia has also been increasing gas exports to China through a Siberian pipeline.
What happens when Europe's embargo on 90% of Russian oil comes into force in December, will be critical. An estimated 2 million barrels a day of Russian oil will be in limbo, and while it's likely some of that will go to Asia, experts doubt whether demand will be high enough to absorb it all.
Falakshali says China cannot buy much more Russian oil than it already is, because of a domestic slowdown in demand, and because it simply doesn't need much more of the specific type of oil Russia exports.
Price will play a critical role, too, in whether Russia can afford to keep discounting to secure new markets.
"A discount of 30% from $120 a barrel is one thing," Nechaev points out. "A discount from $70 is another matter."

'Slower burn'

While global inflation is helping Russia's energy sector, it's hurting its people. Much like the rest of Europe, Russians are already suffering a cost of living crisis, made much worse by the war in Ukraine.
Nechaev, who helped steer Russia through a much more dramatic economic collapse in the 1990s, is worried.
"In terms of the standard of living, if you measure it by real incomes, we have gone backwards by about 10 years," he says.
The Russian government is spending to try to combat this. In May, it announced it would raise pensions and the minimum wage by 10%.
It's set up a system where employees of companies that have "suspended their activities" can temporarily transfer to another employer without breaking their employment contract. And it's spending 17 billion rubles ($280 million) buying the bonds of Russian airlines, crippled by airspace bans and sanctions preventing maintenance and the supply of parts by foreign manufacturers.
It's technology sanctions, like those affecting the airline industry that may have the most profound impact on Russia's long-term economic prospects. In June, US commerce secretary Gina Raimondo said global semiconductor exports to Russia had collapsed by 90% since the war started. That is crippling production of everything from cars to computers, and will, experts say, put it further behind in the global technology race.
"The impact of sanctions will be more a slower burn rather than a quick hit," says Weafer. "Russia is now looking at potentially a long period of stagnation."
Nechaev is even more definitive. "Right now, the economic decline has started," he says.

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Saturday, August 27, 2022

China’s Stimulus: All the Steps Taken Recently to Boost Economy - BNN Bloomberg

(Bloomberg) -- Chinese authorities have rolled out several measures in the past four months to revive an economy battered by Covid lockdowns and a persistent housing slump.

Much of the focus has been on boosting funding for infrastructure, easing a liquidity crunch for property developers, and reducing borrowing costs for businesses and homebuyers.

Despite that added stimulus, the response from economists and financial markets has been muted: Of at least 25 official pledges of support for the economy since March 16 -- when Vice Premier Liu He led a coordinated effort to address investors’ fears -- only four have coincided with a 2%-plus gain in stocks.

Many economists say a meaningful rebound in the economy will be elusive as long as Beijing sticks to its harsh Covid Zero policy, which requires authorities to lock down cities when outbreaks occur. Unlike previous downturns, the government is also trying to revive the economy without relying on property, a sector that contributes about 20%-30% of gross domestic product.

Here’s a look at the support measures announced so far:

Aug. 24: 1 trillion yuan stimulus package

The State Council, China’s cabinet, outlined a package of 19 measures to help the economy. They included: 300 billion yuan of funds to state policy banks, like the China Development Bank, to invest in infrastructure projects; 500 billion yuan of local government special bonds -- also a major source of infrastructure spending -- from their previously unused quotas; and 200 billion yuan of bonds to be issued by state-owned power generation companies.

Aug. 19: 200 billion yuan special loans for property

The People’s Bank of China, along with the finance and housing ministries, said policy banks will provide special loans to property developers so they can finish delayed and stalled projects. The issue has been of particular concern to authorities after hundreds of thousands of angry homebuyers embarked on an unprecedented mortgage strike because of unbuilt homes. The loans to policy banks could be worth 200 billion yuan, according to people familiar with the plans. 

Aug. 15: 10 basis-point interest rate cut

The central bank unexpectedly cut its key interest rates by 10 basis points shortly before the release of official data, which painted a grim picture of the economy struggling to cope with continued Covid disruptions, a property downturn and cautious consumers. Banks followed a week later with a bigger-than-expected 15-basis point reduction in their five-year benchmark lending rate, which may drive mortgage costs to a record low.

June 30: 1.1 trillion yuan policy bank financing for infrastructure

The PBOC said it will support China Development Bank and Agricultural Development Bank of China to raise a total of 300 billion yuan through financial bonds, with the funds used to replenish the capital of major infrastructure projects. Earlier in June, the government had ordered the three big policy banks to lend an additional 800 billion yuan on infrastructure projects.  

