Tag Archives: Economic growth

Survey: China’s wealthy received richer in 2019 regardless of tariff struggle

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China’s richest businesspeople received richer in 2019 regardless of a tariff struggle with Washington and an financial slowdown, a survey confirmed Thursday.

The common web value of China’s richest 1,800 folks rose 10% over 2018 to $1.Four billion, based on the Hurun Report, which tracks the nation’s rich.

Jack Ma, who retired final month as chairman of e-commerce big Alibaba, was No. 1 for a second 12 months with a web value of $39 billion. Ma Huateng of Tencent, a video games and social media firm, was second at $37 billion, up 8%.

The outcomes mirror the significance of China’s shopper market at a time when U.S. tariff hikes have battered export-oriented manufacturing.

The variety of businesspeople on the listing from the tech, pharma and meals industries rose whereas these from manufacturing declined.

“Wealth is concentrating into the fingers of those that are capable of adapt to the digital economic system,” mentioned Rupert Hoogewerf, the report’s founder and chief researcher, in an announcement.

In distinction to the US and Europe, the place the ranks of the richest persons are dominated by inherited wealth, virtually everybody on the Chinese language listing is self-made.

Hoogewerf famous that when the survey started twenty years in the past, mainland China had no greenback billionaires.

Actual property developer Xu Jiayin, No. 1 in 2017, dropped to 3rd place with $30 billion.

Solar Piaoyang and Zhong Huijuan, a married couple, have been No. 5 at $25 billion after their drug firm, Hansoh, debuted on the Hong Kong inventory alternate. Hansoh makes remedies for schizophrenia and bipolar dysfunction.

Pharma tycoons account for 8% of this 12 months’s listing, double the share 10 years in the past, based on Hurun.

The web value of Ren Zhengfei, founding father of smartphone maker Huawei Applied sciences Ltd., which is on the middle of a wrestle between Washington and Beijing over expertise growth, rose 24% to $three billion. He climbed 36 locations on the Hurun listing to No. 162.

Huawei, which additionally makes community switching gear, mentioned gross sales rose 23.2% over a 12 months earlier within the first half of 2019. The corporate has warned, nevertheless, that it’s going to “face difficulties” as curbs on its entry to U.S. elements and expertise take impact.

Client industries benefited from an 8.4% rise in retail spending within the first half of 2019. That was regardless of a decline in financial progress to a 26-year low of 6.2%.

Qin Yinglin and Qian Ying, a married couple who personal Muyuan Meals, a pig breeder, profited from an outbreak of African swine fever that pushed up pork costs. Their web value tripled to $14 billion.

The listing included 156 folks underneath age 40, a rise of 24 names from final 12 months.

Colin Huang, 39, of e-commerce firm Pinduoduo, ranked No. 7 with $19 billion 4 years after founding his firm.

“No person on the planet has ever made that a lot from a standing begin,” mentioned Hoogewerf.

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Hurun Report: www.hurun.web

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With Trump commerce conflict a menace, Fed is ready to chop charges once more

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For a second straight time, the Federal Reserve is ready to chop rates of interest this week to attempt to shield the financial system from the implications of a world slowdown and President Donald Trump’s commerce conflict with China.

After that, nobody — not even the Fed itself — appears certain what it would do. The financial panorama appears too hazy and weak to surprising occasions, like oil value spikes ensuing from the weekend assault on Saudi Arabia’s oil manufacturing services.

Among the many key questions:

Will Trump obtain at the very least a truce in his battle with China and diminish a menace overhanging the U.S. financial system?

Will Britain keep away from a disruptive exit from the European Union that might destabilize the worldwide financial system?

Is U.S. inflation, dormant for years, lastly beginning to attain the extent the Fed has lengthy focused? Might a surge in oil costs even ship inflation to heights that might make the Fed uncomfortable about reducing charges? Or would larger vitality costs make the officers extra frightened of a world downturn and so extra inclined to chop charges?

The solutions to these uncertainties will affect the Fed’s choices within the coming months on whether or not it must maintain lowering borrowing charges to attempt to assist maintain the U.S. financial enlargement now in its 11th yr.

It may not matter a lot in any case. With charges already ultra-low, few economists suppose an extra modest drop in borrowing prices would offer a lot financial stimulus. Nonetheless, the monetary markets are anticipating not solely a quarter-point charge minimize on Wednesday when the Fed ends its newest coverage assembly however a number of further cuts later this yr.

