U.S.-China trade reprieve makes no dent on recession chances - Reuters poll
By Shrutee Sarkar BENGALURU (Reuters) - The recent truce in the U.S.-China trade war is not an economic turning point and has done nothing to reduce a significant risk that the United States could slip into recession in the next two years, a Reuters poll of economists found. Collateral damage from the trade conflict between the world's two largest economies has hit financial markets and forced most major central banks to cut interest rates this year.
By Shrutee Sarkar
BENGALURU (Reuters) - The recent truce in the U.S.-China trade war is not an economic turning point and has done nothing to reduce a significant risk that the United States could slip into recession in the next two years, a Reuters poll of economists found.
Collateral damage from the trade conflict between the world's two largest economies has hit financial markets and forced most major central banks to cut interest rates this year.
The Oct. 18-23 Reuters poll of more than 100 economists found growth and inflation views for the coming year and beyond barely changed, despite a White House announcement about a "phase 1" deal with China and suspension of tariffs scheduled to kick in this month.
"U.S.-China trade negotiations over the past 18 months have been a classic case of 'one step forward, several steps back'. Despite recent encouraging noise on trade talks, there are more tariffs in place than three months ago," noted Ajay Rajadhyaksha, head of macro research at Barclays in New York.
"Our forecasts suggest that below-trend U.S. growth will persist for much of 2020. We still feel that the U.S. and the world economy will avoid recession in the coming months, but the U.S. will not be a global locomotive, as it was in 2018."
The median probability of a U.S. recession in the next 12 months rose to 35% from 30% predicted a month ago - the highest percentage in this economic expansion. For the next two years, it held at a high 45%.
In response to an additional question, 75% of economists said the recent trade development between Washington and Beijing was not a turning point in easing uncertainty.
That conclusion was evident in the consensus for U.S. economic growth, which is expected to slow to 1.6%-1.7% on an annualized basis each quarter between now and end-2020, down from 2.0% last reported.
The range of growth forecasts for the second half of this year showed lower highs and lower lows, underscoring fears the U.S. economy is still losing momentum after a short sugar rush from aggressive tax cuts passed in late 2017.
A majority of economists, 27 of 45, also said U.S.-China trade relations would stay about the same between now and the end of next year. The others were evenly split between it getting better or worse.
"Encouraging, but we are mindful a successful resolution is still a long way away and the negotiations will continue to ebb and flow over the coming year," said Sam Bullard, senior economist at Wells Fargo, referring to the latest U.S.-China trade developments.
Even with record low unemployment, the Federal Reserve was expected to cut rates at its Oct. 29-30 meeting, its third cut this year.
The Fed's preferred gauge of inflation, the core personal consumption expenditure (PCE) price index, was expected to touch its target of 2% early next year and stay around that rate through end-2020 at least.
After lowering interest rates in July and September, the central bank was expected to cut again by 25 basis points next week, taking the fed funds rate to 1.50%-1.75%.
Another cut is forecast for early next year, taking the rate to 1.25%-1.50%, with no more changes expected for the rest of 2020.
Those forecasts are in line with interest rate futures market pricing.
In addition to rate cuts, a few economists expect some form of fiscal stimulus next year.
"A likely third Fed rate cut in October and some modest fiscal support next year won't prevent the U.S. economy from slowing further, though the stimulus should offset growing friction from trade protectionism to extend the record-long expansion," said Sal Guatieri, senior economist at BMO Capital Markets.
(Analysis and additional reporting by Indradip Ghosh; Polling by Vivek Mishra and Hari Kishan; Editing by Ross Finley and David Gregorio)
This story has not been edited by Firstpost staff and is generated by auto-feed.
U.S. home sales fall as tight supply boosts prices | Reuters
France, Germany to agree to NATO role against Islamic State - sources | Reuters
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
China's Xi says navy should become world class | Reuters
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.