MARKET WATCH 05 OCT, 2019

NATIONAL

INTERNATIONAL

India and Bangladesh collaborators in making both countries prosperous: Piyush Goyal

India and Bangladesh are not competitors but collaborators in making both countries prosperous and ensuring a better future for their people said the Union Minister of Commerce & Industry and Railways, Piyush Goyal at the India - Bangladesh Business Forum held in New Delhi today. The Prime Minister of Bangladesh, Sheikh Hasina, was also present in the India - Bangladesh Business Forum meeting. Piyush Goyal urged Indian industry to be part of Bangladesh’s growth story with greater investment in infrastructure, technology and energy where Bangladesh has huge potential. This will help to create more balanced trade between the two countries added Piyush Goyal. Commerce & Industry and Railways Minister assured the visiting Prime Minister that India stands committed to every request that Bangladesh has in railways sector because the connectivity that the expansion in railways will bring to both countries will boost trade and also give greater and smoother access to the North East region of India. Bangladesh Prime Minister thanked the Government of India and the three Chambers of Commerce and Industry for giving this opportunity to the Bangladesh Government and Industry to interact with Indian business heads. Bangladesh Prime Minister informed that three Special Economic Zones have been set up in Bangladesh for Indian investors and hoped that this will broaden the export base of Bangladesh. On this occasion two Government to Business (G2B) MoUs were signed between Start up Bangladesh and Tech Mahindra and Bangladesh Economic Zones Authority and Adani Ports and SEZs. Bangladesh is India’s biggest trade partner in South Asia. Bilateral trade between India and Bangladesh has grown steadily over the last decade. India’s exports to Bangladesh for the financial year 2018-19 (April-March) stood at USD 9.21 billion and imports from Bangladesh for the same period stood at USD 1.22 billion. India and Bangladesh have trade agreement which is facilitative in nature. India and Bangladesh are members of various regional trade agreements including the Asia Pacific Trade Agreement (APTA), SAARC Preferential Trade Agreement (SAPTA) and the Agreement on South Asian Free Trade Area (SAFTA) which govern the tariff regimes for trade. Under SAFTA, India has granted duty free quota free access to Bangladesh on all items except alcohol and tobacco. Various bilateral institutional mechanisms including Commerce Secretary Level Meeting, Shipping Secretary Level Talks, Joint Working Groups on Trade, Customs and Fisheries and Sub-groups on Banking and LCS/ICP Infrastructure meet regularly. Four Border Haats, two each in Tripura (Srinagar and Kamalasagar) and Meghalaya (Kalaichar and Balat), have been established for the benefit of communities living along the border areas of both countries. Ten additional Border Haats on the India-Bangladesh border are under implementation. Cumulative Foreign Direct Investment from India to Bangladesh has more than doubled from USD 243.91 million in 2014 to USD 570.11 million in December 2018. Indian companies have invested in various sectors including telecommunications, pharmaceuticals, FMCG and automobiles sectors in Bangladesh. During Bangladesh Prime Minister, Sheikh Hasina’s visit in April 2017, 13 agreements worth around USD 10 billion of Indian investment mainly in power and energy sectors in Bangladesh were signed. Bangladesh is the biggest development partner of India today. India has extended 3 Lines of Credits (LOCs) to Bangladesh in the last 8 years amounting to USD 8 billion. In addition to LOCs, the Government of India has also been providing grant assistance to Bangladesh for various infrastructure projects such as the Agartala- Akhaura rail link, dredging of inland waterways, India Bangladesh Friendship Pipeline, and High Impact Community Development Projects (HICDPs) in the areas of education, health, water, culture, urban development, disaster management and community welfare.

