Monday, February 8, 2016

What is holding back the world economy; Bad debt worries South Africa; How social media is transforming the fashion industry

1 What is holding back the world economy (Joseph Stiglitz in The Guardian) Seven years after the global financial crisis erupted in 2008, the world economy continued to stumble in 2015. According to the United Nations’ report World Economic Situation and Prospects 2016, the average growth rate in developed economies has declined by more than 54% since the crisis. An estimated 44 million people are unemployed in developed countries, about 12 million more than in 2007, while inflation has reached its lowest level since the crisis.

More worryingly, advanced countries’ growth rates have also become more volatile. This is surprising, because, as developed economies with fully open capital accounts, they should have benefited from the free flow of capital and international risk sharing – and thus experienced little macroeconomic volatility. Furthermore, social transfers, including unemployment benefits, should have allowed households to stabilise their consumption.

But the dominant policies during the post-crisis period – fiscal retrenchment and quantitative easing (QE) by major central banks – have offered little support to stimulate household consumption, investment, and growth. On the contrary, they have tended to make matters worse.

Neither monetary policy nor the financial sector is doing what it’s supposed to do. It appears that the flood of liquidity has disproportionately gone towards creating financial wealth and inflating asset bubbles, rather than strengthening the real economy. Despite sharp declines in equity prices worldwide, market capitalization as a share of world GDP remains high. The risk of another financial crisis cannot be ignored.

There are other policies that hold out the promise of restoring sustainable and inclusive growth. These begin with rewriting the rules of the market economy to ensure greater equality, more long-term thinking, and reining in the financial market with effective regulation and appropriate incentive structures.

But large increases in public investment in infrastructure, education, and technology will also be needed. These will have to be financed, at least in part, by the imposition of environmental taxes, including carbon taxes, and taxes on the monopoly and other rents that have become pervasive in the market economy – and contribute enormously to inequality and slow growth.


2 Bad debt worries South Africa cities (Shenaaz Jamal & Penwell Dlamini in Johannesburg Times) South Africa's low economic growth is squeezing the life out of municipalities as ratepayers fail to pay for council services.

In Gauteng, which boasts higher job opportunities, the three metros have about R30-billion of irrecoverable debt. Although Ekurhuleni, Tshwane and Johannesburg got unqualified audit opinions, the a uditor-general expressed concern about the money he considers irrecoverable.

This is debt the cities are unlikely to recover and has been on the books for more than one year. A City of Johannesburg source said its irrecoverable debt is about R17-billion. Its capital budget for 2014-15 is R10.8-billion. For Ekurhuleni, which received a clean audit, the auditor-general identified R9.1-billion of irrecoverable debt. The metro's budget is R3.9-billion. Tshwane had a capital budget of R4.1-billion and irrecoverable debt of R800-million.

SA Local Government Association's Nhlanhla Ngidi said: "Once you alleviate the poverty levels in your supply area, a lot of people will be able to pay their bills. In a place where you have people who can afford to pay and choose not to, when you cut their energy, they find a way to [pay]. But, if you cut energy of a person who cannot afford to pay, they will connect illegally."


3 How social media is transforming fashion industry (Katie Hope on BBC) When Brooklyn Beckham revealed on his Instagram feed that he would be photographing Burberry's latest fragrance ad campaign, the outrage was palpable. Commentators rushed to criticise the fashion house's choice of the 16-year-old son of David and Victoria Beckham for the shoot, instead of an established industry professional.

But Burberry boss Christopher Bailey suggested it might have been Brooklyn's 5.9 million Instagram followers, rather than his parents, that got him the gig. This is the new reality: the choice of Brooklyn as photographer was less about how well-connected famous people can get their kids into competitive professions than a reflection of just how much social media has shaken up the fashion industry.

It's now the number of followers on Instagram, Pinterest, Facebook and Twitter, rather than your experience necessarily, that can secure you a top job. The influence of social media has rapidly changed how models are chosen. Kendall Jenner, who shot to fame thanks to the Keeping Up with the Kardashians reality TV show, has been dubbed the "ultimate Instagirl" for her huge social media fan base: 48 million followers on Instagram and 15.3 million on Twitter.

