WCA January 2020

From the Americas

Growth in the quarter ending 30 September slowed to an annual rate of 1.82 per cent. Economists in the Journal poll forecast a further slowing to 1.77 per cent during the last three months of 2019, still troubled by the uncertainty of US trade relations. The figures are below the three per cent growth promised by President Trump during his 2016 campaign. Used cars as an economic indicator Used motor vehicle and truck prices decreased 1.6 per cent in September, after three months of increases. This offers a crumb of hope to working class Americans who are finding the costs of funding and running a modest used car becoming an increasing burden. A Reuters article [“Rising old used car prices help push poor Americans over the edge,” 11 October 2019] pointed to a historic cause for the difficulties: the huge cut in car production that followed the 2007/2009 financial crisis has resulted in fewer affordable ten-year-old cars for today’s used car market. Data provided to Reuters from the industry website Edmunds shows the average price of a ten-year-old vehicle at $8,657, more than 70 per cent higher than in 2010. In the same period, the price of the average new car has risen by 25 per cent. Previous weak lending standards have exacerbated the problem amongst low-earners, leading to seven million Americans being 90 days or more behind on their car loans. According to the New York Federal Reserve, the highest growth in serious delinquency rates has been seen among borrowers with the lowest credit scores. People can drive the new economy With economic data showing cracks in the US economy, and the threat of an end to the longest economic expansion in history, the CEO of Siemens USA, Barbara Humpton, believes the time is right for digital transformation and changed attitudes to workers. At a Yahoo Finance All Markets Summit in October, Ms Humpton argued that technology and skilled workers offer the solutions for American corporations. “We are all concerned about the indicators that we are seeing in manufacturing. We understand the geopolitical factors at work right now, [but] there has not been a better time to use this for transformation,” she said during a panel discussion. “First of all, what we’re finding is there’s a real richness in bringing together multi-generational teams,” she explained. “Think about 40 per cent more power for Egypt, 14.4 gigawatts of power generation built in a 27-month period. You don’t get into that work with a bunch of new folks. You need the folks with 30 years of experience. But combining [those generations], that’s where the richness comes from.” Also taking part was Joe Ucuzoglu, Deloitte US CEO, who agreed that technological advancements and qualified employees could unlock significant growth for their respective companies. Echoing Ms Humpton’s views, Mr Ucuzoglu added: “What you’re seeing is an evolution. Every job has the requirement of some level of what we call tech savviness. At the end of the day, if you have great people who have a desire to learn, who are agile, leave the rest to us.”

The economy Still a tale of rises, falls and standing still Various reviews of the US economy at the end of September 2019 gave support to the possibility of a Federal Reserve cut in interest rates – for the third time in a year – during October, but also showed that working Americans are not automatically benefitting from prolonged economic expansion. Yet despite possible risks to the economy from US-China trade tensions, the labour market seemed to gather strength. September showed an unexpected decline in the number of Americans filing claims for unemployment benefits (dropping 10,000 to a seasonally adjusted 210,000; economists had forecast an unchanged 219,000), and layoffs stayed low. The Bureau of Labor Statistics confirmed that, at 3.5 per cent, the unemployment rate was close to a 50-year low, with total non-farm payroll rising by 136,000 (down from 168,000 in August). Fading stimulus Economic expansion continued to be under threat from slow overseas growth and the US-China trade war that has undermined business investment and helped to drive recession in the manufacturing sector. Economists surveyed by Reuters believed that growth was restricted by the “fading stimulus” from 2018’s $1.5 trillion tax cuts. The Labor Department said the flat consumer price index in September was “the weakest reading since January” and came as increases in the cost of food and rents were offset by decreases in the prices of energy and used cars and trucks. Excluding the volatile food and energy components, the CPI climbed 0.1 per cent after gaining 0.3 per cent for three consecutive months. September showed the biggest drop in producer prices for eight months, causing Federal Reserve officials to fear for the 11-year economic expansion. The Fed cut rates in July and September, and economists were anticipating another rate cut after the Fed’s late October policy meeting. There was some modestly good news for Americans receiving Social Security benefits: based on July, August and September inflation data, recipients could see a 1.6 per cent cost of living adjustment in the new fiscal year. Economists voice their concerns Economists are generally expecting inflation to pass its target in 2020 following the widening of tariffs to include Chinese consumer goods. A Wall Street Journal poll of economists in October found that around two-thirds believe the US manufacturing sector is in recession (usually defined as two consecutive quarters of contraction). Manufacturing data from the Institute for Supply Management (ISM) showed two consecutive months of declines, while the Federal Reserve figures from the summer showed similar contraction at factories.

BigStockPhoto.com Photographer: Aispl

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Wire & Cable ASIA – January/February 2020

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