Source: PIB

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Amit Shah holds meeting to discuss RCEP

Union Home Minister Amit Shah on Friday held a meeting with Union Ministers including Finance Minister Nirmala Sitharaman and Railways Minister Piyush Goyal to discuss the Regional Comprehensive Economic Partnership, a proposed free trade agreement involving 16 countries. Union Minister of Civil Aviation Hardeep Singh Puri and External Affairs Minister S Jaishankar also attended the meeting today. The RCEP is an economic cooperation agreement that is being negotiated by 16 countries including the ten countries of ASEAN. India has some issues of interest both in trade in goods and trade in services. Earlier in September, Goyal had asserted that India will protect its national interest while signing RCEP. "Not every industrial sector is opposed to RCEP Free Trade Agreement (FTA). Pharmaceutical and textiles sector has supported RCEP FTA. We will take care of concerns of certain sectors related to China in RCEP FTA," he had said.

Source: Business Line

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RBI cuts repo rate to 5.15%, lowest in 9 years; FY20 GDP growth estimates slashed to 6.1 percent amid weak demand

The MPC hints at more rate cuts in the coming months to help the economy gather pace as inflation remains firmly bottled up. The Reserve Bank of India (RBI) on October 4 cut the repo rate — its key lending rate — by 25 basis points to 5.15 percent, triggering hopes for cheaper loans during the festival season, but sharply lowered the economy's growth projections amid persistent slowdown in household spending. The repo rate, the rate at which banks borrow from the RBI, is now at its lowest level in nine years, aided by the fifth rate cut in as many monetary policies since February 2019. The lower repo rate has raised hopes of bringing down EMIs for the millions of borrowers as well cut capital raising costs for corporates, with banks expected to pass on the reduced rates by slashing lending rates for its customers. The six-member Monetary Policy Committee (MPC), headed by RBI governor Shaktikanta Das, however, struck a stridently bearish note on the broader economy. The MPC also made it abundantly clear that at this point in time, it stood firmly on the side of growth in the inflation control versus revival contest, strongly hinting at more rate cuts to help the economy gather pace. "There is a policy space to address these growth concerns by reinvigorating domestic demand within the flexible inflation targeting mandate. It is in this context that the MPC decided to continue with an accommodative stance as long it is necessary to revive growth, while ensuring that inflation remains within target," the MPC statement said. India's gross domestic product (GDP), according to the MPC's latest projections, is set to grow at 6.1 percent in 2019-20, significantly lower than the 6.9 percent growth estimates it had put out in the previous policy in August. The RBI placed the onus squarely on the government, obliquely suggesting that more policy measures were needed to engineer a quick turnaround in the Indian economy that has seen its growth rate slump to 5 percent in April-June. "While recent measures announced by the government are likely to help strengthen private consumption and spur private investment activity, the continuing slowdown warrants intensified efforts to restore growth momentum," it said. In a mini-budget of sorts, Finance Minister Nirmala Sitharaman on September 20 announced major changes in corporate income tax rates to revive growth in the broader economy. The government has slashed the corporate income tax rate from 30 percent to 22 percent for all companies. Inclusive of cess and surcharges the effective corporate tax rate in India now comes down to corporate tax to 25.17 per cent. Newer companies, which are set up after October 1, 2019, will be subjected to an even lower effective tax rate of 17 percent. These were by far the biggest, and the boldest, step to revive the Indian economy, which until recently, was feted as a global growth engine. The goal is to turn India into an investors' darling, demonstrate the government’s intent to walk the talk on economic management, restore investors’ confidence and boost sentiments and demand. The earliest markers of an economy's health are found in car showrooms, retail malls and the rapidity of activity in farms. Recent months’ data related to these would suggest that the Indian economy is going through a bumpy ride, an aspect that the MPC has clearly underlined in its latest assessment. The central bank's latest consumer confidence survey shows weak sentiment and tepid consumption demand, especially in non-essential items. Manufacturing firms also see weakening of demand conditions during July-December and expect their output prices to soften as cost of finance and salary outgoes remain muted. "Various high frequency indicators suggest that domestic demand conditions have remained weak. The business expectations index of the Reserve Bank's industrial outlook survey shows muted expansion in demand conditions in Q3 (October-December)," the statement said. Export prospects have been impacted by slowing global growth and continuing trade tensions, it said. GDP growth is projected to improve slightly to 5.2 percent in July-September, the RBI projected, but may pick up speed in the later months. The RBI has estimated that GDP will grow at 6.6-7.2 percent in the second half (October-March) 2019-20 and 7.2 percent in April-June 2020. Plentiful summer rains bodes well for the agriculture sector that can potentially lead the economy’s revival. "Overall, the prospects of agriculture have brightened considerably, positioning is favourably for regenerating employment and income, and the revival in the domestic demand," it said. The government's measures and the rate cuts since February 2019 are expected to feed into the real economy and boost demand gradually, the RBI said. All members of the MPC voted to reduce the policy repo rate and to continue with the accommodative stance of monetary policy. Chetan Ghate, Pami Dua, Michael Debabrata Patra, Bibhu Prasad Kanungo and Das voted to reduce the repo rate by 25 basis points. Ravindra H. Dholakia voted to reduce the repo rate by 40 basis points.