May 23: 33-point rescue package

The State Council rolled out an expansive package of 33 measures, which included: 142 billion yuan in additional value-added tax rebates and 300 billion yuan of railway construction bonds. Local governments were ordered to accelerate their bond sales. 

The package also had a pledge to increase the scale of goal to increase the National Financing Guarantee Fund’s re-guarantee business by over 1 trillion yuan, which is mainly used to support financing of small and agricultural businesses.

May 20: 35 basis-point cut to minimum mortgage rate

Chinese banks reduced the five-year loan prime rate, a reference for mortgage rates, by a record 15 basis points, which came on top of the PBOC’s 20 basis-point reduction in the floor for mortgage rates. The size of the moves indicated authorities’ urgency in seeking to boost housing demand as consumers increasingly shunned debt and piled up their savings. 

April 15: 25 basis-point cut to reserve requirement ratio

The PBOC reduced the amount of cash banks must keep in reserve by 25 basis points for most lenders, a move that unleashed about 530 billion yuan of long-term liquidity into the economy. The size of the reduction was smaller than expected. 

©2022 Bloomberg L.P.

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China’s Stimulus: All the Steps Taken Recently to Boost Economy - BNN Bloomberg
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Charting the Global Economy: Housing Slumps From US to Asia - Bloomberg

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Charting the Global Economy: Housing Slumps From US to Asia  Bloomberg
Charting the Global Economy: Housing Slumps From US to Asia - Bloomberg
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World Economy Needs Policy Reset to Revitalize Growth, BIS Says - BNN Bloomberg

(Bloomberg) -- The global economy risks sustained weakness without a change in how it’s run, according to Agustin Carstens, who heads the Bank for International Settlements.

The pandemic and war in Ukraine have proved a “rude awakening” for central banks, which had assumed for too long that supply adjusts automatically and smoothly to shifts in demand, Carstens told the Federal Reserve’s annual Jackson Hole symposium.

He suggests monetary officials focus primarily on tackling inflation but work much more closely with governments, with only the latter able to nurture innovation and resilience, while shepherding necessary institutional, technological and ecological transitions.

“The sooner policy makers recognize the need for a reset and commit to sustainable growth strategies focused on revitalizing the supply side, the stronger and more resilient the global economy will be,” Carstens said. “If we manage to do that, new tailwinds may well develop, with substantial benefits for both growth and price stability.”

He warned the world may be nearing what in aviation is called a “coffin corner” -- where a plane slows below its stall speed and can’t generate enough lift to maintain its altitude.

“It takes skilled piloting to get the aircraft back to a safer, stable place,” the BIS chief said. “Continuing to rely primarily on aggregate demand tools to boost growth in this environment could increase the danger, as higher and harder-to-control inflation could result.”

The world’s economic outlook has darkened of late. After a strong pandemic rebound, many countries are facing recessions because of soaring inflation, the threat of a Russian energy cutoff and slower expansion in China. Just last month, the International Monetary Fund cut its global-growth forecast for 2022 and 2023.

“Central banks cannot hope to smooth out all economic air pockets, and must instead focus first and foremost on keeping inflation low and stable,” Carstens said. “Monetary policy needs to meet the urgent challenge of dealing with the current inflation threat.”

Supply-side factors are likely to continue boosting prices, even as upward pressure from Covid and the war eventually fade, he said. Geopolitics, globalization and demographics -- forces that have restrained inflation in the past -- are set to become headwinds, alongside climate change and the exit from fossil fuels.

“Signs of fragility in supply have been ignored for too long,” Carstens said. “Recent events have shown the dangers of doing this. Reinvigorating productivity growth and enhancing the flexibility and resilience of supply will have to play a larger role in policy debates going forward.”

©2022 Bloomberg L.P.

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Friday, August 26, 2022

Trucking is a huge part of Peel's economy; how can its toll on the climate be reduced? - The Pointer

Peel is in a tug-of-war with one of its most important sectors—the trucking industry. The region relies on a robust logistics sector to support its local economy. Almost half the region’s jobs are connected to the sector and the movement of goods contributes $49 million annually to Peel’s gross domestic product with about $1.8 billion of goods traversing its highways and roads each day. 

