Tag Archives: gross domestic product

UK’s Johnson delays COVID reopening by a month, citing Delta variant risk

By Alistair Smout and William James

LONDON (Reuters) -Prime Minister Boris Johnson delayed his plans to lift most remaining COVID-19 restrictions by a month on Monday, warning that thousands more people might die if he did nothing because of the rapid spread of the more infectious Delta variant.

Under the final stage of a plan outlined by Johnson in February, he had hoped to lift most social restrictions on June 21, meaning pubs, restaurants, nightclubs and other hospitality venues could fully reopen.

That much-anticipated step was pushed back to July 19.

“I think it is sensible to wait just a little longer,” Johnson told a news conference. “As things stand, and on the evidence that I can see right now, I’m confident that we will not need more than four weeks.”

The extra time would be used to speed up Britain’s vaccination program – already one of the world’s furthest advanced – by shortening the recommended time between doses for those aged over 40 to eight weeks from 12 weeks.

The situation would be reviewed on June 28, which could allow the reopening to be brought forward, although Johnson’s spokesman said that was considered unlikely.

In recent weeks there has been fast growth in new cases caused by the Delta variant, first discovered in India. Health officials believe it is 60% more transmissible than the previous dominant strain and scientists have warned that it could trigger a third wave of infections.

The opposition Labor Party blamed the government for the delay, saying it had been too slow to close borders to travelers from India.

On Monday, Britain recorded 7,742 new COVID-19 cases and three deaths. Johnson said the number of cases was growing by about 64% per week and the number of people in hospitals’ intensive care units was rising.

“By being cautious now we have the chance in the next four weeks to save many thousands of lives by vaccinating millions more people,” he said.

Britain has officially reported almost 128,000 deaths since the start of the pandemic, the seventh highest number globally.

Monday’s decision was based on scientific modelling which showed that, if the reopening went ahead as planned, under some scenarios hospitalizations could match those in March last year when ministers feared the health system could be overwhelmed.

“The four week delay should reduce the peak – whatever it would be – by something between 30 and 50%,” the government’s Chief Scientific Adviser Patrick Vallance said.

Studies on Monday showed the Delta variant doubles the risk of hospitalization, but two doses of vaccine still provide strong protection.

Unlike in March 2020, the increase in hospitalizations was likely to be among younger people who require shorter treatment and are less at risk of dying.

Nevertheless, the risk of increased pressure on the health system meant that the tests the government set out for going ahead with the reopening had not been met.

Johnson sets COVID-19 restrictions for England, with devolved administrations in Scotland, Wales and Northern Ireland making their own policy.

NO NEW SUPPORT

There are no plans to extend new economic help to businesses as a result of the delay, Johnson said. He said current data on vaccines and infections showed no need to do so.

Britain’s furlough program supports just over 2 million jobs and is due to continue until the end of September. But from July employers will have to pay 10% of furloughed staff’s wages, rising to 30% in September.

The hospitality industry has also called for an extension of other sector-specific aid. The Society of London Theatre and UK Theatre said thousands of jobs were hanging in the balance.

Despite Monday’s delay, the government lifted some restrictions on the number of guests allowed to attend weddings, and will continue pilots of crowds at sporting events and theatrical shows.

Deutsche Bank estimated last week that a four-week delay would temporarily reduce gross domestic product by around 0.25% – a fraction of the historic 9.8% slump recorded in 2020.

It comes despite Britain having one of the fastest vaccine rollouts in the world. More than 41 million people have received their first shot and nearly 30 million have had both doses – about 57% of the adult population.

(Additional reporting by Sarah Young and David Milliken; Writing by Michael Holden; Editing by Giles Elgood and Alex Richardson)

U.S. consumer spending strong; manufacturing struggling

FILE PHOTO: People tour The Shops during the grand opening of The Hudson Yards development, a residential, commercial, and retail space on Manhattan's West side in New York City, New York, U.S., March 15, 2019. REUTERS/Brendan McDermid

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales surged in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help to assuage financial market fears that the economy was heading into recession.

The upbeat report from the Commerce Department on Thursday, however, will likely not change expectations that the Federal Reserve will cut interest rates again next month as news from the manufacturing sector remains dour, underscoring the darkening outlook for the economy against the backdrop of trade tensions and slowing growth overseas.

A key part of the U.S. Treasury yield curve inverted on Wednesday for the first time since June 2007, triggering a stock market sell-off. An inverted Treasury yield curve is historically a reliable predictor of looming recessions.

Financial markets have fully priced in a 25-basis-point rate cut at the U.S. central bank’s Sept. 17-18 policy meeting. The Fed lowered its short-term interest rate by a quarter of a percentage point last month, citing the acrimonious U.S.-China trade war and slowing global economies.

But the data could push markets to dial back expectations of a 50-basis-point rate cut next month.

