Friday 1 September 2017

ECB unease over firmer euro risks slowing asset purchase exit – sources

In World Economy News 01/09/2017

Rapid gains by the euro against the dollar are worrying a growing number of policymakers at the ECB, raising the chance its asset purchases will be phased out only slowly, three sources familiar with discussions told Reuters.
The scheme is due to expire at the end of 2017 but formal talks over its future are only beginning, meaning the European Central Bank is highly unlikely to take any decision at next Thursday’s rate meeting, the sources said.
Pressure is building for a gentle rather than a rapid reduction in the pace of asset buying from some policymakers, particularly in the bloc’s weaker economies, who are concerned that the strong euro could dampen inflation and hamper growth by making exports dearer, the sources said.
“The exchange rate has become a bigger issue,” one of the sources told Reuters. “It is now less favourable for an exit and a stronger argument for a muddle-through option.”
The ECB has said it will announce in autumn if it will extend the asset buys, known as quantitative easing (QE) and launched two and a half years ago to bring down borrowing costs, revive growth and prop up inflation.
ECB head Mario Draghi has said that the programme will continue until the central bank is happy that inflation is consistent with its medium-term target of just below 2 percent.
STILL DISJOINTED
As the ECB prepares for what is its biggest policy decision in years, the worries over the euro show just how far it remains from achieving its goal of integrating the currency zone’s stubbornly divergent economies.
Germany and Northern Europe are ready to dial back monetary stimulus as their growth rates pick up, just as southern nations take on the added burden of uncompetitive exports on top of high unemployment.
The debate also exposes the dilemma the ECB faces in trying to reconcile robust GDP growth with inflation — which edged up across the euro zone to 1.5 percent in August — expected to undershoot its target for years.
“The huge appreciation in the euro is already causing monetary tightening and is equivalent to an increase in interest rates,” another source said.
Rate setters were already wary of euro strength in July, minutes of the discussion at that month’s policy meeting showed, fretting that an overshoot could undo the very stimulus they hoped to achieve.
But the currency has risen steadily since then and gained 13 percent against the dollar since the start of the year, mostly on growing speculation about an end to the asset purchases. It hit a two-and-a-half-year high of $1.2069 (0.9367 pounds) on Tuesday before edging back below $1.19 on Thursday.
The ECB, which declined to comment for this article, has often said that exchange rates are set by the market and it does not target any particular level.
“You can’t have it both ways – a strong economy and at the same time a weak currency… You should also not call it euro ‘strength’ but rather ‘non-weakness’,” the third source said.
TAPER VS EXTEND
The sources said no policy proposals had been made and the formal discussion within the ECB’s governing council would only begin next week as agreed at the July meeting.
Hawkish policymakers tend to favour a relatively rapid exit from QE, perhaps over six to nine months, with the ECB’s guidance alluding to the bank’s intent to phase out asset purchases in its policy statement.
Led by Jens Weidmann, the President of the powerful Bundesbank who has already called for a “quick and orderly” exit – they argue that no extension of what is an emergency monetary tool is warranted given rapid growth. [nL8N1L93S8]
In the opposite camp, doves favour an extension of the 60-billion-euro-a-month scheme at a reduced but steady pace and revisiting the issue of exit only next year, once German wage negotiations wrap up.
But any meaningful extension of the 2.3 trillion euro ($2.73 trillion) scheme could run up against asset purchase limits that the ECB has itself imposed.
Without a change to the programme’s key parameters, the ECB could buy between 30 to 40 billion euros of bonds in the first half of 2018 but would be severely constrained thereafter, the sources said.
It could further relax a requirement to buy bonds in proportion to each country’s ECB shareholding, or include new asset classes such as stocks, as raised in July by one policymaker but not given consideration, or non-performing bank loans.
For legal reasons the ECB is unlikely to remove a cap that limits it to buying only a third of each country’s debt, as Draghi himself suggested in July.
To conform with a European Court of Justice ruling on a separate bond purchase scheme, the ECB may in any case favour maintaining either an end date or a commitment to phase out purchases, the sources added.