Source: Money Control

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Remove trade barriers for better economic ties, Sri Lanka tells India

The Centre had also stopped immediately shipments of onion at below minimum export prices to Sri Lanka and Bangladesh and warned violators of strict action. Sri Lanka on Friday urged India to remove trade barriers for better economic cooperation among South Asian nations, saying the move by the neighbouring country to restrict exports of onions has a massive impact on prices there. Speaking at the India Economic Summit here, Minister of Economic Reforms and Public Distribution of Sri Lanka Harsha de Silva asked India to remove restrictions on import of tea from Sri Lanka. "India banned export of onions in the last few weeks, perhaps you may not realise it but in small countries like ours, it has major impact on prices," he said. Last month, India had banned exports of onion and imposed stock limit on traders to ensure domestic availability amid rising prices of the kitchen staple, which had touched Rs 80 per kg. The Centre had also stopped immediately shipments of onion at below minimum export prices to Sri Lanka and Bangladesh and warned violators of strict action. Regarding export of tea to India, Silva further said "we would like to see barriers brought down and quotas removed".On these things, he said, "We don't need to compete, we can collaborate. So, trade barriers and restrictions among our countries in this region must seriously be brought down.

Source: Business Standard

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Trade deal with US 'not easy', involves 'complicated issues': Jaishankar

External Affairs Minister S Jaishankar's remarks come as U.S. Commerce Secretary Wilbur Ross and his Indian counterpart Piyush Goyal are holding talks in New Delhi. External Affairs Minister Subrahmanyam Jaishankar said that a trade deal with the U.S. is “not that easy,” but trade ministers from both sides were trying to iron out their differences. “It’s a fairly complicated set of issues because you are really looking at trying to clear up issues.” Jaishankar said Friday, speaking at the India Economic Summit organised by the World Economic Forum in New Delhi. ”I guess if they are taking a little time they would be justified in doing so.” Jaishankar’s remarks come as U.S. Commerce Secretary Wilbur Ross and his Indian counterpart Piyush Goyal are holding talks in New Delhi. On Thursday Ross had said that there was no structural reason a U.S.-India trade deal could not be done soon. “Neither government said there would be a trade deal in five minutes. That was just speculation,” Ross said. “We do think that there’s no structural reason why there can’t be one pretty quickly.” Trade tensions between India and the U.S. have been ongoing for a while now with U.S. President Donald Trump accusing India of charging higher duty on American imports, particularly tariffs as high as 100% on Harley-Davidson Inc. motorcycles. However, New Delhi and Washington have been working to sort out trade issues, including a possible withdrawal of some disputes from the World Trade Organization. The bilateral trade between the two countries stands close to $90 billion. There had been speculation that a trade agreement would be hammered out while Prime Minister Narendra Modi was in the U.S. last week but that didn’t happen. Ending trade frictions could help India boost exports and cushion an economic slowdown caused by a collapse in domestic consumption.