For the reason that Fed’s final assembly ended July 31, the markets have endured a tumultuous journey. On that day, it introduced its first charge minimize in additional than a decade — because the eruption of the monetary disaster in 2008. In explaining its transfer to chop its key short-term charge to a variety of two% to 2.25%, the Fed cited the weakening worldwide financial system, uncertainties heightened by Trump’s commerce fights and chronically low inflation. It forged its motion as a pre-emptive transfer to maintain the enlargement.

But the very subsequent day, Trump despatched markets plunging when he introduced a brand new spherical of penalty tariffs in opposition to China. Across the similar time, he additionally stepped up his public assaults on the Fed and on Chairman Jerome Powell personally. By the point Powell addressed an annual Fed convention in Jackson Gap, Wyoming, in late August, Trump was tweeting that the person he had chosen to guide America’s central financial institution was an “enemy” of the US to rival China’s President Xi Jinping.

Trump’s sniping on the Powell Fed hasn’t let up. He has demanded bigger and bigger charge cuts. Final week, he insisted that the Fed ought to minimize its benchmark charge to zero — or under, because the European Central Financial institution has performed.

Practically all economists exterior the administration view that concept as unwise if not reckless. Adverse charges are inclined to mirror extreme financial weak point — one thing not attribute of the U.S. financial system, with its gradual however regular progress, stable client spending and an unemployment charge close to a half-century low.

Probably the most critical menace to the enlargement is extensively seen as Trump’s personal commerce conflict. The elevated import taxes he has imposed on items from China and Europe — and the counter-tariffs different nations have imposed on U.S. exports — have harm American corporations and paralyzed plans for funding and enlargement.

And regardless of Trump’s insistence that the Fed aggressively slash what are already traditionally low rates of interest, few companies really feel that borrowing charges are too excessive or that they cannot receive loans.

“Once we speak to our companies — and it would not matter the sector, it would not matter the scale, it would not matter their geographic location — what’s driving their concern is uncertainty within the policymaking course of, particularly with respect to tariffs,” stated Neil Bradley, government vp of the U.S. Chamber of Commerce.

In latest days, the Trump administration and Beijing have acted to de-escalate tensions earlier than a brand new spherical of commerce talks deliberate for October in Washington. But most analysts foresee no important settlement rising this fall within the battle, which is essentially over Beijing’s aggressive drive to supplant America’s technological dominance.

Balanced in opposition to a attainable truce within the commerce conflict are occasions that might undercut the financial system, from a strike at Basic Motors to the assault that has quickly diminished Saudi Arabia’s oil manufacturing. The Trump administration says Iran is behind the assault, elevating already excessive U.S.-Iran tensions.

Thus far, most economists say the non permanent lack of Saudi manufacturing will not find yourself hurting the U.S. financial system, primarily as a result of there stays loads of world provide.

“Greater oil costs usually are not the large financial deal that they’ve been in a long time previous,” stated Mark Zandi, chief economist at Moody’s Analytics. “I think the Fed will look by way of the Saudi assault and can follow their script of delivering a charge minimize this week.”

On Wednesday, along with saying its choice on charges, the Fed’s policymakers will replace their forecasts for financial progress, unemployment, inflation and rates of interest over the subsequent three years. Powell can even maintain a information convention.

The case for a charge minimize is not at all overwhelming. The job market is basically wholesome, and wages are rising. Final week, the federal government reported that retail gross sales rose in August. An index of client sentiment produced by the College of Michigan has rebounded.

As well as, inflation, which has run chronically under the Fed’s 2% goal charge for years, could also be choosing up. The federal government stated core client costs, excluding the risky sectors of vitality and meals, rose 2.4% over the previous 12 months — the quickest such tempo in additional than a yr. If the Fed’s policymakers conclude that inflation will maintain a quicker tempo, it would give them pause about reducing charges a lot additional.

Nonetheless, the course of the commerce conflict, together with different unknowns like the result of Brexit, will seemingly be the most important issue within the Fed’s decision-making.

“They must react to insurance policies that may change with the velocity of a tweet,” stated Diane Swonk, chief economist at accounting agency Grant Thornton.