Source: Reuters (Additional reporting by Frank Siebelt; editing by John Stonestreet)

Euro-Area Inflation Gathers Pace as ECB Weighs Future Stimulus

In World Economy News 01/09/2017

Inflation in the euro area picked up more than economists predicted though underlying cost pressures failed to accelerate, underscoring the European Central Bank’s struggle for price stability just days before officials debate the future of their stimulus program.
Consumer prices rose 1.5 percent in August after 1.3 percent in July, the European Union’s statistics office said on Thursday. That’s the highest reading in four months and exceeds the median forecast of 1.4 percent in a Bloomberg survey.
The acceleration, which is almost exclusively due to energy prices, follows stronger than expected inflation readings for Germany and Spain earlier this week. Euro-area core inflation, which strips out volatile elements such as food and fuel, held at a tepid 1.2 percent.
Growth in the 19-country region is on an upswing, with economic confidence touching a decade high and latest unemployment data, also published Thursday, showing a rate of 9.1 percent. Yet that hasn’t yet translated into significantly faster inflation and rising wages, despite the central bank’s negative deposit rate and its 2.3 trillion euro ($2.7 trillion) bond-buying program. ECB officials need to discuss the future of their quantitative-easing plan, which is currently set to expire by the end of this year.
The ECB is likely to take “a pretty cautious stance at its meeting next week,” Jennifer McKeown, chief European economist at Capital Economics in London, said before the data were published. “It won’t want to undo the groundwork it’s laid for the asset purchases to be tapered next year but I don’t think it will want to set out any firm plans as yet.”
At his speech in Jackson Hole, Wyoming, last week ECB President Mario Draghi appeared to temper expectations about any winding down of purchases, saying “a significant degree of monetary accommodation” is still warranted. The ECB’s Governing Council is scheduled to meet on Sept. 7 in Frankfurt.
One reason for concern may be the appreciating euro, which has climbed some 13 percent versus the dollar since the start of the year, causing a tightening of monetary conditions.
Minutes of the ECB’s most recent meeting showed showed some officials were concerned about the euro strengthening too much. That put investors on alert for signs Draghi will attempt to rein in the currency.
While his Jackson Hole comment is in line with statements at his July press conference, it highlights the divisions within the Governing Council ahead of the next policy announcement, which will also include updated economic forecasts. In contrast to Draghi’s dovish tone, Bundesbank President Jens Weidmann told the Boersen-Zeitung he saw “no acute need” to extend quantitative easing into next year.
“The way in which the euro has strengthened this year has exceeded expectation,” Stephen MacKlow-Smith, head of European equity strategy at JP Morgan, said in a television interview with Manus Cranny. “At the back end of last year, people were definitely positioned very long in the dollar.


Source: Bloomberg

EU’s Barnier says no ‘decisive progress’ in Brexit talks

In World Economy News 01/09/2017

The European Commission’s chief Brexit negotiator, Michel Barnier, on Thursday said that no “decisive progress” had been achieved after the third round of Brexit negotiations in Brussels.
“Over the course of this week we have made a number of useful clarification on a number of points, for instance the status of border workers,” Barnier told a joint news conference with Britain’s David Davis.
“However, we did not get any decisive progress on any of the principle subjects, even though on the discussion we had about Ireland – that discussion was fruitful.”