“So yes, consumers are lifting economic growth and easing pressure on the Federal Reserve to cut more aggressively, but the trade war itself, and the rhetoric that accompanies it will push for more rate cuts,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

Retail sales increased 0.7% last month after gaining 0.3% in June, the government said. Economists polled by Reuters had forecast retail sales would rise 0.3% in July. Compared to July last year, retail sales increased 3.4%.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 1.0% last month after advancing by an unrevised 0.7% in June. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

U.S. stock index futures extended gains after the release of the data. U.S. Treasury yields rose while the dollar <.DXY> was slightly weaker against a basket of currencies.

STRONG LABOR MARKET

July’s gain in core retail sales suggested strong consumer spending early in the third quarter, though the pace will likely slow from the April-June quarter’s robust 4.3% annualized rate. Consumer spending, which accounts for more than two-thirds of the economy, is being underpinned by the lowest unemployment rate in nearly half a century.

While a separate report from the Labor Department on Thursday showed an increase in the number of Americans filing applications for unemployment benefits last week, the trend in claims continued to point to a strong labor market.

Solid consumer spending is blunting some of the hit on the economy from the downturn in manufacturing, which is underscored by weak business investment. There are, however, red flags for the labor market coming from manufacturing.

The sector’s struggles were highlighted by a third report from the Fed on Thursday showing factory production dropped 0.4% in July. Output at factories has declined more than 1.5% since December 2018. Manufacturing, which makes up about 12% of the economy, is also being weighed down by an inventory overhang, especially in the automotive sector.

Manufacturing productivity tumbled at its fastest pace in nearly two years in the second quarter, with factories cutting hours for workers, another report from the Labor Department showed.

Manufacturing’s troubles appear to have persisted into the third quarter. Though a report from the Philadelphia Fed on Thursday showed factory activity in the mid-Atlantic region slowed less than expected in August amid an increase in new orders, manufacturers reported hiring fewer workers.

A measure of factory employment dropped to its lowest level since November 2016. The weakness in factory employment in the region that covers eastern Pennsylvania, southern New Jersey and Delaware was mirrored by another survey from the New York Fed. Activity in New York state was little changed this month, with employment measures deteriorating further.

“The health of factories is still an important driver of growth and the soft patch for production remains a factor that is keeping economic growth in the slow lane,” said Chris Rupkey, chief economist at MUFG in New York.

The economy grew at a 2.1% rate in the second quarter, decelerating from the first quarter’s 3.1% pace. Growth estimates for the third quarter are below a 2.0% rate.

In July, auto sales fell 0.6% after rising 0.3% in June. Receipts at service stations rebounded 1.8%, reflecting higher gasoline prices. Sales at building material stores gained 0.2%.

Receipts at clothing stores increased 0.8%. Online and mail-order retail sales jumped 2.8%, the most in six months, after rising 1.9% in June. They were likely boosted by Amazon.com Inc’s <AMZN.O> Prime Day.

Receipts at furniture stores rose 0.3%. Sales at restaurants and bars accelerated 1.1%. But spending at hobby, musical instrument and book stores dropped 1.1% last month.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

New North American trade deal would boost U.S. economy, U.S. commission finds

FILE PHOTO: U.S. President Donald Trump, Canada's Prime Minister Justin Trudeau and Mexico's President Enrique Pena Nieto sign documents during the USMCA signing ceremony before the G20 leaders summit in Buenos Aires, Argentina November 30, 2018. REUTERS/Kevin Lamarque/File Photo

(Reuters) – The U.S. International Trade Commission estimated the proposed new North American free trade deal would modestly boost the U.S. economy but could reduce U.S. vehicle production.

The economic assessment of the U.S.-Mexico-Canada Agreement, released on Thursday, said the trade deal would increase U.S. real gross domestic product by 0.35 percent, or $68.5 billion, on an annual basis and add 176,000 U.S. jobs, while raising U.S. exports.

The report’s estimates are for year six of the trade deal, once it is fully implemented.

Auto industry employment would rise by 30,000 jobs for parts and engine production, but U.S. vehicle production would decline in and U.S. vehicle consumption would be reduced by 140,000 units because of higher prices, or 1.25 percent of 2017 sales, the report said.

The report may give ammunition to opponents of the deal. The leaders of the three countries approved the deal last year, but it still must be approved by the U.S. Congress. The deal is a replacement for the more than two-decade-old North American Free Trade Agreement.

The auto industry had been a key focus of the deal for the Trump administration.

The report also found that 1,500 U.S. vehicle manufacturing jobs would be lost and the price of new U.S. vehicles would rise from 0.4 percent for pickup trucks to 1.6 percent for small cars.

Some automakers may decide “not to offer vehicles that would be too expensive to bring into compliance, which would ultimately decrease consumer choice,” the report said.

President Donald Trump has touted the deal as boosting the U.S. auto industry employment, which could be a key 2020 campaign issue in some battleground states. In February, he said at his State of the Union address that the deal would “ensure that more cars are proudly stamped with our four beautiful words, ‘Made in the USA.'”

(Reporting by David Shepardson, David Lawder and Chris Prentice; Editing by Leslie Adler)