Source: Business Standard

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DPIIT Secy assures new e-commerce policy will be 'good and sound'

He said that when the Government of India makes a policy, it has to listen to each and every stakeholder in the country. The government on Friday assured that the new e-commerce policy, which is under the process of formulation, will be "good and sound".Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Guruprasad Mohapatra said there are issues such as data, brick and mortar stores and e-commerce firms and about a level-playing field for them. "We are working on a new policy which is more comprehensive... But I can assure that the policy that will be made, will be good and sound policy," he said here at the Indian Economic Summit. He said that when the Government of India makes a policy, it has to listen to each and every stakeholder in the country. The secretary added that when a policy has ramifications not only across India but also on Asian and global investors who like to come to India, the government would have to engage with all stakeholders. Different countries have different approach towards dealing with data issues and "when a government as a whole decides to do something, it has to engage with a large number of stakeholders and that is what is happening now," Mohapatra said. The government in February released the draft national e-commerce policy proposing setting up a legal and technological framework for restrictions on cross-border data flow and also laid out conditions for businesses regarding collection or processing of sensitive data locally and storing it abroad. Several foreign e-commerce firms have raised concerns over some points in the draft pertaining to data. Replying about regulatory issues being faced by start-ups, he said, "The more we keep them away from regulations, the more we allow them to operate within the space they want to operate, I think it is better in long run for start-ups." And with this attitude, the government is working to improve ecosystem for budding entrepreneurs, he said. Further, he said that at the moment, over 50,000 start-ups are registered with the DPIIT and "we expect to reach another 50,000 by 2024".Talking about the Rs 10,000-crore Funds of Fund, he said over 300 cases have been cleared by the SIDBI. While the DPIIT is the monitoring agency, Small Industries Development Bank of India (SIDBI) is the operating agency for this fund. "We have recent discussions with SIDBI and we have told that in this year's Budget and in the next year's Budget, we want to increase the fund available to SIDBI to intervene and we are also trying to bring some other channels along with SIDBI to do this activity," the secretary said. Under the 'Start-up India Action Plan', the government announced incentives, including tax holiday and inspector raj-free regime, besides capital gains tax exemption and a Rs 10,000-crore corpus to fund them. "We want to create an ecosystem that every start-up in India feels proud to come up and we want to make it pan-India rather than being concentrated in metros," he said. When asked about failures in start-ups, Mohapatra expressed his view as an individual that there should be a system which is not branding them and instead providing equal access to facilities that any other successful start-up has. "That is the kind of ecosystem we should try to do as far as failures are concerned," he added.

Source: Business Standard

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TEA Urges Centre To Release Pending Claim Amounts Related To Drawbacks

The TEA president Raja M Shanmugham said that the knitwear garment sector has been already going through a liquidity crisis & has urged Centre to release funds. TEA president Raja M Shanmugham said the knitwear garment sector has been already going through a liquidity crisis and in this situation, the Diwali festival is approaching in the next 20 days and the units have to statutorily disburse the bonus to the workers from now onwards.

Letter to FM

In a letter to Finance Minister Nirmala Sitharaman, he said: "As the issue is critical to the units, may we request the minister to advise to clear the amount of the pending claims related to Drawback, RoSL, RoSCTL including IGST stopped to the concerned exporting units listed under Risky Exporterscategory expediently." The release of the pending claims will help tide over the financial crisis and also to make the bonus payment without any issue, and the measure will be particularly beneficial to the MSME units, numbering 80 per cent out of total garment exporting units, Shanmugham said Regarding Risky Exporters category, he said that duty drawback, IGST, and RoSL benefits have been suspended to the knitwear garment units and these units are also undergoing100 per cent inspection at port further to classification of these units under this category.