Source: Reuters (Reporting by Alastair Macdonald and Jan Strupczewski, Writing by Gabriela Baczynska; Eiting by Alissa de Carbonnel)

BOE’s Saunders Says Brexit Risks Don’t Justify Low Rate

In World Economy News 01/09/2017

The risks related to Britain’s exit from the European Union aren’t reason enough to hold off raising interest rates, according to Bank of England policy dissenter Michael Saunders.
While Brexit could weaken sentiment, lower inward migration, limit labor supply and further impact the pound, the necessary monetary policy response is not clear, he said in a speech in Cardiff, Wales on Thursday. Meanwhile, the trade-off between above-target inflation and below-potential output is now “beyond my limits of tolerance,” he said, explaining his decision to vote for a rate increase at the BOE’s last two meetings.
“I do not want to dismiss risks that the Brexit process might be bumpy, and could undermine business and consumer confidence,” Saunders said. “We should not maintain an overly loose stance as insurance against this scenario. Rather, we should be prepared to respond as needed if it happens.”
Saunders has voted alongside fellow Monetary Policy Committee member Ian McCafferty for a 25-basis point rate hike since June. While Chief Economist Andy Haldane has also said he’s considering it, he joined the rest of the rate-setting board in opting for no change at their Aug. 3 meeting.
The MPC is grappling with inflation well above its 2 percent target, even as output loses momentum amid uncertainty about the U.K.’s future trading relationship with the EU. The economy expanded 0.3 percent in the second quarter, leaving growth in the first half at its worst since 2012. It’s also the slowest among Group of Seven nations that have reported so far, although Saunders said that he expects the data to be revised higher.
“We do not need to be putting the brakes on so much that the economy weakens sharply,” Saunders said. “But, our foot no longer needs to be quite so firmly on the accelerator in my view. A modest rise in rates would help ensure a sustainable return of inflation to target over time.”
Britain now has little or no output gap and, combined with inflation pressures, that implies less need for stimulus, he said. External cost pressures from its post-referendum pound drop may be peaking although the “slight dip” posted in July “probably does not mark a turning point to lower inflation.”
Echoing Governor Mark Carney’s comments last year, Saunders said the BOE is “not indifferent” to the faster inflation caused by sterling’s depreciation. There’s no particular exchange rate level that would trigger concern and the BOE doesn’t target the pound, he said.
The speech is the first by a U.K. policy maker since the Aug. 3 inflation report. Since then, the pound has lost about 2 percent against the euro.


Source: Bloomberg

UK house prices seen restrained; Brexit vote hits London – Reuters poll

In World Economy News 01/09/2017

British house prices will at best keep up with inflation this year and next, with no rises expected at all this year in London, where the Brexit vote is holding back the market the most, according to a Reuters poll of property market experts.
Britain’s referendum vote last year to leave the European Union has made a significant contribution to the housing slowdown in the capital. A majority of those polled said a national correction is likely if the UK leaves without a deal.
London house prices, which are more than 10 times the average salary in the capital, are rated extremely expensive, 9 on a scale of 1 to 10. The national market is also pricey, again rated a median 7 by analysts in the quarterly survey.
The milder nationwide housing market slowdown hasn’t had as much to do with repercussions from the Brexit vote as it has in London, analysts said, although they were almost evenly split on whether it was significant or not significant.