On Monday, Trump linked the oil assault and the Fed’s charge choice, saying that after “the oil hit,” the financial system wants “Huge Curiosity Fee Drop, Stimulus!”

However some analysts suppose the Fed would possibly react to Trump’s rising calls for for steep charge cuts by making explicitly clear that it is conserving its deal with the financial system.

“The Fed will ship a message to President Trump saying that home situations, together with financial progress and inflation at the moment, don’t justify any extra important cuts in rates of interest,” stated Sung Received Sohn, enterprise economist at Loyola Marymount College in Los Angeles.

David Jones, the writer of a number of books on the Fed, stated he expects the Fed’s message to echo the one Powell sounded at an occasion this month in Switzerland through which he recommended that the financial system seems resilient regardless of heightened uncertainties and weaker progress.

“Versus Mr. Trump and his criticism, Powell feels the financial system is in good condition, and he needs to maintain it that manner,” Jones stated.

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AP Economics Author Christopher Rugaber contributed to this report.

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Asian shares mixed as investors look ahead to rate decisions

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Asian shares were mixed Tuesday after a day of listless trading on Wall Street, as investors awaited signs on global interest rates.

Japan’s benchmark Nikkei 225 added nearly 0.3% in afternoon trading to 21,379.45. Australia’s S&P/ASX 200 fell 0.7% to 6,599.60, while South Korea’s Kospi edged up 0.5% to 2,030.21. Hong Kong’s Hang Seng was virtually unchanged, inching down less than 0.1% at 26,679.83, while the Shanghai Composite lost 0.3% to 3,015.25.

On Wall Street, the S&P 500 ended virtually flat as losses in technology and health care stocks outweighed gains in financials and other sectors. The Russell 2000 index of smaller company stocks, which has lagged the S&P 500 this year, outpaced the rest of the market.

Investors are taking a shine to smaller company stocks in hopes that they’ll be better shielded from the fallout of the costly trade war between the U.S. and China than large multinationals.

The S&P 500 inched 0.28 points lower, or less than 0.1%, to 2,978.43. The index, which has finished higher the past two weeks, is within 1.6% of its all-time high set in late July. The Dow Jones Industrial Average rose 38.05 points, or 0.1%, to 26,835.51. The Nasdaq fell 15.64 points, or 0.2%, to 8,087.44. The Russell 2000 climbed 19.06 points, or 1.3%, to 1,524.23.

The broader market has bounced back the past two weeks following volatility brought on by the trade war as Washington and Beijing imposed new tariffs on more of each other’s imported goods. Investors worry the escalation of tariffs may be dampening global economic growth and threatening to nudge the United States into a recession.

Traders are hoping for a deal between the world’s two largest economies and were encouraged last week by news that talks will resume in October.

A mixed bag of economic data has also kept Wall Street focused on central banks and whether they will continue taking measures to shore up economic growth. On Friday, Federal Reserve Chairman Jerome Powell said the central bank doesn’t expect a recession and will take necessary actions to maintain growth.

Economists expect the Fed to cut interest rates when it meets next week. Separately, the European Central Bank is expected to unveil new monetary stimulus measures on Thursday to help shore up the region’s economy.

“Markets look to be adrift ahead of the slew of events this week including the likes of the European Central Bank where further support for the markets is expected,” said Jingyi Pan, market strategist at IG in Singapore.

“As far as the risk sentiment is concerned, the improvement carries forth from the previous week in anticipation of the various central bank meetings.”

ENERGY:

Benchmark crude oil rose 31 cents to $58.16 a barrel. It rose $1.33 to $57.85 a barrel Monday. Brent crude oil, the international standard, gained 29 cents to $62.88 a barrel.

CURRENCIES:

The dollar rose to 107.37 Japanese yen from 106.96 yen on Monday. The euro strengthened to $1.1045 from $1.1037.

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S&P 500 finishes flat; smaller company stocks notch gains

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Major U.S. stock indexes ended mixed Monday as large companies gave up early gains and smaller companies closed broadly higher.

The S&P 500 ended virtually flat as losses in technology and health care stocks outweighed gains in financials and other sectors. The Russell 2000 index of smaller company stocks, which has lagged the S&P 500 this year, outpaced the rest of the market.

Investors are taking a shine to smaller-company stocks in hopes that they’ll be better shielded from the fallout of the costly trade war between the U.S. and China than large multinationals.