Behind-the-scenes pictures and videos shared on its Instagram and Snapchat feeds of the Brooklyn shoot had some 15 million impressions in the eight hours the shoot was live. The fashion retailer has nearly 40 million followers across 20 different social media platforms and openly admits that it has become as much a media content producer as a design company.

Yet not all the big fashion houses have embraced social media due to concerns over the potential loss of control over their brand image. This may be a risky approach, however. Online sales in 2014 accounted for just 6% of the $250bn global market for luxury goods, but they're growing at a much faster rate than shop sales, according to management consultancy McKinsey.

Sunday, February 7, 2016

China currency reserves plunge; US debt crosses $19trn; A quarter of North Sea oil platforms could be scrapped in 10 years

1 China currency reserves plunge (BBC) China's foreign currency reserves plunged by $99.5bn in January, the People's Bank of China reported. China has been running down its vast foreign currency reserves in an attempt to boost the value of its own currency and stem a flow of funds overseas.

At $3.23 trillion, China still has the world's biggest reserve of foreign currency holdings. But that has declined by $420bn over six months and stands at the lowest level since May 2012. The Chinese authorities fear a rapid devaluation of their currency, as it could destabilise the economy.

Many Chinese businesses hold debt in dollars and managing those debts with a severely weakened yuan could cause problems and some companies to fail. So China has been trying to engineer an ordered devaluation of the yuan, but that is proving hard to deliver.

Investors have been trying to pull funds out of investments priced in yuan and speculators have been betting on further falls in the currency. To stabilise the situation China has been selling dollars and buying yuan.

Commenting on the decline, veteran economist, George Magnus noted that there is "confusion" over China's foreign currency policy. "Clearly this can't go on for long," he tweeted, referring to the fall in currency reserves.


2 US debt crosses $19trn (Khaleej Times) The US is now officially a whopping $19 trillion in debt - that's T for trillion which translates to nearly $19,000 billion. According to the latest figures released by the US Treasury Department, technically the US federal government is in debt, The Washington Times reported.

According to the report, President Obama took office in 2009 with $10.6 trillion, adding up to $8 trillion during his two terms - taking the national debt to $19 trillion at a 'record pace'. The Congressional Budget Office has said that this is likely to increase further.

As of February 5, the total federal government debt stood at $19.01 trillion. Of this $13.7 trillion is debt held by the public and the rest is internal government borrowing, including the IOUs the government has left in the Social Security trust fund over the last three decades.

So how much is the US citizen in debt? According to a popular US national debt counter site, www.us.debtclock.org: Debt per US citizen is $58,853 and debt per taxpayer is $158,836.


3 A quarter of North Sea oil platforms could be scrapped in 10 years (The Guardian) Almost 150 oil platforms in UK waters could be scrapped within the next 10 years, according to industry analysts.

Douglas Westwood, which carries out market research and consultancy work for the energy industry worldwide, said it anticipated that “146 platforms will be removed from the UK during 2019-2026”, around 25% of the current total.

The North Sea has been hit hard by plummeting oil prices, with the industry body Oil and Gas UK estimating 65,000 jobs have been lost in the sector since 2014. But Douglas Westwood said that decommissioning could provide an opportunity for the specialist firms involved in the work.

A paper on its website predicted that the “UK will dominate decommissioning expenditure”. This is due to the “high number of ageing platforms in the UK, which have an average age of over 20 years and are uneconomic at current commodity prices, as a result of high maintenance costs and the expensive production techniques required for mature fields”.


Saturday, February 6, 2016

Weak US job growth shows rate rise was a mistake; ArcelorMittal slumps to $8bn loss; Apple's spaceship-like campus

1 Weak US job growth shows rate rise was a mistake (Larry Elliott in The Guardian) It is hard to imagine that the Federal Reserve would have raised interest rates in December had it known then what it knows now. News that employment growth as measured by the increase in non-farm payrolls was up by 151,000 is just the latest piece of evidence to suggest that the US economy is going through a tough period.

Growth in the fourth quarter was weak, sales of durable goods suggest that businesses are reluctant to invest, and consumers are saving rather than spending the windfall from lower oil prices. Even so, Janet Yellen, chairman of the Fed, is not going to hit the panic button and reverse December’s increase – at least not yet.

There are two reasons for that: a U-turn would be a considerable blow to the central bank’s reputation; and the Fed will want to see more evidence before it decides that the world’s biggest economy is heading for a recession rather than simply going through a temporary soft patch.