On the whole, the latest Reuters survey of 30 housing experts taken Aug 18-29 shows wilting sentiment about the market’s prospects just as those for the broader economy, at least in the near to medium term, are also in decline.
But analysts say those eroding economic prospects – Britain is now the slowest-growing major world economy – have brought with them a small silver lining for the housing market.
“Although the Brexit vote has created additional economic uncertainty, which in itself is unhelpful to the property market, one counter-balancing factor helping the market is the Brexit impact on interest rates, resulting in an expectation they will now remain low for even longer,” notes Ray Boulger at mortgage broker John Charcol.
Asked about the chances of a housing market correction if Britain leaves the EU without a deal, about two-thirds of analysts polled said it was likely or very likely. Even those who said it wasn’t still acknowledged there was a risk.
“I am not convinced that a hard Brexit would lead to a major price crash, though it may prompt a modest correction,” said Peter Dixon, economist at Commerzbank.
“At the very least, a weaker pound may induce interest from the likes of Chinese investors seeking to invest in offshore real estate.”
DOMESTIC DEMAND MAIN DRIVER
Britain’s extensive and restrictive planning regulation, along with steadily rising demand from new households, foreign investment and years of rampant property speculation, has kept the housing market on a tear for the past two decades.
That was interrupted by a brief correction after the financial crisis that was milder than the historic crash of more than 30 percent in the United States.
An exceptional amount of fiscal stimulus has also been aimed at the housing market in recent years, including the Conservative government’s Help to Buy programme, which has helped to drive extremely high prices even higher.
Average British house prices have more than doubled in the past two decades, and more than quadrupled in London. But average wages have risen by only a fraction of that amount.
“Those valuations would not be sustainable if interest rates began to rise, without something else to prop them up, such as further government stimulus,” notes Joanna Davies at Fathom Consulting.
Recent fiscal constraints, including a rise in stamp duty, or transaction tax, as well as a move to scale back tax relief for buy-to-let investors, started to take the wind out of the market before Britain’s vote on June 23, 2016 to leave the EU.
But with business uncertainty mounting, and anecdotal evidence and surveys showing many professionals either considering moving or in the process of leaving the UK, downward pressure on the market, particularly London, is building.
Notably, a handful of forecasters are predicting outright declines in prices in London, as much as 7.5 percent this year and 5.0 percent next.
Mark Farmer of real estate consultancy Cast notes that the part of the market driven by overseas investors and UK buy-to-let investors has “cooled dramatically” as a result of recent fiscal measures, leaving domestic demand the main driver.
Most people “currently cannot afford (housing) in large parts of London and (are) being impacted by growing concerns about Brexit and economic confidence,” he said.
“The issue is whether a downward correction gathers pace, and becomes more of a fundamental step change correction in London pricing, bringing it back to more sustainable long-term levels,” he said.
The outlook for the national market is a more positive.
Fionnuala Earley, residential research director at Hamptons International, said that prices in the north of the country still haven’t recovered to where they were before the financial crisis and so remain closer to fair value.