“If you’re making your product or service in the U.S. and selling it to U.S. customers, you’re somewhat more insulated from the global trade volatility and the slower growth that’s spawning from that globally, too,” said Ben Phillips, chief investment officer at EventShares.

The S&P 500 inched 0.28 points lower, or less than 0.1%, to 2,978.43. The index, which has finished higher the past two weeks, is within 1.6% of its all-time high set in late July.

The Dow Jones Industrial Average rose 38.05 points, or 0.1%, to 26,835.51. The Nasdaq fell 15.64 points, or 0.2%, to 8,087.44. The Russell 2000 climbed 19.06 points, or 1.3%, to 1,524.23.

The broader market has bounced back the past two weeks following a bout of volatility brought on by the trade war as Washington and Beijing imposed new tariffs on more of each other’s imported goods. Investors worry the escalation of tariffs may be dampening global economic growth and threatening to nudge the United States into a recession.

Traders are hoping for a deal between the world’s two largest economies and were encouraged last week by news that talks will resume in October.

A mixed bag of economic data has also kept Wall Street focused on central banks and whether they will continue taking measures to shore up economic growth. On Friday, Federal Reserve Chairman Jerome Powell said the central bank doesn’t expect a recession and will take necessary actions to maintain growth.

Economists expect the Fed to cut interest rates when it meets next week. Separately, the European Central Bank is expected to unveil new monetary stimulus measures on Thursday to help shore up the region’s economy.

U.S. stock indexes appeared set to extend their gains from last week in early trading Monday, led by gains in banks and communications companies. But the momentum faded by midmorning and the major indexes veered between small gains and losses the rest of the day.

At the same time, the Russell 2000 continued to climb. It’s 13% gain year-to-date is still far behind the 18.8% increase in the S&P 500. That’s one reason why the smaller-company stocks are looking attractive right now.

“People are rotating out of the more expensive stuff, some of the things that are probably risky in a downturn, like tech, and going into some more traditional value,” Phillips said.

Among the winning small-cap stocks Monday were video-game retailer GameStop, which jumped 10.4%, and prison operator GEO Group, which rose 2.6%.

Payment processors helped weigh down technology sector stocks. Visa slid 2.3%, Mastercard fell 2.8% and PayPal lost 4.2%. Drugmakers led the slide in health care stocks. Merck fell 3.6% and Abbott Laboratories dropped 2.1%.

Rising bond yields gave banks a boost. Lenders rely on higher yields to set more lucrative interest rates on loans. JPMorgan Chase rose 2.5% and Bank of America gained 3.3%.

The yield on the 10-year Treasury rose to 1.64% from 1.55% late Friday in a sign that investors remain confident that the economy will continue growing. They also shifted money out of safe-play sectors like utilities and makers of consumer products.

Energy stocks climbed as the price of U.S. crude oil rose 2.4%. Oilfield services company Schlumberger jumped 5.9% and Halliburton gained 4.5%.

Benchmark crude oil rose $1.33 to settle at $57.85 a barrel. Brent crude oil, the international standard, gained $1.05 to close at $62.59 a barrel.

AT&T rose 1.5% after activist investment manager Elliott Management, which has a $3.2 billion stake in the telecom company, sent a letter to AT&T’s board, noting that its stock has badly lagged the broader market over the past 10 years and urged it to shed businesses and trim costs. AT&T said it will review the proposals.

Freddie Mac and Fannie Mae each soared 42.8% after an appeals court overturned a ruling that supported the government’s practice of collecting most of the profits generated by the mortgage finance giants.

Last week, the Trump administration unveiled a plan for ending government control of Fannie Mae and Freddie Mac. The companies nearly collapsed in the financial crisis 11 years ago and were bailed out by the government.

In other commodities trading Monday, wholesale gasoline rose 1 cent to $1.58 per gallon. Heating oil climbed 3 cents to $1.93 per gallon. Natural gas rose 9 cents to $2.59 per 1,000 cubic feet.

Gold fell $4.00 to $1,502.20 per ounce, silver rose 5 cents to $18.02 per ounce and copper fell 1 cent to $2.61 per pound.

The dollar rose to 107.16 Japanese yen from 106.89 yen on Friday. The euro strengthened to $1.1052 from $1.1028.

Major stock indexes in Europe also ended mixed Monday as economic growth concerns and Britain’s potentially chaotic exit from the European Union weigh on investors. Stocks in Asia finished broadly higher.