Source: Republic World

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Textiles Minister Smriti Irani to represent India at World Cotton Day celebrations in Geneva

The Ministry of Textiles, Government of India, is participating in the World Cotton Day being observed from 7th October to 11th October 2019 in Geneva. The World Trade Organisation (WTO) is organizing World Cotton Day event in collaboration with the Secretariats of the United Nations Food and Agriculture Organization (FAO), the United Nations Conference on Trade and Development (UNCTAD), the International Trade Centre (ITC) and the International Cotton Advisory Committee (ICAC). Union Minister of Textiles, Smriti Zubin Irani, will participate in the plenary session of the event to be attended by heads of states, heads of international organisations and executives from the private sector. WTO is hosting the event at the request of the Cotton – 4 countries, Benin, Burkina Faso, Chad and Mali to celebrate their official application for the recognition of 7th October as World Cotton Day by the United Nations. World Cotton Day will celebrate the many advantages of cotton, from its qualities as a natural fibre, to the benefits people obtain from its production, transformation, trade and consumption. World Cotton Day will also serve to shed light on the challenges faced by cotton economies around the world because cotton is important to least developed, developing and developed economies worldwide. Cotton is a global commodity that is produced all over the world and a single tonne of cotton provides year-round employment for five people on average. Cotton is a drought – resistant crop ideal for arid climates, it occupies just 2.1 % of the world’s arable land, yet it meets 27% of the world’s textiles need. In addition to its fibre used in textiles and apparel, food products are also derived from cotton like edible oil and animal feed from the seed. The objective of observing October, 7 as World Cotton Day is to give exposure and recognition to cotton and all its stakeholders in production, transformation and trade; to engage donors and beneficiaries and strengthen development assistance for cotton; seek new collaborations with the private sector and investors for the cotton related industries and production in developing countries and promote technological advances, as well as further research and development on cotton. The World Cotton Day launch event in Geneva on October 7th is an opportunity for members, the private sector and the international development community to share knowledge and showcase cotton related activities and products. There will also be a Partners Conference where development partners will discuss and consolidate support for the new project on cotton by products and for other development initiatives. There will be a photo contest to encourage photographers around the world to communicate strong and positive messages underlying the importance of the cotton value chain. A fashion event will take place to display cotton fashion and designers from different parts of the world with a special focus on Africa. A cotton exhibition is also being held where TEXPROCIL, Handloom Export Promotion Council (HEPC), Cotton Corporation of India (CCI) and the National Institute of Fashion Technology (NIFT) will be setting up their stalls. The CCI will be displaying various grades of raw cotton including SUVIN, the finest quality of Extra Long Staple Cotton produced in Tamil Nadu having the highest fibre length. Further, natural coloured cotton that is grown in Dharwad in the state of Karnataka in different colours like dark brown, medium brown, green and cream colours will also be on display. Being naturally coloured there is no need to use synthetic dyes which leads to less toxicity in the fabric when used. A sculpture of Mahatma Gandhi made out of cotton will be displayed to commemorate the 150th birth anniversary of Gandhi ji. The Cotton Textiles Export Promotion Council (TEXPROCIL) will be displaying India’s high quality cotton textiles at the exhibition. At the exhibition HEPC will be displaying hand woven products from prominent clusters of India and will also have a live demonstration of the charkha by Pitta Ramulu, National Awardee weaver. The charkha will be donated to the WTO after the event. The India pavilion at the World Cotton Day exhibition is being curated and designed by NIFT, a pioneer institute of fashion education in India. The NIFT exhibition will be an immersive experience that will bring out the beauty and soul of Indian Textiles with its hand spun and hand woven Khadi. Fabrics which have been given Geographical Indication like Venkatagiri, Chanderi, Maheshwari and Ikkat sarees will be displayed along with many other traditional Indian textiles and organic cotton fabrics. The World Cotton Day launch will give more than 30 countries exposure to producers, processors and businesses and more than 400 participants will be celebrating cotton in Geneva with thousand more around the world . World Cotton Day will be celebrated in countries across the globe, with events giving exposure to farmers, processors, researchers and businesses and their contributions to the cotton value chain. These activities will be organised at the country level and livestreamed at the WTO headquarters. Between 2011 and 2018, India implemented a Cotton Technical Assistance Programme (Cotton TAP-I) of about USD 2.85 million for seven African countries namely Benin, Burkina Faso, Mali and Chad and also Uganda, Malawi and Nigeria. The technical assistance focused on improving the competitiveness of the cotton and cotton-based textiles and apparel industry in these countries through a series of interventions which had significant outcomes leading to a demand for a follow on project.