When the Fed raised rates in December, there was an assumption it would move for a second time in March. Two months of market turmoil and indifferent economic news means that is now completely out of the question. Employment is a lagging indicator of economic performance: it says more about what was happening a few months ago than it does about the present state of activity.

The Fed will sit tight and wait to see whether the strong jobs data in the last few months of 2015 was as good as it gets. If that is the case, the US is heading for a bumpy, perhaps even a hard, landing. And it will be time for Yellen to panic.


2 ArcelorMittal slumps to $8bn loss (BBC) ArcelorMittal has slumped to an annual loss of almost $8bn as the world's biggest steelmaker was hit by plunging commodity prices. The net loss included $4.8bn of writedowns, mainly in its mining division, and $1.4bn of exceptional charges in its steel operations.

The loss was more than four times worse than the $1.86bn posted for 2014. The company plans to axe the dividend and cut costs in response. ArcelorMittal's Amsterdam-listed shares have sunk more than 60% in the past 12 months.

Lakshmi Mittal, chairman and chief executive, said 2015 was a very difficult year for the steel and mining industries, with steel prices falling because of excess capacity in China. The crisis in the steel industry has hit the UK. Last month, Tata Steel said it was cutting more than 1,000 UK jobs. They came on top of the 1,200 jobs that went last October.

ArcelorMittal is also one of the world's largest producers of iron ore and coal. Sales fell 20% to $63.6bn, largely because of sinking iron ore prices, even though steel shipments only fell slightly. It produced 92.5 million tonnes of crude steel last year and 62.8 million tonnes of iron ore.

The company aims to raise $3bn in new capital and sell a minority stake in automotive engineering company Gestamp to reduce its debt. The debt pile stood at $15.7bn, down $1.1bn, to the lowest level since the ArcelorMittal merger.


3 Apple’s spaceship-like campus (Emily Price in San Francisco Chronicle) It looks like Apple’s new Cupertino headquarters is getting closer to becoming a reality. A new video shows a bird’s eye view of the office building under construction, and it’s starting to look a lot more like a building (and a spaceship, but that’s neither here nor there).

The video, recorded by local videographer Duncan Sinfield using a drone, captures some of the first shots of the inside of the structure, including a look at the headquarter’s underground auditorium (with a circular space-like roof). The office space is truly massive, something that comes across in the filming.

Apple’s new headquarters is being built on a 176-acre site, which equates to it being essentially a 2.8 million-square-foot office building. Once completed, the space is expected to house close to 13,000 employees and include 300,000 square feet of research facilities, as well as underground parking.
Glass on each side of the ring will allow employees to look out from both sides. Solar panels will be used as backup power for the building, while it will get most of its power from the Cupertino power grid.

Originally Apple employees were expected to start moving into the structure last year. That move-in date has been adjusted to sometime in 2016. Employees are expected to move in to the main structure, while construction continues on other pieces of the building. The project is expected to cost Apple roughly $5 billion before it is completed.


Thursday, February 4, 2016

UK interest rates to stay at record low; Indonesia growth slows for fifth year; Shell confirms 10,000 job losses

1 UK interest rates to stay at record low (Katie Allen in The Guardian) The prospect of a UK interest rate rise has receded further after the Bank of England cut its forecasts for growth, wages and inflation. However, the governor, Mark Carney, warned borrowers against getting too comfortable with rock-bottom rates.

Carney quashed recent market speculation that a global economic slowdown could prompt a rate cut. But at the same time, the Bank revealed that its policymakers had voted unanimously to hold borrowing costs this month and they gave little indication that there would be an early increase.

The Bank governor used his quarterly inflation report briefing to say that after almost seven years at a record low of 0.5%, interest rates were “more likely than not” to need to go up over the next two years. He also cautioned against repeating the mistakes of the past, when rate rises had come as a shock to indebted households and businesses.

After a tumultuous start to the year on financial markets thanks to jitters over China’s economic slowdown, the Bank predicted that emerging economies were likely to grow more slowly than in recent years and that global growth would be “only modest”.


2 Indonesia growth slows for fifth year (BBC) Growth in South East Asia's largest economy, Indonesia, has come in at 4.76% for 2015, marking the fifth consecutive yearly decline. Weaker commodity prices and consumer spending, together with a slowdown in its key trading partner, China, has hurt growth.

