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US recession not ‘inevitable,’ Treasury secretary says

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US Treasury Secretary Janet Yellen speaks at a policy forum in Washington on June 9, 2022
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A recession in the United States is not “inevitable” but the economy is likely to slow, Treasury Secretary Janet Yellen said Sunday, days after the US Federal Reserve hiked interest rates, raising fears of a contraction.

“I expect the economy to slow” as it transitions to stable growth, she said on ABC’s “This Week,” but “I don’t think a recession is at all inevitable.”

The US economy has recovered strongly from the damage wrought by Covid-19, but soaring inflation and supply-chain snarls made worse by the war in Ukraine have increased pessimism.

Wall Street stocks tumbled after the US central bank, seeking to cool inflation, on Wednesday raised the benchmark borrowing rate by 0.75 percentage points, the sharpest rise in nearly 30 years.

And economists see worrying signs that consumer confidence is weakening, with spending on services affected most sharply.

People are beginning to hold off on vacation plans — domestic flight bookings were down 2.3 percent last month, Adobe Analytics reported — and are cutting back on restaurant visits, haircuts and home repairs.

– Inflation ‘unacceptably high’ –

Yellen conceded that “clearly inflation is unacceptably high,” attributing it partly to the war in Ukraine, which has pushed up energy and food prices.

But she said she did not believe “a dropoff in consumer spending is the likely cause of a recession.” 

The US labor market is “arguably the strongest of the postwar period,” Yellen said, and she predicted a slowing of inflation in coming months.

For Fed chair Jerome Powell — who succeeded Yellen in that position — to control inflation without weakening the labor market will take “skill and luck,” she said, before adding, “but I believe it’s possible.”

The US economy contracted by 1.5 percent in the first quarter of this year, its first drop since 2020, and early indications point to a continued slowing in key sectors including manufacturing, real estate and retail sales.  

A recent survey of 750 company executives by the Conference Board found 76 percent believed a recession is looming, or has already begun.

A recent analysis from the non-profit business group predicted a period of “stagflation” — stagnant growth coupled with inflation — in 2023.

Economist Larry Summers, who served as Treasury secretary from 1999 to 2001, said a wide range of indicators — market volatility, interest rates and inflation among them — suggest a recession on the horizon.

“All of that tells me that… the dominant probability would be that by the end of next year we would be seeing a recession in the American economy,” Summers told NBC’s “Meet the Press.”

– ‘Pain’ at the pump –

For now, Americans are trying to cope with some historically sharp price increases. The cost of gas at the pump, now around $5 a gallon, has roughly doubled in only two years. 

Yellen was asked about proposals for a temporary suspension in federal gas taxes, and expressed openness.

US President Joe Biden “wants to do anything he possibly can to help consumers,” she said. “And that’s an idea that’s certainly worth considering.”

The White House recently confirmed Biden will travel to major oil producer Saudi Arabia during a Mideast trip next month.

The president is “very concerned about what people are experiencing at the pump,” Energy Secretary Jennifer Granholm told CNN Sunday. 

“Saudi Arabia is head of OPEC and we need to have increased production so that everyday citizens in America will not be feeling this pain that they’re feeling.”

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US recession not ‘inevitable,’ Treasury secretary says

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US Treasury Secretary Janet Yellen speaks at a policy forum in Washington on June 9, 2022
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A recession in the United States is not “inevitable,” Treasury Secretary Janet Yellen said Sunday, just days after the US Federal Reserve hiked interest rates, raising fears of an economic contraction.

“I expect the economy to slow” as it transitions to stable growth, she said on ABC’s “This Week,” but “I don’t think a recession is at all inevitable.”

The US economy has recovered strongly from the damage wrought by Covid-19, but soaring inflation and supply-chain snarls exacerbated by the war in Ukraine have increased pessimism. 

Wall Street stocks tumbled after the US central bank on Wednesday raised the benchmark borrowing rate by 0.75 percentage points, the sharpest rise in nearly 30 years.

And economists see worrying signs that consumer confidence is weakening, with people beginning to hold off on vacation plans, dining out or doing home repairs.

Yellen conceded that “clearly inflation is unacceptably high,” attributing it partly to the war in Ukraine, which has pushed up energy and food prices.

But she said she did not believe that “a dropoff in consumer spending is the likely cause of a recession.” 

Yellen argued that the US labor market is “arguably the strongest of the postwar period” and she predicted that the pace of inflation would slow in coming months.

She acknowledged, however, that as Fed chair Jerome Powell works to control inflation while preserving labor-market strength, “That’s going to take skill and luck.”

Soaring gas prices — at some $5 a gallon, they have roughly doubled in a few years — are a pressing concern for many Americans.

Asked about proposals for a temporary suspension in federal gas taxes, Yellen expressed openness.

US President Joe Biden “wants to do anything he possibly can to help consumers,” she said. “And that’s an idea that’s certainly worth considering.”

As to whether Biden might move further to lower consumer prices by lifting tariffs on Chinese goods, Yellen demurred.

Reworking the Donald Trump-era tariffs “is something that’s under consideration,” she said.

“I don’t want to get ahead of where the policy process is.” 

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Italy’s Eni joins giant Qatar gas project after Russian cuts

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Qatar's Energy Minister and president and CEO of QatarEnergy Saad Sherida al-Kaabi (R) and Claudio Descalzi, CEO of Italian multinational oil and gas company ENI, attend the signing ceremony for their joint venture
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Italian company Eni on Sunday joined Qatar Energy’s project to expand production from the world’s biggest natural gas field, days after Russia slashed supplies to Italy.