But Peel has also committed to mitigating its climate footprint, and while a vitally important industry, trucking is a significant contributor to greenhouse gas emissions.

The Atmospheric Fund (TAF), a non-profit organization set up by the City of Toronto in 1991 to help finance climate action, studies carbon emissions across the Greater Golden Horseshoe.

Data from TAF show that throughout 2019 and 2020, Peel emitted 10 megatonnes of carbon, the second highest amount next to Toronto at 13.2 megatonnes.

A dramatic shift away from dirty transportation is needed if the world is to limit global warming below cataclysmic thresholds. So how can Peel continue to support a vital piece of its economy—that is a significant greenhouse gas contributor—while also reaching its own climate targets?

Is an economic shift in Peel’s future? Not likely.

But if solutions aren’t found, risks could upend the industry.

Earlier this year, Peel’s Regional Audit and Risk Committee received a report from staff detailing how climate change is impacting the goods movement sector across the region.

The findings are damning and showcase a multitude of vulnerable areas in the transportation network across Ontario. If the planet warms to the irreversible two degrees above pre-industrial levels—widely viewed by experts as a point of no return for devastating climate impacts—keeping the industry going will be costly.

Done in collaboration with the Toronto Region Conservation Authority (TRCA) and the University of Waterloo’s Terrametrics Research Lab, the study reviewed key climate hazards and how they will impact the movement of goods. The study did not focus just on trucking, but incorporated goods movement through the Pearson International Airport and along the Canadian National (CN) Railway Company lines as well.

The study relied on evidence from past environmental disasters in Peel to inform its findings.

The first natural disaster mentioned was the 2013 rain storm which flooded most of Peel, Toronto and cost $1 billion in damages according to the Insurance Board of Canada. Not only did it disrupt the trucking industry, it stranded people on GO Transit, overwhelmed stormwater systems and left widespread property damage. Another flood in 2018 cost a further $80 million and once again the Region saw a domino effect across the supply chain.

Not only does the study believe these sorts of weather events will continue, researchers also found continuous flooding has impacts beyond those caused by the initial flood.

“Another problem expected to arise due to increased flooding is the subsequent increase in erosion,” the review reads. “Erosion caused by floods affects both the underlying soil structure and built infrastructure designed to meet specified ranges in the underlying ground conditions.”

The report explains further investigation is needed in Peel to understand if the stormwater management system can withstand the projected increases in precipitation.

The Region of Peel Official Plan finalized in April 2022 set out to define roadways networks most important to the movement of goods.

(Region of Peel)

Roadways are also unique because of the expensive pavement surface and the ongoing budget requirements to maintain them. Despite being used everywhere, asphalt does not hold up well under the elements. Any driver is familiar with the sickening thud that can come from striking a pothole. These potholes are often created by the freeze and thaw of the pavement which cracks the surface. Freeze-thaw cycles are becoming more common with the changing climate, and the degradation to ground-related infrastructure is expected to get worse.

When water seeps underneath pavement or train tracks it is malleable, when it freezes it becomes hard, creating cracks. According to a City of Mississauga press release in March, the municipality had seen a 75 percent increase in the number of potholes in 2022 compared to the previous year.

One idea to reduce the reliance on highway infrastructure is a shift within the goods movement sector to the province’s rail network. But similar to roadways, railways come with their own set of vulnerabilities in a warming climate.

The train network in Ontario is small, and one disruption to a portion of track would trigger a chain reaction causing delays down the line.

“The rail system has a set of interconnecting components that lend themselves to failure much more easily than roads which may have alternative paths to ensure continuous operations,” the study explains.

Regional Councillor Annette Groves told The Pointer in order to relieve stress on local roadways, Peel should be investing in existing thoroughfares that are important to the sector. She pointed to Highway 407, the vastly underused toll road that bisects the region.

“Give the truckers a couple of lanes on there at no cost so that they can move their goods to market, because goods need to get to market today, not 10 years from now, not 15 years from now.”

According to researchers, extreme heat days and higher than usual temperatures will be widely felt across all transportation systems. Along with creating an increased demand for cooling systems on trucks carrying things like food or medicine, the hotter temperatures will negatively impact those forced to step out and work in these extreme temperatures.

Hotter days have dire impacts on human health and the well-being of employees. The consequences would be seen in sectors requiring outdoor work such as loading/unloading cargo, maintenance to infrastructure and trucks and airport activity. This warming is already being felt in Peel where data from the Credit Valley Conservation Authority found that since 1940 the region has been warming at twice the rate of the global average. 