Source: Reuters (Polling and analysis by Anisha Sheth, Mumal Rathore and Sarmista Sen; Editing by Larry King)

BDI: British government continues to lack a clear Brexit course

In World Economy News 31/08/2017

BDI President Dieter Kempf calls on the British government to finally make clear statements on their withdrawal arrangements at the start of the third round of Brexit negotiations. The proposals for customs exemptions would be disproportionately bureaucratic and impractical. Kempf hardly expects significant progress without a coordinated government approach.
‘The British government continues to lack a clear course. Despite declarations of unity from British cabinet members, there is no coordinated government approach to be seen. These are poor preconditions for the third round of negotiations, and significant progress is hardly to be expected. The British proposals for customs exemptions would create disproportionately large bureaucratic burdens. These ideas are impractical for businesses. The United Kingdom must finally make clear statements on their withdrawal arrangements.’


Source: BDI

Brexit risks gaps on shop shelves, says retail body BRC

In World Economy News 31/08/2017

Brexit brings risks of food shortages if the UK does not resolve issues around customs processes, the British Retail Consortium (BRC) has warned.
While the UK has outlined its vision for customs arrangements after Brexit, the retail trade body said it was still waiting for crucial details.
It said European supply chains were “key” to delivering everyday goods.
But Brexit campaigners said technology meant there would be “no need for hold-ups at borders”.
Prime Minister Theresa May has said she wants to avoid a “cliff-edge” for businesses when the UK leaves the European Union in March 2019.
The BRC called for significant investment in ports and transport infrastructure to ensure new systems are ready when Brexit takes place.
It also said agreements were needed to prevent goods being held up at the border because of extra checks.
“Whilst the government has acknowledged the need to avoid a cliff-edge after Brexit day, a customs union in itself won’t solve the problem of delays at ports,” said the trade body’s chief executive, Helen Dickinson.
“So to ensure supply chains are not disrupted and goods continue to reach the shelves, agreements on security, transit, haulage, drivers, VAT and other checks will be required to get systems ready for March 2019.”
The body said disruption or additional costs would “affect availability on the shelves, increase waste and push prices up”.
Earlier this month, the UK government produced a paper setting out two proposals to replace its membership of the EU’s customs union.
The first was an “innovative and untested approach”, which would mean no customs checks at UK-EU borders.
Its alternative proposal – a more efficient system of border checks – would involve “an increase in administration”, it admits.
European Commission President Jean-Claude Juncker said on Tuesday that none of the UK’s Brexit papers provided so far were satisfactory.
‘Good for consumers’
If the UK leaves the EU without a trade deal or a transitional period – something the government has said it wants to avoid – that could result in delays of up to three days at ports, the BRC said.
It added that 180,000 extra firms would need to make customs declarations for the first time.
However, Patrick Minford, a Brexit campaigner at Economists for Free Trade, rejected the BRC concerns.
“Modern computerised customs procedures are something the EU must by international law put in place for the UK as a sovereign state with its own customs authority post-Brexit,” he said.
“It is also necessary for the UK government to make sure that HMRC has installed all the necessary computer and other systems to handle trade with the EU as a foreign customs authority.
“There is no need for any hold-ups at borders, provided both the EU and HMRC take these necessary actions, which they should be preparing already,” he said.
And Jamie Whyte, director of research at the free-trade think tank, the Institute of Economic Affairs, said: “If the UK leaves the customs union, barriers to the entry of imports are entirely a matter of domestic policy.
“This gives the government a huge opportunity to make importing as easy as possible, not only from the EU, but from the rest of the world.
“UK consumers will benefit enormously from the lower prices which would ensue,” he added.


Source: BBC

U.K. Consumer Borrowing Cools as Slowdown, BOE Action Take Toll

In World Economy News 31/08/2017

U.K. consumer credit grew at its slowest pace in more than a year in July, suggesting a weakening economy and Bank of England action are making households less willing to take on debt.
Unsecured lending rose 9.8 percent from a year earlier, the least since April 2016 and down from 10 percent in June, the U.K. central bank said on Wednesday. It grew 1.2 billion pounds ($1.6 billion) on the month, well below the 1.6 billion pounds averaged this year.
Consumer borrowing has surged in recent years, boosted by record-low interest rates. More recently, households may have turned to credit to maintain their standard of living as rising prices eroded their spending power. But their appetite for debt now appears to be cooling.
Against a backdrop of tense divorce talks with the European Union, the U.K. economy has had its worst start to the year since 2012, with consumer spending — which kept the economy growing in the aftermath of the Brexit referendum — barely expanding between April and June.
The BOE has also stepped in to prevent a potential credit bubble, raising capital requirements for U.K. banks in June and then announcing the end of its Term Funding Scheme, introduced last year as part of a post-Brexit stimulus package to encourage banks to continue lending.
The slowdown may not be enough to head off further action from the BOE, which has signaled a further increase in the countercyclical buffer to 1 percent of risk-weighted assets from 0.5 percent in November in the absence of a material change in credit growth.
“Some moderation could well be a welcome sight, but the bank may still decide to tighten conditions later in the year,” said Philip Shaw, an economist at Investec in London. “It may be worries about credit are sufficiently ingrained to see the bank getting out its macroprudential toolkit to deal with credit growth later in the year.”
Default Risk
While consumer credit accounts for just a fraction of total household debt, financial-stability officials have warned that people are much more likely to default on unsecured loans than they are on their mortgages. Car lending has come under particular scrutiny by the BOE in recent months after it has grown by about 20 percent a year since 2012.
Executive Director Alex Brazier warned last month that a rise in consumer credit has created a “pocket of risk” that may weaken the financial system if it gets out of hand.
Borrowing on credit cards grew an annual 8.9 percent in July. Lending including vehicle finance, personal loans and overdrafts rose by 10.3 percent. Both figures were slightly lower than the previous month.
Non-financial business lending climbed to 8.1 billion pounds, driven by large firms. That’s the most since records began in 2011.
Separate data showed growth in the mortgage market, with home-loan approvals rising to 68,689 in July, the highest since March 2016. Actual lending rose by 3.6 billion pounds, from 4.1 billion pounds a month earlier.


