Thursday, October 29, 2015

US economic growth slows sharply; After $6.6bn loss, Deutsche Bank to cut 15,000 jobs; China ends one-child policy after 35 years

1 US economic growth slows sharply (Andrew Walker on BBC) US economic growth slowed sharply in the third quarter of the year. Gross domestic product grew at an annualised pace of 1.5% between July and September, according to the Department of Commerce, down from a rate of 3.9% in the second quarter. The slowdown was partly due to companies running down stockpiles of goods in their warehouses.

It is a sharp slowdown compared with the previous three months. But the biggest reason for it was companies running down stocks - meeting demand by selling stuff they already have in the warehouse. That is a process that has a limit. Sooner or later, they will feel they have sold enough and may want to start replenishing those stocks.

Consumer spending remained fairly robust. Yes, it too did slow, but not by all that much. It grew by 0.8% in the three-month period, or 3.2% in the annualised terms that the US official statisticians prefer.

The big question for markets is, when will the Federal Reserve raise interest rates? Will the central bank think the economy is strong enough to take it? The markets seem to think the new figures have, if anything slightly increased the chances that the Fed will move at its next policy meeting in December.

Low oil prices have hit US energy firms so far this year. But lower fuel prices have been good news for consumer spending, which accounts for more than two-thirds of US economic activity. Analysts said that the running down of warehouse stockpiles in the third quarter was likely to be a temporary effect and they expected growth to accelerate again in the fourth quarter.

2 After $6.6bn loss, Deutsche Bank to cut 15,000 jobs (Khaleej Times) Deutsche Bank says it is cutting 35,000 jobs through redundancies and the sale of businesses as new CEO John Cryan seeks to make Germany's biggest lender more manageable and profitable. The bank will slash 9,000 full-time jobs, 6,000 contractor positions and sell operations with 20,000 more workers. It will also close local operations in 10 smaller countries.

The announcement came as the bank reported a net loss of 6 billion euros ($6.6 billion). Net profit was hit by 5.8 billion euros in noncash charges for the reduced value of its investment bank and retail bank Postbank, which it plans to sell.

The bank has struggled to reduce costs and make its administration more transparent and ethical as it deals with uneven profits and investigations into rigging financial benchmarks. Former co-CEO Anshu Jain resigned in June. The other co-CEO, Juergen Fitschen is leaving in May.

The bank has set aside billions to pay for fines and legal settlements and costs in a several cases, including the rigging by a number of banks of the key interest rate benchmark known as the London Interbank Offered Rate, or Libor. The bank said it would close its onshore operations in Argentina, Chile, Mexico, Peru, Uruguay, Denmark, Finland, Norway, Malta and New Zealand. Some branches in Germany would close as well, Cryan said.

3 After 35 years, China ends one-child policy (Tom Phillips in The Guardian) China has scrapped its one-child policy, allowing all couples to have two children for the first time since draconian family planning rules were introduced more than three decades ago.

Some celebrated the move as a positive step towards greater personal freedom in China. But human rights activists and critics said the loosening – which means the Communist party continues to control the size of Chinese families – did not go far enough. “The state has no business regulating how many children people have,” said William Nee, a Hong Kong-based activist for Amnesty International.

For months there has been speculation that Beijing was preparing to abandon the divisive family planning rule, which was introduced in 1980 because of fears of a population boom. Demographers in and outside China have long warned that its low fertility rate – which experts say lies somewhere between 1.2 and 1.5 children a woman – was driving the country towards a demographic crisis.

The Communist party credits the policy with preventing 400m births, thus contributing to China’s dramatic economic takeoff since the 1980s. But the human toll has been immense, with forced sterilisations, infanticide and sex-selective abortions that have caused a dramatic gender imbalance that means millions of men will never find female partners.

In one of the most shocking recent cases of human rights abuses related to the once-child policy, a woman who was seven months pregnant was abducted by family planning officials in Shaanxi province in 2012 and forced to have an abortion.

Opponents say the policy has created a demographic “timebomb”, with China’s 1.3 billion-strong population ageing rapidly, and the country’s labour pool shrinking. The UN estimates that by 2050 China will have about 440 million people over 60. The working-age population – those between 15 and 59 – fell by 3.71 million last year, a trend that is expected to continue.

Experts said the relaxation of family planning rules is unlikely to have a lasting demographic impact, particularly in urban areas where couples were now reluctant to have two children because of the high cost.

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