The City of Mississauga estimates each pothole takes about 20 minutes to fill.

(City of Mississauga)

According to the Audit and Risk study, heat days—which can lead to lost work hours—are particularly a concern for rail networks, since buckling of tracks in summer months is expected along with issues of equipment malfunction in higher temperatures.

The Intergovernmental Panel on Climate Change (IPCC) has produced various reports referenced often throughout the study. The United Nations panel has released damning scientific studies in recent years detailing the consequences that will befall the planet should a lack of climate mitigation continue. One theme throughout the IPCC’s reports raises the issue of more extreme and compounding events.

Instances of mass weather changes, increasing deadly storms — like the one seen a few weeks ago that killed a person in Brampton — tornadoes and extreme heat and cold snaps are expected to become more frequent.

“Drawing on an examination of projected weather patterns, it is likely that the Peel Region will experience similar intensifying concurrent weather patterns leading to the need for preplanning for critical services to residents and services,” the report warns.

If solutions to mitigating climate change are not found, Peel will have costly, potentially deadly disruptions in the future.

“The impact of a single event in one aspect of the system can result in cascading impacts on the overall stability and predictability of the region’s economy,” the report’s authors wrote.

The Region’s director of the Office of Climate Change and Energy Management made it clear at a council meeting that if Peel wants to accomplish the goal of reducing GHG emissions by 45 percent below 2010 levels, an acceleration of work and further funding is needed. 

“The planet is now on a dangerous trajectory of warming. The Region of Peel is not immune,” Christine Tu said. “Act now, be bold.”

Peel’s Climate Change Action plan is 50 pages of ideas on how to reduce its corporate carbon footprint, this includes any buildings, systems, vehicles and organizational groups the Region directly oversees. According to the plan, buildings, water and wastewater and employee commuting create the most GHG emissions for Peel. Since the municipalities under the Region have public transit systems, their carbon emissions for Peel are not included in the breakdown.

The transport industry is largely the responsibility of the province which is supposed to take ownership of the increasing GHG emissions.

Statistics Canada says Ontario’s largest carbon emitting industry is the transportation sector with 36 percent of total emissions, followed by buildings at 17 percent. This contributed to a 2019 total of 163 megatonnes of carbon emitted in the atmosphere. According to Canada-wide data, Ontario is the second largest emitter of carbon in the country following Alberta. 

The Ontario government website explains a decrease can be seen from 2000 to 2015 in total carbon emissions with transportation emissions staying consistent.

(Province of Ontario)

What Peel does oversee is the planning on where and how the Region will grow. Land-use policies are one of the most valuable tools in shaping a municipality’s future. In April, Peel councillors voted to open almost 11,000 acres of greenfield lands to expand the urban boundary. Some of the discussions surrounding the expansion hinted at the idea of Caledon becoming a freight village.

In 2018 Caledon Mayor Allan Thompson made a comment in an interview to Business View magazine on his aspirations for Caledon to become a “freight village.” These words have haunted the Mayor who initially walked back the comment.

But actions speak louder than words.

Since his election in 2018, Thompson has been pushing to expand Caledon’s trucking industry, create more warehouses and zone land as employment. This can be seen in the multiple Minister’s Zoning Orders (MZO) the Town Council has asked for, allowing farmland to be paved over. When Peel was passing its Official Plan (OP) until 2051, Thompson tried to force a motion at the last minute allowing Caledon to increase the amount of employment land within the OP.

It was not on the public agenda during the meeting and would have opened up huge swaths of land around Bolton and north of Mayfield Road for development, mirroring the proposed Highway 413, another project Thompson has aggressively pushed, to help create his “freight village”.

His close council ally, Jennifer Innis, has supported the same initiatives and is vying to become Caledon’s next mayor, after Thompson steps down later this year.

But her main rival for the job has a different vision.

“I don't support a freight village. I don't believe that a freight village is a good fit with what we want to do with respect to climate change and the climate change action plan that we have,” Groves, who is also running to become Caledon’s mayor, told The Pointer. “I don't know what a freight village would look like.”

A balance is needed to keep a valuable industry alive while also minimizing the impacts it has on the environment. As Peel and the world barrel toward human activities that will speed up climate change, industries are still figuring out how to adapt.