Source: PIB

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Textile industry under scrutiny for potential ‘import leaks’

The Trade Ministry is working with a special task force to audit producers’ importer identification numbers (API-P) to verify the textile industry's import quantity and identify possible "import leaks", a top official said on Wednesday. Trade Minister Enggartiasto Lukita said at a press forum in Batu, East Java, that he had yet to confirm the source of excess imports. He added that mistakes made in import verifications done by state-appointed surveyors at bonded logistics centers could be one of the causes and he plans to revert verification responsibilities from such surveyors to the Directorate General of Customs and Excise (DGCE) again. "The key is that we will verify and [hand over]the bonded logistics centers’ system to the DGCE. We will then issue import licenses based on the business’ capacity, which will soon be under audit," he said. "But it is impossible for us to stop imports if businesses require raw materials that aren’t produced locally. And we can't stop exports, either.” The task force is made up of personnel from the Industry Ministry, Consumer Protection and Commerce Order Directorate General, Foreign Trade Directorate General and the Indonesian Textile Association (API). The ministry's move follows urgings from the textile industry for the government to protect them from rapidly growing imports, as the sector cannot compete in the domestic and international markets. Statistics Indonesia (BPS) data shows that export growth in the textile industry has been just 3 percent annually over the last 10 years, while import growth has been 20 percent annually in the same period. Similarly, the Indonesian Association of Synthetic Fiber Producers has said that fabric imports increased threefold from 300,000 tons in 2008 to 900,000 tons in 2018, while garment exports stagnated at about 550 million tons over the same period. According to API, as many as nine textile factories have closed and at least 2,000 workers have been dismissed because garment producers prefer to buy imported fabrics. "This is a red alert for the textile industry," API chairman Ade Sudrajat Usman said at a recent press conference.

Source: The Jakarta Post

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UK textile exports to US to be hit with punitive tariffs

Exports of a range of fashion and textile products from the UK to the US will be hit with a 25 per cent tariff as part of the ongoing dispute between the US and the EU over subsidies granted to both Boeing and Airbus. The list of products that will be facing a 25 per cent tariff includes cashmere jumpers, anoraks, swimwear, and bed linen. The 25 per cent tariff is in addition to the normal duties which will apply. "The US has threatened to introduce the tariffs as early as October 17, 2019. It has been confirmed that these tariffs will apply even if the UK leaves the European Union with or without a deal," UK Fashion & Textile Association (UKFT) said in a statement. UKFT CEO Adam Mansell has called on both sides to resolve the 15-year old trade dispute as quickly as possible. “At a time when the industry is facing huge uncertainty over the impact of Brexit, it is devastating that one of our key non-EU markets has imposed such significant tariffs on products that have nothing to do with the aircraft dispute,” said Mansell. “Some of our leading manufacturers will be hit by theses punitive tariffs and that will undoubtedly affect jobs and investment.” Simon Cotton, chief executive of Johnstons of Elgin, the largest manufacturer cashmere knitwear in the UK, and a board member of UKFT, said these tariffs will have a significant impact on the UK knitwear industry. “The US is our third largest export market behind Europe and Japan,” he said. “This will have major impact on our knitwear business, as well as the whole of the UK knitwear industry. The US consumer has a great affinity with British high-quality knitwear and we urge all parties involved to come to an agreement quickly for the sake of British manufacturers and US consumers.” “The UK government is clear that resorting to tariffs is not in the interests of the UK, EU or US. We are working closely with the US, EU and European partners to support a negotiated settlement to the Airbus and Boeing disputes," the UK department for international trade (DIT) said in a statement. “We are also seeking confirmation from the WTO that the UK has complied fully with WTO rulings regarding support to Airbus, and should not be subject to tariffs,” the DIT statement said.