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AP Business Writer Damian J. Troise contributed.

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US financial system slowed to 2.1% development fee in second quarter

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The U.S. financial system slowed sharply within the April-June quarter at the same time as customers stepped up their spending.

The gross home product, the financial system’s complete output of products and providers, grew at a 2.1% annual fee final quarter, down from a 3.1% achieve within the first quarter, the Commerce Division estimated Friday.

However shopper spending, which drives about 70% of financial exercise, accelerated to a scorching 4.3% development fee after a lackluster 1.1% annual achieve within the January-March quarter, boosted particularly by auto gross sales. The resurgent energy in family spending was offset by a widening of the commerce deficit and slower enterprise stock rebuilding.

Economists additionally famous that enterprise capital funding fell within the April-June quarter for the primary time in three years. That weak point seemingly displays some reluctance by companies to decide to tasks due to uncertainty surrounding President Donald Trump’s commerce conflict with China.

Certainly, most analysts assume the U.S. financial system may sluggish by the remainder of the 12 months, reflecting world weak point and the commerce conflict between the world’s two largest economies.

This week, the Worldwide Financial Fund downgraded its outlook for the world financial system due to the commerce battle. China’s personal development sank final quarter to its lowest degree in no less than 26 years after Trump raised his tariffs on Chinese language imports to stress Beijing over the ways it is utilizing to problem U.S. technological dominance. Economists say China’s slowdown would possibly lengthen into subsequent 12 months, which might have world repercussions as a result of many nations feed uncooked supplies to Chinese language factories.

Europe, too, is weakening within the face of world commerce tensions — a priority that led the European Central Financial institution to sign that extra financial stimulus might be coming quickly.

The worldwide weak point is a key purpose why the Federal Reserve is broadly anticipated to chop rates of interest subsequent week for the primary time in additional than a decade and to sign that it might additional ease credit score within the months forward.

Sung Gained Sohn, a enterprise economist at Loyola Marymount College in California, famous the disparity between stable U.S. shopper spending and tepid company funding.

“Customers and companies are going their separate methods,” Sohn mentioned. “If the sample continues, it’s not a great signal for the financial system as a result of there can be fewer jobs. For that reason, the Federal Reserve will go forward with an interest-rate reduce subsequent week.”

Larry Kudlow, head of the president’s Nationwide Financial Council, blamed final 12 months’s 4 fee will increase by the Fed, somewhat than Trump’s commerce insurance policies, for final quarter’s drop in enterprise funding.

“I do not assume the commerce issue is almost as essential because the financial issue,” Kudlow mentioned in a CNBC interview Friday. “I hope that financial coverage makes the shift that buyers expect.”

Trump has been pressuring the Fed by a sequence of tweets to begin chopping charges. Economists count on a quarter-point discount within the federal funds fee, which influences many shopper and enterprise mortgage charges, when the central financial institution meets subsequent week.

Responding to Friday’s GDP report, Trump tweeted, “Q2 Up 2.1%. Not unhealthy contemplating now we have the very heavy weight of the Federal Reserve anchor wrapped round our neck. Virtually no inflation. USA is about to Zoom!”

Later, chatting with reporters within the Oval Workplace in regards to the Fed, Trump mentioned, “They acted too quickly and too violently” in elevating charges 9 instances since late 2015. Trump additionally complained in regards to the Fed’s efforts to decrease its bond holdings, saying that was driving up charges as effectively.

Trump mentioned with out the Fed’s tightening strikes, development would have been 4.5% within the second quarter as a substitute of two.1% and the Dow Jones Industrial Common, which together with different inventory gauges has been setting document highs, can be 5,000 to 10,000 factors larger.

“I’m not a fan,” Trump mentioned of Fed Chairman Jerome Powell.

Requested if he felt the greenback was too excessive towards different currencies, making it tougher to export U.S. merchandise, Trump mentioned a robust greenback “is a wonderful factor in a means but it surely makes it very exhausting to compete.”

Kudlow informed reporters earlier Friday that the administration had a White Home assembly final week and dominated out intervening in foreign money markets to weaken the greenback. However in his feedback with reporters, Trump appeared to nonetheless go away the door open to such a transfer which may violate commitments the USA has made with different main economies to not manipulate currencies to realize commerce benefits.