Source: Bloomberg

French President Emmanuel Macron Lays Out Controversial Labor Overhaul

In World Economy News 31/08/2017

The government of French President Emmanuel Macron unveiled a contentious labor overhaul Thursday, a pivotal step in the young leader’s drive to revive France’s economy and shore up the European Union.
The changes, which the government plans to pass by decree later this month, revise a thicket of rules and worker protections that businesses say discourage them from hiring and make it difficult to negotiate conditions with employees.
Their unveiling marks a moment of truth for the Macron government, which has been consulting with France’s combative unions for months in a bid to contain street protests that have undermined efforts by previous administrations to lower France’s chronically high unemployment.
The most contentious measures include a cap on court-ordered fines employers can face for making layoffs, and a provision that allows small companies to negotiate directly with non-unionized workers.
The stakes are high for Mr. Macron because he has made changing labor rules a condition for reaching a “New Deal” with Germany and other European countries to revamp the economic bloc’s architecture. It is also a starting point for his plans to reboot France’s sclerotic economy, from changes to the welfare and pension systems to government spending on housing and jobs training.
“My wish isn’t for this to be easy, but for it to be effective. The reform of the labor market is a reform of deep transformation,” Mr. Macron said in an interview with French magazine Le Point.
Union leaders had mixed reactions after meeting with the government Thursday. In a victory for Mr. Macron, France’s largest union CFDT said it would not join a street protest planned by the far-left CGT union in mid-September. However, CFDT Secretary General Laurent Berger said he was “disappointed” with the changes.
“We will remain extremely vigilant in the months to come,” says Mr. Berger.
Jean-Claude Mailly, head of the Force Ouvrière union, said “there are a certain number of points on which we still disagree.”
Europe is also watching closely. Over the last decade, France has slipped behind other major economies in the currency bloc, racking up wide trade and budget deficits and high, long-term unemployment. Mr. Macron blames successive French leaders for failing to emulate Germany’s shift to become more competitive with changes to its welfare state and labor rules in the early 2000s, under the leadership of then-Chancellor Gerhard Schröder.
Economists say that by making hiring and firing less risky, employers are likely to hire workers on longer-term and invest more in new projects. That in turn could boost productivity and fuel economic growth. French unemployment stands at 9.5%–more than twice the rate in Germany.
“It is clearly a package that can help France catch up,” said Stéphane Carcillo, an economist specializing in labor at the Organization for Economic Co-operation and Development.


Source: Dow Jones

S&P warns of dire impact on U.S. economy from any shutdown, default

In World Economy News 31/08/2017

Standard & Poor’s warned on Wednesday of grim consequences for the U.S. economy if the White House and lawmakers fail to reach a deal to keep the government open and avert a default.
The likelihood of either outcome, however, remains slim, with the urgency to address massive damage from Tropical Storm Harvey, the most powerful storm to hit Texas in over 50 years, further reducing the chances, according to the rating agency.
A default would be worse than the collapse of Lehman Brothers in 2008 at the height of the 2007-2009 global credit crisis, Standard & Poor’s U.S. chief economist Beth Ann Bovino said.
“The economy would fall back into a recession, wiping out much of the progress made by the recovery,” Bovino wrote in a report titled “With A Shutdown, There Will Be Blood.”
A government shutdown, while less devastating than a default, would still harm the economy.
Closure of federal operations, if it were to happen at the start of the fourth quarter, would subtract 0.2 percentage point or at least $6.5 billion from gross domestic product each week it drags on, Bovino said.
“A disruption in government spending means no government paychecks to spend at the mall, lost business and revenue to private contractors, lost sales at retail shops, particularly those that circle now-closed national parks, and less tax revenue for Uncle Sam,” she said.
Bovino and economists at some top Wall Street banks expect Congress to come up with a budget plan and a vote to raise the government’s legal borrowing limit, currently at $19.9 trillion, when lawmakers return to work on Sept. 5.
“But betting on a rational U.S. government can be risky,” Bovino said.
Last week, President Donald Trump at a rally in Phoenix threatened to veto a spending bill from Congress if it does not contain money to begin building a wall along the border between Mexico and the United States, which he promised during his election campaign.


