Tuesday, February 21, 2017

Eurozone growth accelerates; India demonetization hits trust hurdle; South Korea women to live beyond 90

1 Eurozone growth accelerates (San Francisco Chronicle) Economic growth in the 19-country eurozone accelerated in February to a near six-year high. In its monthly survey of economic activity across the region, financial information company IHS Markit also said job creation was the best for nine and a half years, as order books and business optimism continued to pick up.

The firm's purchasing managers' composite output index — a broad gauge of economic activity — spiked to 56.0 points in February from 54.4 the previous month. The index now stands at its highest level since April 2011, and is pointing to potentially robust quarterly growth of 0.6 percent in the first three months of the year — if the current pace is sustained into March.

The big surprise within the survey was that France appears to be growing slightly faster than Germany for the first time since August 2012. Both are growing at rates of between 0.6 percent and 0.7 percent in the first quarter.

Political uncertainties abound in the eurozone this year. In addition to the French election in April/May, there are national polls taking place in the Netherlands next month and Germany in the autumn.

In light of last year's vote in Britain to leave the European Union and Donald Trump's victory in the US presidential election, there are concerns that a populist tide may sweep continental Europe, too. Given the uncertainties, few in the markets think the European Central Bank will soon end to its stimulus efforts to revive the eurozone economy.

2 India demonetization hits trust hurdle (Mihir Sharma in Gulf News) It’s been more than three months since Indian Prime Minister Narendra Modi told his people that 86 per cent of their currency would be worthless in a few hours. Since then, his government has scrambled to find justification for such an unprecedented and draconian decision — one justification after another, as it happens.

First, the goal was to eliminate “black money” — stacks of cash concealed from the taxman. When the programme turned up little such cash, officials started talking about combating counterfeit notes and terror financing. Finally, they hit on the idea that demonetisation would promote cashlessness, and that’s where we seem to have stopped for the moment.

I wonder how long the government will stick with that justification, though, because the initial data isn’t encouraging. According to the Reserve Bank of India, as cash trickles back into the economy, people are slowly abandoning the digital methods of payment they were forced to use in the first weeks after demonetisation.

As of January 18, only Rs9.2 trillion in new bills had re-entered the system, after Rs15.44 trillion in old bills had been taken out. This is unlikely to surprise most development economists. If the government had indeed intended to make digital payments more common, then they should have figured out ways to nudge people into using them, rather than trying to force the change.

Call it Liberalism 101 or call it common sense: If the state tries to force people into changing their behaviour, they resist. They find ways to get around state diktats and go back to old patterns of behaviour the moment the pressure’s off. Instead, governments have to set up patterns of incentives — gentle “nudges,” as behavioural economists would say — to get people to behave differently.

It’s particularly important to keep this in mind in low-trust economies like India. The reason that many poorer Indians keep a lot of cash in hand is not because they’re avoiding taxes — obviously — but because they have trouble trusting “formal” institutions that are quite visibly not set up for them to use.

3 South Korean women to live beyond 90 (James Gallagher on BBC) South Korean women will be the first in the world to have an average life expectancy above 90, a study suggests. Imperial College London and the World Health Organization analysed lifespans in 35 industrialised countries.

It predicted all would see people living longer in 2030 and the gap between men and women would start to close in most countries. "South Korea has gotten a lot of things right," Prof Majid Ezzati said. "They seem to have been a more equal place and things that have benefited people - education, nutrition - have benefited most people."

The data also forecasts that Japan, once the picture of longevity, will tumble down the global rankings. It currently has the highest life expectancy for women, but will be overtaken by both South Korea and France.

The US also performs poorly and is on course to have the lowest life expectancy of rich countries by 2030. The study predicts an average age of 80 for men and 83 for women - roughly the same state Mexico and Croatia will have achieved.

"[Society in the US is] very unequal to an extent the whole national performance is affected - it is the only country without universal health insurance” added Prof Ezzati

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