Towards the end of last year, however, the economy expanded by just over 5%, boosted by government spending. President Joko Widodo had promised to lift annual growth to 7% on average. However, the country has seen an average of just under 6% growth over the past decade and analysts have said growth is unlikely to improve for some time.

Mr Widodo made his promise to raise growth when his five-year term began in 2014, but he has faced problems boosting government spending and has seen several large infrastructure projects delayed.

A $5.5bn high-speed railway project, funded by China, was signed last year and is scheduled to be up and running by 2019. But the project has faced widespread objections from transport experts and its long-term viability has been questioned.

Mr Widodo has also faced international condemnation for the country's man-made forest fires, which have caused serious economic and environmental damage. In December, the World Bank said Indonesia's forest fires last year had likely cost the country more than twice the amount spent on reconstruction efforts after the 2004 Aceh tsunami. In its quarterly report, the bank said the fires had cost some $15.72bn.


3 Shell confirms 10,000 job losses (Khaleej Times) Royal Dutch Shell on Thursday announced an 87-per cent plunge in annual net profits on slumping oil prices. The Anglo-Dutch group reported profit after tax of $1.94 billion for 2015, compared with almost $15 billion the previous year.

The slump had been expected after Shell announced two weeks ago that it foresaw annual profit of between $1.6 billion and $2.0 billion.  The update comes as Shell is slashing thousands of jobs, selling assets worth billions of dollars and exiting projects as oil prices tumble on world markets. The company is meanwhile close to completing a mega-takeover of British rival BG Group.

"We are making substantial changes in the company, reorganising... and reducing costs and capital investment, as we refocus Shell, and respond to lower oil prices," Royal Dutch Shell chief executive Ben van Beurden said in the earnings statement. "As we have previously indicated, this will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies."

The company is very near to finalising a $68-billion takeover of smaller British rival BG Group after the pair won shareholder backing and cleared regulatory hurdles. The deal is intended at strengthening Shell's position in the liquefied natural gas market.

Oil companies have been downsizing staff and mothballing drilling rigs in response to a drop in oil prices from more than $100 a barrel in July 2014 to about $30 currently. On Tuesday, US energy giant ExxonMobil announced plans to slash its capital budget and suspend a share repurchase programme. The same day, British group BP posted its biggest loss in at least 20 years and announced plans to axe 3,000 jobs.


Wednesday, February 3, 2016

Trans-Pacific Partnership deal signed; Lloyds Bank cutting 1,755 jobs; UAE seeks minister below 25 years

1 Trans-Pacific Partnership deal signed (BBC) The Trans Pacific Partnership, one of the biggest multinational trade deals ever, has been signed by ministers from its 12 member nations in New Zealand. The ceremony in Auckland brings the huge trade pact, which has been five years in the making, another step towards to becoming a reality.

But the TPP continues to face opposition. The 12 nations account for some 40% of the world's economy - they now have two years to ratify or reject the pact. The TPP involves the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.

Those against the deal, particularly some Americans, fear it could mean jobs will move from the US to developing countries. However, US President Barack Obama said the agreement was a new type of trade deal "that puts American workers first".

The trade deal looks to facilitate investment between 12 countries across the Pacific Rim, which together account for about 40% of the global economy. The US-led initiative is a key part of Mr Obama's so-called pivot to Asia but has proved to be a controversial issue ahead of the US elections in November. US Trade Representative Michael Froman said the deal could add $100bn a year to US growth.


2 Lloyds Bank cutting 1,755 jobs (Jill Treanor & Sean Farrell in The Guardian) Lloyds Banking Group is cutting 1,755 jobs and closing 29 branches as part of a plan by its chief executive, António Horta-Osório, to cut costs as he prepares the bank for privatisation.

Staff at Britain’s biggest retail bank were told about the job losses, which cover large parts of the group, on Wednesday, but union officials said they hoped that the reductions could be achieved by voluntary means. The bank said it would add 170 new jobs in retail and commercial banking and in its legal team, taking the net figure for job losses to about 1,585.

Horta-Osório is continuing with the cost reduction programme even though the chancellor, George Osborne, has admitted that he cannot press on with a sale of the government’s remaining Lloyds shares to the public because of market turmoil, which has knocked the bank’s share price.

