By Charles Riley, CNN Business
The United States and China have each in turn fueled the global economic recovery from the pandemic. Is Europe next?
The European economy rebounded more strongly than expected after the easing of foreclosure restrictions earlier this year. And it avoided some of the big risks that are now clouding the outlook for the United States and China.
S&P Global Ratings last week raised its European growth forecast for 2021 to 5.1% from 4.4%, citing rapid improvements in economic output, the labor market and high levels of business investment.
The Organization for Economic Co-operation and Development takes a similar view. He said last week that he expects the eurozone economy to grow 5.3% this year, an improvement of 1 percentage point from his May projection.
Overview: S&P now expects Europe to return to its pre-crisis GDP level before the end of this year, a quarter earlier than expected.
The economic recovery was reinforced by the European Union’s vaccination campaign, which started slowly but is now one of the most successful in the world. More than 72% of European adults over 18 have been fully immunized, according to official data, compared to 66% of Americans over 18.
The emergency response to the coronavirus also played a major role. The European Central Bank responded to the crisis with a major bond buying program and governments have put in place programs to ensure workers are paid.
More to come: European consumers have accumulated more than 300 billion euros ($ 350 billion) in excess cash reserves during the pandemic, according to S&P, and they are starting to spend, helping to fuel a continued rebound in services.
At the same time, EU countries are starting to receive huge grants and cheap loans from the bloc’s â¬ 800 billion ($ 940 billion) stimulus fund. The stimulus is expected to add 3.9% to eurozone GDP by 2026, according to S&P.
Condition Check: The United States and China are facing significant headwinds.
The vaccine rollout has failed in America, where the percentage of people who have received at least one dose is the lowest in the G7. The OECD lowered its US forecast for 2021 last week by 0.9 percentage point to 6%.
The Chinese economy will grow 8.5% this year, according to the OECD. But growth may have stalled in August, according to survey data, as officials tried to eradicate new outbreaks of the coronavirus. A sweeping regulatory crackdown on private companies could further dampen activity, and the country is bracing for the potential collapse of Evergrande.
The fate of the huge real estate developer remains uncertain after a deadline passed last week without the company being made aware of its intention to pay nearly $ 84 million in interest owed to bondholders.
Why it matters: Evergrande has total liabilities of around $ 300 billion, and some analysts fear that a disorderly collapse could trigger China’s ‘Lehman Bros’ moment by sending shocks through the financial system and the economy. economy. Real estate and related industries account for around 30% of Chinese GDP.
Can Europe take over if necessary? It remains to be seen.
The German Ifo business climate index fell in September, suggesting that the recovery is faltering in Europe’s largest economy. IHS Markit said trade activity in the euro area “grew at a markedly reduced pace” during the month, reflecting supply chain bottlenecks and concerns over the pandemic.
It is possible that the United States, China and Europe will all struggle for the rest of the year, putting policymakers ahead of a tough set of decisions as inflation continues to remain high.
“The most likely outcome is that the global recovery will continue, albeit at a slower pace, that inflation peaks in the next few quarters before falling back next year, and that central banks reduce their political support. in a progressive and well-reported manner, âNeil Shearing of Capital Economics wrote recently.
Marc Benioff wants to talk about Facebook
From the climate crisis to the Covid, Marc Benioff sees a common thread to what afflicts America today: the deception that is allowed to spread like wildfire on Facebook.
âThis digital revolution has the world in a way. And in that take, you can see the amount of mistrust and misinformation that’s happening, âBenioff told my CNN Business colleague Matt Egan.
The Salesforce CEO and owner of Time Magazine has warned that these lies deceiving social media users make it harder to solve the company’s biggest problems.
âLook at how it affects the world. You can talk about the political process. You can talk about climate. You can talk about the pandemic, âsaid Benioff. âIn each major subject, it comes down to the mistrust that occurs and especially to the amount of it sown by social networks. It must stop now.
The tech billionaire has called on Congress to crack down on Facebook’s misinformation problem.
âI own Time and am held accountable for what is produced on my platform,â Benioff said, adding that CNN and other media are also held accountable. âWhen it comes to Facebook, they are not being held responsible. They therefore have no incentive from the government. This must change.
Tuesday: US consumer confidence; Gains in microns
Wednesday: EIA Crude Oil Inventories, Evergrande Bond Payment Due
Thusday: jobless claims in the United States; CarMax gains; China PMI
Friday: Data on personal income and inflation in the United States; Eurozone inflation
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