On Friday, in addition to issuing its first of three estimates of development within the April-June quarter, the federal government reported that by one measure, the financial system grew extra slowly in 2018 than it had beforehand estimated. As a part of its annual revisions to GDP, the federal government downgraded its estimate for 2018 development from 3% to 2.5%.

Trump had steadily boasted of the now-downgraded 3% fourth-quarter-over-fourth-quarter GDP determine for 2018 as proof that his insurance policies have invigorated the financial system.

For the January-March quarter, a narrower commerce deficit and a surge in enterprise restocking had contributed 1.Three proportion factors to the three.1% annual achieve. However economists had cautioned that this energy was more likely to be momentary.

For the second half of this 12 months, economists say they assume GDP will develop at a modest annual fee of two% or barely decrease, resulting in development for the complete 12 months of round 2.5%.

That might be a disappointment to the Trump administration which is forecasting that Trump’s financial insurance policies of tax cuts, deregulation and harder commerce enforcement will elevate the U.S. financial system to sustained positive factors in coming years of three% or higher. Trump usually cites the financial system’s efficiency at his marketing campaign rallies, saying his insurance policies have lifted the financial system out of a decade-long slowdown he blames on the wrongheaded insurance policies pursued by the Obama administration.

Whereas economists see the tax reduce Trump pushed by Congress in late 2017 as a key issue boosting development final 12 months, they count on the affect of these cuts to fade this 12 months. Most assume it will go away the financial system rising near the annual common of two.3% that has prevailed since this growth started in June 2009.

The restoration this month grew to become the longest in U.S. historical past, one month longer than the 10-year growth of the 1990s. Nonetheless, the two.3% common annual development fee is the weakest for any restoration within the post-World Battle II interval. Most economists say the tepid tempo mirrored the severity of the 2007-2009 recession in addition to such long-term tendencies because the retirements of the newborn boomers and slowing employee productiveness.

Mark Zandi, chief economist at Moody’s Analytics, mentioned he foresees annual GDP development this 12 months of two.5% earlier than a slowdown to 1.7% in 2020.

“The advantages of the 2017 tax cuts are largely performed out,” Zandi mentioned. “I feel going ahead that recession dangers are excessive, particularly if one thing main goes off the rails comparable to a resurgence of the commerce conflict or a nasty exit by Britain from the European Union.”

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US economy grew at strong 3.2% rate in first quarter

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The U.S. economy grew at a solid 3.2% annual rate in the first three months of the year, a far better outcome than expected, overcoming a host of headwinds including global weakness, rising trade tensions and a partial government shutdown.

The advance in the gross domestic product, the broadest measure of economic health, marks an acceleration from a 2.2% gain in the previous October-December period, the Commerce Department reported Friday. However, about half the gain reflected two factors not expected to last — a big jump in stockpiling by businesses and a sharp contraction in the trade deficit.

Still, the GDP gain surpassed the 3% bar set by President Donald Trump as evidence his economic program is working. Trump is counting on a strong economy as he campaigns for re-election.

In a tweet, Trump called the 3.2 percent growth “far above expectations.” Speaking to reporters before leaving Washington for a speech to the National Rifle Association, Trump termed the GDP figure an “incredible number” and said, “Our economy is doing great. Number One in the world.”

It was the strongest first quarter growth rate since 2015. In recent years, GDP has been exceptionally weak in the first quarter. There had been fears growth could dip below 1% this year due to a variety of adverse factors such as the December stock market nosedive, rising weakness in key economies overseas, the U.S. trade war with China and a 35-day partial government shutdown that ended in January.

But the economy shrugged off those concerns, helped by an announcement in early January from the Federal Reserve that after raising rates four times last year, it was declaring a pause on further rate hikes. That spurred a stock market rebound by easing concerns that the central bank might overdo its credit tightening and send the country into a recession.

In the first quarter, inventory rebuilding added 0.7 percentage point to growth, while a falling trade deficit boosted growth by a full percentage point. Analysts think both of those factors will reverse in the current quarter. Analysts at Macroeconomic Advisers said they expect GDP will slow to a 1.8 percent rate in the second quarter.

“The drivers of growth in the first quarter are unlikely to persist,” said Gus Faucher, chief economist at PNC.