Source: Fibre2Fashion

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US unemployment falls to lowest in 50 years despite trade tensions

The Labor Department's closely watched monthly employment report on Friday, however, contained reminders that the risks to the longest economic expansion on record remained tilted to the downside. The US unemployment rate dropped to near a 50-year low of 3.5% in September, with job growth increasing moderately, suggesting the slowing economy could avoid a recession for now despite trade tensions that are hammering manufacturing. The Labor Department's closely watched monthly employment report on Friday, however, contained reminders that the risks to the longest economic expansion on record remained tilted to the downside. Wage growth stagnated and manufacturing payrolls declined for the first time in six months. The retail and utilities sectors also continued to shed jobs. The report followed a string of weak economic reports, including a plunge in manufacturing activity to more than a 10-year low in September and a sharp slowdown in services industry growth to levels last seen in 2016, that heightened fears the economy was flirting with a recession. "The unemployment rate usually rises ahead of a recession, so a fresh decline pushes out the timeline for any potential recession into late 2020 at the earliest," said Josh Wright, chief economist at iCIMS in New York. The two-tenths of a percentage point drop in the unemployment rate from 3.7% in August pushed it to its lowest level since December 1969. The jobless rate, which had been stuck at 3.7% for three straight months, declined even as 117,000 people entered the labor force last month. Nonfarm payrolls increased by 136,000 jobs last month, the government's survey of establishments showed. The economy created 45,000 more jobs in July and August than previously estimated. Economists polled by Reuters had forecast payrolls would increase by 145,000 jobs in September. September's job gains were below the monthly average of 161,000 this year, but still above the roughly 100,000 needed each month to keep up with growth in the working-age population. The smaller household survey from which the unemployment rate is derived showed a jump of 391,000 in employment in September. With signs that the Trump administration's 15-month trade war with China is spilling over to the broader economy, continued labor market strength is a critical buffer against an economic downturn. The trade war has eroded business confidence, sinking investment and manufacturing. There is also political uncertainty in Washington after the Democratic-controlled US House of Representatives launched an impeachment inquiry against President Donald Trump after accusations he pressed Ukrainian President Volodymyr Zelenskiy to investigate former US Vice President Joe Biden, a leading candidate for the 2020 Democratic presidential nomination. These factors, together with benign wage inflation, are likely to prompt the Federal Reserve to cut interest rates at least one more time this year, economists said. The US central bank cut rates last month after reducing borrowing costs in July for the first time since 2008, to keep the economic expansion, now in its 11th year, on track. "We continue to expect the Fed to cut its target interest rate later this month," said Michael Feroli, an economist at JPMorgan in New York. "We believe it would have taken a much stronger number to convince Fed leadership that they have already taken out enough insurance against downside risks." The dollar briefly rose on the employment data before surrendering gains to trade little changed against a basket of currencies. Prices of US Treasuries were mixed. Stocks on Wall Street were trading higher.