Similar to electric vehicles (EVs), the largest industrial sized green “big rigs” are hitting the market. An article from Autoweek describes the lengths at which manufacturing companies are going to ensure carbon pollution is limited. The piece explains how various large truck manufacturing companies like MAN and Scania with car companies like Volvo and Tesla are introducing electric technology into commercial transport trucks. The difficulties of switching over the industry as a whole is around the available technology for batteries to withstand long distances and pull thousands of pounds of goods.

Freightliner’s eCascadia vehicle has a travel range of 250 miles with two or three times the cost. Since these trucks travel much farther than average family vehicles, companies are unsure how they will hold up over time. Charging infrastructure along trucking routes is also scarcely available.

“There's got to be a way to do this and to do it right,” Groves said. “I'll be honest, I don't have those answers. But I think that if we put our heads together, along with the industry, we can come up with some very good solutions.”


Email: [email protected]

Twitter: @taasha__15  


COVID-19 is impacting all Canadians. At a time when vital public information is needed by everyone, The Pointer has taken down our paywall on all stories relating to the pandemic and those of public interest to ensure every resident of Brampton and Mississauga has access to the facts. For those who are able, we encourage you to consider a subscription. This will help us report on important public interest issues the community needs to know about now more than ever. You can register for a 30-day free trial HERE. Thereafter, The Pointer will charge $10 a month and you can cancel any time right on the website. Thank you

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Trucking is a huge part of Peel's economy; how can its toll on the climate be reduced? - The Pointer
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Thursday, August 25, 2022

U.S. economy shrank for second straight quarter in Q2 - Investment Executive

In its revised estimate Thursday, the Commerce Department calculated that the nation’s gross domestic product — the broadest measure of economic output — contracted last quarter, though less than the 1.6% annual decline in the January-March period. In its previous estimate for the April-June quarter, the government had estimated that the economy had shrunk at a 0.9% rate.

In its drive to curb inflation, the Fed has raised its benchmark interest rate four times this year by increasingly large increments. By raising borrowing rates, the central bank is making it costlier to take out a mortgage or an auto or business loan. The idea is that consumers and businesses will borrow and spend less, thereby helping cool the economy and slow inflation.

In the meantime, signs of economic weakness are growing. The rise in borrowing costs has weakened the housing market, in particular. Sales of both new and existing homes are down sharply, and the pace of home construction in July sank to its lowest point since early last year. Similarly, retail sales were flat last month, with inflation and higher loan rates forcing many households to spend more cautiously.

Under Chair Jerome Powell, the Fed is aiming for a “soft landing,” whereby the economy slows enough to reduce hiring and wage growth without causing a recession and lowers inflation back to the Fed’s 2% annual target. But by tightening credit even while the economy has slowed, the Fed is heightening the risk that its rate hikes will trigger a downturn. The surge in inflation and fear of a recession have eroded consumer confidence and fanned public anxiety about the economy.

In recent weeks, inflation pressures have begun to slow modestly, driven by a steady drop in gas prices from their lofty highs, along with lower measures of overall inflation. In July, consumer prices were 8.5% more than they were a year earlier, down from a 9.1% year-over-year jump in June. And on a monthly basis, prices were unchanged from June to July.

Still, the costs of many necessities, notably food and rent, have shown little sign of moderating and continue to squeeze millions of households.

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From energy to drinking water, China has lots to fix in its economy - CNN

Hong Kong (CNN Business)China has unveiled 19 new measures to shore up its economy and "secure drinking water" supply as the country continues to struggle with its worst heatwave in 60 years and rigid Covld lockdowns.