But Larry Kudlow, head of the president’s National Economic Council, said the administration is sticking with its estimate for growth above 3 percent this year, believing that low unemployment and solid wage gains will give a boost to consumer spending, which slowed in the first quarter.

Kudlow predicted that the income growth will lead to a rebound in car sales and also help lift housing, which has been struggling over the past year.

“I think the prosperity cycle is intact,” Kudlow said in a CNBC interview. “I think the Trump policies are working to rebuild America and people are getting happier and happier.”

Consumer spending, which accounts for 70% of economic activity, slowed to growth at a rate of just 1.2% in the first quarter. In particular, spending on durable goods fell at a rate of 5.3%, the biggest decline in a decade, led by a sharp drop in light truck sales.

Government spending was up 2.4% as a big 3.9% gain in state and local spending, reflecting increases in highway construction, offset a flat performance for the federal government. The government estimated that the 35-day partial federal shutdown trimmed 0.3 percentage point from growth in the first quarter after trimming fourth quarter growth by 0.1 percentage point.

For the year, economists believe GDP will expand 2.4%, down from last year’s 2.9% gain, as the boost from the 2017 tax cuts and increased government spending over the past two years start to fade.

The consensus view of private forecasters is well below expectations of the Trump administration which contends that its economic policies have broken a decade-long period when GDP gains averaged 2.2% annually. The administration is predicting growth will top 3% in coming years.

There are factors that could help lift growth in coming quarters. The global economy appears on better footing, given improvements in such major economies as China, and a trade war between the world’s two largest economies that appears closer to being resolved than it did at the start of the year.

Mark Zandi, chief economist at Moody’s Analytics, said he expects growth for this year to be around 2.2%, close to the average for the past 10 years.

“We got a temporary boost to growth last year because of the tax cuts but that money has been spent so we are back to the kind of growth we have had,” Zandi said. “I think we are back to the 2% world we have been in since the recession ended.”

The current recovery from the Great Recession of 2007-2009 is currently the second longest in history and will become the longest if it lasts past June.

But it has also been the slowest in the post-World War II period, a development economists attribute to slower growth in the labor force and weak gains in productivity.

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Global shares mixed on world tensions, worries about growth

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Global shares were mixed Wednesday amid growing tensions between the U.S. and the European Union and a dim forecast on global economic growth.

France’s CAC 40 rose 0.4% in early trading to 5,455.98, while Germany‘s DAX gained 0.5% to 11,907.95. Britain’s FTSE 100 was little changed but slightly lower at 7,420.13. U.S. shares were set to drift higher with Dow futures up 0.1% at 26,193. S&P 500 futures were up 0.2% at 2,887.30.

Japan’s benchmark Nikkei 225 dropped 0.5% to finish at 21,687.57. Australia’s S&P/ASX 200 was little changed, inching up less than 0.1% to 6,223.50. South Korea’s Kospi added 0.5% to 2,224.39. Hong Kong’s Hang Seng shed 0.1% to 30,119.56, while the Shanghai Composite inched up nearly 0.1 % to 3,241.93.

The threat from President Donald Trump to impose $11.2 billion in tariffs on European products, including cheese, wine and helicopters, could make investors even more concerned about trade disputes hurting an already slowing global economy at a time when the U.S. is trying to resolve a trade conflict with China.

That spat has already made a list of goods more expensive for consumers and is weighing on an already slowing Chinese economy. Negotiators met again last week and both sides have said they are making progress.

Traders also were disappointed to see that the International Monetary Fund lowered its forecast for global growth this year. The IMF now projects 3.3% global growth in 2019, matching the weakest year since 2009. The U.S. fared particularly poorly in the report, with growth now expected at 2.3%, down from 2.9% in 2018.

Investors will get more clues about the Fed’s intentions Wednesday, when the central bank releases minutes from its latest policy meeting. The European Central Bank will also meet Wednesday.

“Amid the sporing of growth and trade tension concerns once again, sentiments in Asia markets have once again been undermined,” said Jingyi Pan, market strategist at IG in Singapore.

ENERGY:

Benchmark U.S. crude rose 39 cents to $64.37. It fell 0.7% to settle at $63.98 a barrel Tuesday. Brent crude added 36 cents to $70.97 a barrel.

CURRENCIES:

The dollar fell to 111.15 yen from 111.28 yen Tuesday. The euro inched down to $1.1270 from $1.1277.