Eni will own a stake of just over three percent in the $28 billion North Field East project, Qatar Energy’s CEO said at a signing ceremony in Doha.

Qatar announced France’s TotalEnergies as its first, and largest, foreign partner on the development last week, with a 6.25 percent share. 

More companies are set to be named. 

“Today I’m pleased… to announce the selection of Eni as a partner in this unique strategic project,” said Energy Minister Saad Sherida al-Kaabi, who is also president and CEO of state-owned Qatar Energy.

The project’s LNG — the cooled form of gas that makes it easier to transport — is expected to come on line in 2026. It will help Qatar increase its liquefied natural gas production by more than 60 percent by 2027, TotalEnergies chief executive Patrick Pouyanne told AFP last week.

Russia’s invasion of Ukraine has injected urgency into efforts around the world to develop new energy sources as Western countries try to reduce their reliance on Russia.

On Friday, Eni said it would receive only 50 percent of the gas requested from Russia’s Gazprom, the third day running of reduced supplies. Rome has accused Gazprom of peddling “lies” over the cuts.

“We have a lot of things to learn from your leadership and also from your standards and from your ability to adapt to very difficult circumstances,” Eni CEO Claudio Descalzi told his Qatari counterpart.

Qatar Energy estimates that the North Field, which extends under the Gulf sea into Iranian territory, holds about 10 percent of the world’s known gas reserves.

Kaabi refused to divulge how many more partners will be announced. Industry sources have discussed ExxonMobil, Shell and ConocoPhillips, while Bloomberg reported this week that Chinese companies were in talks.

South Korea, Japan and China have become the main markets for Qatar’s LNG but since an energy crisis hit Europe last year, the Gulf state has helped Britain with extra supplies and also announced a cooperation deal with Germany.

Europe has in the past rejected the long-term deals that Qatar seeks for its energy but the Ukraine conflict has forced a change in attitude.

“Qatar is the lowest cost source of supply at the moment and  therefore it’s attractive to the majors (companies),” Daniel Toleman, an analyst at resources consultancy Wood Mackenzie, told AFP.

“So these companies want to be involved in those projects.”

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Layoffs and exits: Firms in China teeter under zero-Covid pressure

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China's adherence to a zero-Covid strategy leaves firms and workers at risk of snap lockdowns
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Fiona Shi lost her job twice during the pandemic — first, in 2020 when Covid ravaged the travel industry, and then this year as China’s strict virus controls hammered businesses in the world’s number two economy.

China is the last major economy welded to a zero-Covid strategy — putting firms and workers at risk of snap lockdowns, freezing activity in the services sector and tangling supply chains crucial for factories to sell their goods.

As the country battles its worst outbreak since 2020, its urban jobless rate has surged to the highest level in two years and the pain is being felt by both blue- and white-collar workers.

“Many places say they are not recruiting people aged above 35,” said Shi, 38, who pointed to the difficulty of returning to entry-level positions after managerial roles.

She worked in a management role in the hospitality industry in 2020 when the coronavirus brought nearly all travel to a halt as governments imposed social distancing and movement restrictions.

Two years later, the Beijinger found herself in the same position after losing her job at a multinational firm.

“The pandemic has also made it harder… many places have frozen headcounts,” she told AFP. “I’m really anxious.”

Months of unpredictable Covid restrictions — including snap lockdowns and severe travel curbs — have hit dozens of cities from business hub Shanghai to the northern breadbasket province of Jilin.

An American Chamber of Commerce survey released this week showed that almost all respondents cut their revenue projections, while in a separate study 11 percent of European firms said they would downsize their China operations because of Covid measures.

Domestic firms have also been tightening their purse strings.

Ride-hailing platform Caocao Chuxing has let go of staff, with Chinese media reports pegging the proportion at 40 percent.

Some staff at e-commerce giant Alibaba were also reportedly asked to leave, according to state outlet Legal Daily.

– ‘The situation is grim’ –

The imposition of restrictions to stamp out Covid outbreaks this year has intensified pressure on firms already grappling with a slowdown in the economy and regulatory crackdowns on sectors including property and tech.

Bai, 27, told AFP she was laid off by a US tech company that was preparing to end its business in China.

“In some ways, we saw it coming,” she said, only giving her surname. “Its China operations have been losing money.”

“It’s not the first to leave the China market and won’t be the last.”

Beijing-based Bai said it was the second time she lost her job because of the pandemic.

In 2020, as the virus raged in China, she was let go by a cruise line operator over fears tied to her nationality, she said.

Andrea Zhang, 24, who handled events planning, said his employer shuttered its clothing shops in March and April when outbreaks flared this year.

“Our bosses wanted to understand the situation at various stores (across the country) but realised they could not due to quarantine requirements,” said Zhang.

The company eventually closed its offline operations, and Zhang left.

Around 1.3 million entities cancelled their business registrations in China in March alone, a 24 percent spike on-year, according to official numbers.

With President Xi Jinping repeatedly backing the government’s zero-Covid strategy, observers do not expect authorities to pivot away from it even as the economy suffers.

But the restrictions have made life unbearable for some.

“Working from home, especially in an industry such as ours known for overtime practices, has made work-life boundaries even more blurred,” said Ning, who works in marketing at a tech firm in Beijing and only gave his surname.

The 26-year-old typically left work around 11 pm.

But his hours stretched past midnight and into weekends after the capital ordered people in his district to stay home last month as Covid cases surged.

“I was too exhausted, and left my job,” Ning said.

He has since submitted more than 200 job applications. Only three of these translated into job interviews.

“The situation is grim,” Ning told AFP. “But we will have to find a way to survive.”

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