STRONG GOVERNMENT HIRING

Economic growth estimates for the third quarter range from as low as a 1.3% annualized rate to as high as a 1.9% pace. The economy grew at a 2.0% pace in the second quarter, slowing from a 3.1% rate in the January-March period. Slower growth was reinforced by a report from the Commerce Department on Friday that showed the US trade deficit widened 1.6% to $54.9 billion in August. A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, declined to 6.9% last month, the lowest level since December 2000, from 7.2% in August. Despite the tight labor market, average hourly earnings were unchanged last month after advancing 0.4% in August. That lowered the annual increase in wages to 2.9% from 3.2% in August. The average workweek was unchanged at 34.4 hours. Some economists believe wage growth is stalling because companies are hiring inexperienced workers in the face of labor shortages. Others blame the slowdown on ebbing demand for workers. "With demand for labor softening and many companies contending with higher input costs as the trade war lingers and broadens, we do not expect to see any meaningful strengthening in wage growth in the coming months," said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. Hiring is slowing across all sectors, with the exception of government, which is being boosted by state and local government recruitment. Private payrolls increased by 114,000 jobs in September after rising by 122,000 in August. The three-month average gain in private employment fell to 119,000, the smallest since July 2012, from 135,000 in August. Manufacturing shed 2,000 jobs last month, the first decline in factory payrolls since March, after hiring 2,000 workers in August. Factory employment growth has slowed from last year's brisk pace. Manufacturing has ironically borne the brunt of the Trump administration's trade war, which the White House has argued is intended to boost the sector. Last month's decline in manufacturing payrolls was led by the automotive sector, which lost 4,100 jobs. Further losses are likely if a strike by General Motors workers continues. There were also job losses in machinery, fabricated metals products and primary metal industries. Construction employment increased by 7,000 jobs last month after rising by 4,000 in August. Retail payrolls dropped by 11,400 jobs, shedding employment for an eighth straight month. Government employment increased by 22,000 jobs in September after surging by 46,000 in August. Hiring was boosted by state and local governments. Only 1,000 workers were hired last month for the 2020 Census. Government payrolls have increased by 147,000 over the year, driven by local governments.

Source: Business Standard

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Factory output continues slide in Aug

THE country’s manufacturing output, both in volume and value, dropped for the ninth consecutive month in August, the Philippine Statistics Authority (PSA) said on Friday. Results of the statistics agency’s Monthly Integrated Survey of Selected Industries showed that the volume of production index (VoPi) declined by 9.3 percent in August, compared with the 6.1-percent contraction in July and 3.1-percent expansion the year before. The decrease was attributed to the annual decreases in seven industry groups, led by petroleum products (-59.0 percent), furniture and fixtures (-43.4 percent), and transport equipment (-19.0 percent). Miscellaneous manufactures (-17.7 percent), electrical machinery (-11.1), beverages (-8.4 percent) and textiles (-3.6 percent) round up the groups with losses. The value of production index (VaPi) on the other hand, contracted by 7.9 percent in the month, worse than July’s 5.5 percent and reversing the 4.1-percent expansion in August 2018. The latest contraction was blamed on the decline in the indices of nine major industry groups, also led by petroleum products (-61.8 percent). The others are transport equipment (-18.5 percent), electrical machinery (-14.3 percent), miscellaneous manufactures (-14.0 percent), textiles (-6.8 percent) furniture and fixtures (-6.6 percent), beverages (-5.3 percent), footwear and wearing apparel (-1.4 percent), and paper and paper products (-0.3 percent). But production indices in construction-related manufactures grew, with notable increases in the volume and value of non-metallic mineral products (8.9 percent for VoPI and 12.7 percent for VaPI) and basic metals (16.5 percent for VoPI and 6.8 percent for VaPI). In a statement, the National Economic and Development Authority (NEDA) credited this particular growth to the construction of new cement plants and the expansion in the government’s infrastructure spending. According to Socioeconomic Planning Secretary Ernesto Pernia, fast-tracking the implementation of infrastructure projects would help the manufacturing sector recover, despite the pessimistic business outlook brought about by lingering uncertainty in the global market. “The completion of infrastructure projects will improve transport and logistics, [which are] crucial in supporting the manufacturing sector. An extension in the validity of the 2019 budget, particularly for infrastructure projects, and the immediate passage of the proposed national budget for fiscal year 2020 will assure [the] sustained implementation of construction-related projects and activities,” the NEDA chief said. Such projects, he added, are expected to contribute to the increase in employment and disposable incomes, which will result in increased demand for consumer goods.  “Domestic demand is seen to be more favorable in the third quarter of 2019, with [the] production of consumer goods, such as food and beverages, tobacco, footwear and wearing apparel, and furniture and fixtures…expected to increase,” the official said. Pernia also said increasing efforts to promote technology and innovation through the adoption of digital solutions across sectors and the amendment to the Foreign Investment Act of 1991 would prop up the manufacturing sector in the long run.

Source: Manila Times

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