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1Q Market Review: Great returns, but with a twist at the end

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It’s been a fabulous start to the year for investors — as long as you ignore all those simmering worries about a possible recession.

The S&P 500 on Friday closed out its best quarter in nearly a decade, having jumped 13.1 percent through the first three months of 2019, and many other investments from junk bonds to foreign stocks have also bounced back from their dismal end to 2018. But the returns would have been even better if not for concerns that slowing growth around the world may drag down the U.S. economy.

The quarter’s twists are just the latest for the markets, which have yo-yoed from record heights to fear-induced sell-offs for more than a year.

The big swings have left stock and bonds looking fairly valued, said Frances Donald, head of macroeconomics strategy at Manulife Asset Management. She’s optimistic markets can keep climbing this year, but she anticipates more swings along the way. When she talks with big institutional investors, the mood is usually one of nervousness, she says.

“The 2020 recession calls, whether they’re right or wrong, have permeated all individual investor mentalities,” she said.

The Fed was again one of the market’s main drivers, and it flipped to hero from antagonist in the eyes of many investors.

As last year was closing, investors were worried that the Federal Reserve would raise interest rates too quickly and choke off the economy. The central bank raised short-term rates in December for the seventh time in two years, and the S&P 500 fell more than 19 percent from late September through Dec. 24, nearly taking down the longest bull market for U.S. stocks on record.

But on Jan. 4, Fed Chairman Jerome Powell told a conference for economists that the central bank would be flexible in deciding when to raise rates. It was an immediate balm for investors, and the S&P 500 leaped 3.4 percent that day. It kept climbing until hitting a peak on March 21, the day after the Fed said that it may not raise rates at all this year.

All the while, companies were turning in yet another round of blockbuster profit reports aided by lower taxes. Earnings per share for S&P 500 companies surged 13 percent during the last three months of 2018 from a year earlier, led by big gains for energy and communications companies.

But the momentum for stocks stalled last week when a surprisingly weak report on the European economy and other worries triggered concerns about the global economy. Investors sought the safety of bonds, and that in turn triggered the alarm on one of the market’s more reliable recession indicators.

Investors drove the yield for the 10-year Treasury lower than for the three-month Treasury bill for the first time since a little before the Great Recession. Such an “inverted yield curve” does not have a perfect track record as a recession predictor, but it has preceded each of the last seven by a year or two.

Here’s a look at some of the moves that shaped the last quarter for investments:

— STOCK FUNDS SOARED

During the fourth-quarter swoon the S&P 500 fell as much as 19.8 percent from its all-time high set Sept. 20. The Fed’s pledge for patience helped the index rally back to within 2.6 percent of the peak this quarter.

Technology stocks again did much of the work, but the gains were widespread. Funds specializing in small stocks or large, energy companies or real estate, all logged gains. The SPDR S&P 500 ETF retuned 13.6 percent for the quarter, including dividends, for its best return since the third quarter of 2009, when the economy was first crawling out of the Great Recession.

Stock funds that focus on high-growth companies, such as tech, again easily bested their counterparts that look for low-priced stocks, called value funds. Value stock funds trailed partly because they often have lots of banks and other financial stocks, which lagged during the quarter on worries that lower interest rates and slower economy will hurt their profits.

— BOND FUNDS CLIMBED AS YIELDS FELL

Inflation is still low, the Fed is holding the line on interest rates and worries are rising about the strength of the economy. All those help push up prices for bonds, and pull yields down, and bond funds of all types powered to gains during the quarter.

The iShares Core U.S. Aggregate Bond ETF returned 2.9 percent for its best performance in three years. It tracks an index of investment-grade bonds, and it benefited from a drop in the yield on the 10-year Treasury to 2.41 percent from 2.68 percent at the end of the last quarter.

— WHAT’S AHEAD?

Like the global economy, growth is also slowing for U.S. corporate earnings. Analysts say first-quarter profits likely fell nearly 4 percent from a year earlier, according to FactSet. If they’re right, it would be the first decline in nearly three years. That’s setting the stage for some potentially disappointing reports when the next quarter opens on April 1.

So, investors may want to ready themselves for even more turbulence in the coming quarter. Besides earnings reports, they’ll also be getting more clues about the strength of the global economy and whether the United States and China can make progress on their trade dispute to help the global outlook.

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