The new measures announced by China's cabinet on Wednesday amount to more than 1 trillion yuan ($146 billion) in funding to improve infrastructure, ease power shortages, and tackle drought, including money to secure rice production.
"The current economic recovery has a weak foundation," the statement said, adding that the new funding was aimed at stabilizing the economy. Premier Li Keqiang hosted the cabinet meeting.
Beijing has tried to boost investment and consumption in the world's second largest economy more than once this year. In May, the government announced 33 measures to revive growth.
Despite these interventions, the Chinese economy has deteriorated in recent months because of Covid lockdowns and a deepening property downturn. Analysts are also concerned about the impact China's record-breaking heatwave and drought will have on growth. Already, several international businesses, including Tesla (TSLA) and Toyota (TM), have faced disruption at factories due to power outages.
Several major investment banks, including Goldman Sachs and Nomura, downgraded China's economic growth forecasts for 2022 to 3% or under, as the heatwave hit industrial heartlands. This is way below 5.5% growth target that the Chinese government had set earlier this year.
China's biggest focus remains infrastructure growth.
With the central bank's support, state development banks can lend out $44 billion to finance infrastructure projects, the statement said. That's on top of $161 billion already committed in June.
Local governments will also be permitted to issue $73 billion in debt to fund the building of roads, railways, airports, affordable housing and energy projects. That's in addition to 3.5 trillion yuan ($511 billion) of bonds they were given permission to issue for the same purposes earlier this year.
Li also urged all government departments to "do a better job" in battling the drought and mitigating its impacts. He called for more wells to be drilled, and more drought-resistant water sources to be developed, in addition to seeding clouds, which China resorted to earlier this month to bring more rainfall to the Yangtze River.
"Priority should be given to ensuring people's drinking water, and to transport and deliver the water when necessary," Li added.
The central government will also take 10 billion yuan ($1.5 billion) out of its reserve fund for drought relief, focusing on securing rice production during the key mid-season harvest for rice in the southern region.
"[We should] do everything possible to ensure agricultural irrigation water and help farmers fight the drought and protect their autumn crops," Li said.
The government will support research into measures to promote a "bumper harvest" for late-season rice in the fall, he added.
Analysts weren't optimistic about the impact of the new economic stimulus on the economy.
"These measures could help offset the sharp contraction in government revenue and support infrastructure investment growth to some degree in coming months," said Goldman Sachs analysts in a note late Wednesday.
But they still expect overall growth to remain sluggish during the rest of this year, "barring major policy easing measures," as a "very weak" property sector and headwinds from Covid lockdowns will continue to drag on the economy.
Trouble in the property sector — which accounts for as much as 30% of China's GDP and was already suffering from a prolonged cash crunch — is exerting significant pressure.
The crisis has snowballed since sprawling developer Evergrande defaulted on its debt last year. Property prices have been falling, as have sales of new homes. Angry homebuyers across the country have threatened to stop paying their mortgages on unfinished homes, jolting markets and prompting businesses and authorities to take action to defuse the crisis.
Nomura analysts said the new stimulus measures wouldn't be a "game changer."
"The zero Covid policy continues consuming a large amount of local governments' fiscal resources," they said, adding that he property sector is "still in deep trouble."

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Wednesday, August 24, 2022

Japan sees economy picking up modestly, flags looming risks -govt - Financial Post

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TOKYO — Japan’s government described its economy as “moderately picking up” in its monthly economic report, keeping the overall assessment unchanged from the previous month, while noting an upward revision to factory output.

While sounding cautiously optimistic on the world’s No. 3 economy, the government flagged risks of a global downturn amid overseas trend of monetary tightening and rising inflation while households face slower wage growth.

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“The economy is picking up moderately,” the Cabinet Office, which compiled the report, said, “It is expected to pick up ahead as we stand ready to take all possible steps to prevent infections as socioeconomic activity normalizes,” referring to coronavirus cases.

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The report was approved by Prime Minister Fumio Kishida’s cabinet ministers on Thursday.

The government upgraded its view on factory output for August as production bounced back from declines seen in April and May as China’s anti-coronavirus lockdowns eased.

Factory output showed signs of picking up, the report said, compared with July when production appeared to be stalling. It marked the first upgrade in seven months.

The assessments of other major components of the economy saw no change from the previous month.

Private consumption, which accounts for more than half of Japan’s economy, was picking up moderately, the report said, noting the resumption of activity among consumers who are “living with coronavirus” after the lifting of COVID-19 curbs.

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“Downward deviation in world economy stemming from global monetary tightening is emerging as risks that weigh on Japan’s economy,” the report said.

“Attention needs to be fully paid to supply constraints and a price-hike impact on households and corporations.”

Japan’s economy rebounded at an annualized 2.2% in April-June from COVID-19-induced doldrums.

Still, the pace of growth undershot economists’ median estimates, raising doubts about strength of private consumption and expectations for pent-up demand known as revenge spending. (Reporting by Tetsushi Kajimoto Editing by Tomasz Janowski)

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CNY USD: Yuan Rally Tested as China’s Economic Pain to Offset Fed Boost - Bloomberg

[unable to retrieve full-text content] CNY USD: Yuan Rally Tested as China’s Economic Pain to Offset Fed Boost    Bloomberg CNY USD: Yuan ...