Source: Reuters (Reporting by Richard Leong; Editing by James Dalgleish)

Moody’s says G20 GDP growth to exceed three percent, warns of geopolitical risks

In World Economy News 31/08/2017

Moody’s Investors Service kept its forecast for G20 economic growth at just over 3 percent for this year and next, but warned of geopolitical risks, U.S. protectionism and spillovers from global monetary tightening and China’s deleveraging measures.
The ratings agency said surprisingly strong data in the first half of the year prompted it to raise 2017 growth forecasts for China to 6.8 percent from 6.6 percent, for South Korea to 2.8 percent from 2.5 percent, and for Japan to 1.5 percent from 1.1 percent.
It also expected the euro zone to accelerate in the rest of the year as suggested by robust sentiment indicators and revised upwards its forecasts for Germany, France and Italy.
The agency cut its forecast for the United States, however, to 2.2 percent in 2017 and 2.3 percent in 2018 from a previous 2.4 percent and 2.5 percent, respectively, citing its weaker-than-expected first half performance and expectations of more modest fiscal stimulus than previously assumed.
“The balance of risks is more favourable than it was at the beginning of the year,” Moody’s said. “However, we note event risks related to conflicts in the Korean Peninsula, the South China Sea, and the Middle East.”
“The test firing of missiles by North Korea, intensification of aggressive rhetoric on both sides, and a hardline stance from the Trump administration have raised the risk of a conflict in the Korean Peninsula.”
The agency also said there appeared to be “renewed momentum” to address bilateral trade issues that the Donald Trump administration deemed as unfair trade practices, which could hurt growth if wide-ranging measures were introduced.
For markets, it warned of risks of increased volatility due to historically elevated asset prices and broad investor expectations that interest rates would remain low even as the Federal Reserve and the European Central Bank said they were preparing to start rolling back unconventional stimulus.
While raising its China forecasts, the agency warned the economy has become increasingly reliant on new debt to foster growth. The agency downgraded China’s ratings by one notch to A1 in May, saying the financial strength of the economy would erode in coming years.
The agency revised its India forecast slightly lower to 7.1 percent as the government’s demonetisation move last year led to several months of acute shortages for manufacturing and construction firms in particular, although it said it expected the impact to ease in coming months.

Source: Reuters (Reporting by Marius Zaharia; Editing by Jacqueline Wong)

Economic losses from Storm Harvey could total $70-90 billion – RMS

In World Economy News 31/08/2017

Total economic losses from Tropical Storm Harvey could be as high as $70-90 billion, with the bulk of the losses coming from inland flooding in the Houston metropolitan area, risk modelling firm RMS said.
The majority of these losses will be uninsured, given private flood insurance is limited, RMS said in a preliminary estimate.
“With the rain still falling heavily and the waters rising, the situation is too fast-moving to be stating with certainty what the losses in Texas could be,” Michael Young, RMS head of Americas climate risk modelling, said.
RMS would issue an official insurance loss estimate for the storm “in the coming weeks”, Young added.
RMS said last week that wind damage from Harvey would likely lead to insurance losses below $6 billion.
Modelling firm Air Worldwide said earlier this week the insured losses from Harvey’s wind and storm surge were estimated at between $1.2 billon and $2.3 billion. That figure does not include flooding.
Analytics firm Corelogic earlier on Wednesday raised its estimate for wind and storm surge insured property losses, excluding flooding, to $1.5-3 billion from $1-2 billion.
Wall Street analysts have forecast insured losses for the storm of as much as $20 billion.

Source: Reuters (Reporting by Carolyn Cohn, editing by David Evans)