The posts that are being axed are part of the 9,000 job cuts announced by Horta-Osório in 2014, when he said that a need to “digitise” the business would also result in the closure of 200 branches. According to officials at the Accord union, which has 23,000 members, about 60% of those cuts have now been announced.

Lloyds, which operates under a number of brands, will close 19 Lloyds, seven Bank of Scotland and three Halifax branches in June. The bank employs about 77,000 people and has more than 2,000 branches.


3 UAE seeks minister below 25 years (Khaleej Times) Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has called for a young Emirati to represent the country's youth as a cabinet minister. In a series of tweets, Shaikh Mohammed asked that universities nominate men and women under the age of 25 for the position.

"I would like to choose a young person under the age of 25 to represent our youth, their issues and ambitions as a UAE government minister," he tweeted. Shaikh Mohammed noted that the large number of young people in the Arab World means that they deserve representation in the decision-making process.

 "Our young country was built by the hands and achievements of youth. Youth is our strength and speed and is our treasure for the future," he added. The decision quickly became a hot topic on social media, and rapidly topped the UAE's 'trending' list.


Tuesday, February 2, 2016

Eurozone unemployment at lowest level in four years; Saudi fiscal reserves at four-year low; Yahoo reports $4.4bn loss, to cut 15% staff; BP profits halve, shares plunge

1 Eurozone unemployment at lowest level in four years (San Francisco Chronicle) Unemployment across the 19-country eurozone fell in December for the 15th month running to its lowest level in a little more than four years, official figures have shown.

However, the monthly decline was the smallest in six months and has reinforced concerns that the recovery was already losing momentum at the end of 2015 — even before the China-related turmoil in financial markets stoked fears for the global economic outlook.

Statistics agency Eurostat said the number of people out of work across the eurozone in December decreased by 49,000 to a total of 16.75 million, its lowest level since October 2011. The last time the eurozone has enjoyed a longer run of falling unemployment was the 21-month stretch that ended in June 2007.

As a result of the latest monthly fall, the unemployment rate fell from 10.5 percent to 10.4 percent, its lowest since September 2011. Though unemployment has been falling steadily, it's still relatively high across the region, certainly in comparison with the US, where the jobless rate stands at 5 percent.

And the overall numbers continue to mask big disparities. While Germany's unemployment rate stands at 4.5 percent, according to Eurostat, Greece and Spain remain lumbered by jobless rates above 20 percent. And youth unemployment is way too high at 22 percent across the eurozone as a whole.


2 Saudi fiscal reserves at four-year low (Gulf News) Saudi Arabia’s fiscal reserves dropped to a four-year low last year as the government sought to finance a budget deficit caused by plunging oil revenues, a report says.

The reserves of the world’s largest crude exporter dropped to $611.9 billion at the end of 2015, the lowest level since 2011, down from $732 billion a year before, the Saudi Jadwa Investment said. Jadwa said it expected reserves to fall to around $500 billion by the end of 2016, after oil prices fell by three quarters since mid-2014.

The kingdom, the second largest crude producer after Russia, posted a record budget deficit of $98 billion last year after oil income dived by 60 per cent to just $118 billion. Riyadh also projected an $87 billion deficit for this year but Jadwa forecast the shortfall to be more than $107 billion.

To help finance the budget deficit, the kingdom in December introduced a series of austerity measures raising fuel prices by up to 80 per cent and increasing the prices of electricity, water, natural gas and others. Jadwa said it expected inflation to soar this year to 3.9 per cent, from 2.2 per cent last year, as a result of the price hikes. The kingdom also issued bonds in the domestic market worth $30 billion.

The International Monetary Fund last month revised downward Saudi gross domestic product growth to just 1.2 per cent this year, the lowest since 2009. Its GDP grew 3.4 per cent in 2015. Saudi Arabia is currently pumping 10.2 million barrels of crude per day.


3 Yahoo reports $4.4bn loss, to cut 15% of staff (Jana Kasperkevic & Julia Carrie Wong in The Guardian) Yahoo chief executive Marissa Mayer has announced plans to cut the company’s workforce by 15% and close five foreign offices by the end of 2016.

The struggling tech company reported a $4.4bn loss for the last three months of 2015 as it wrote down the value of assets including Tumblr, the blogging site it bought for $1bn in 2013. Mayer, a former Google executive, has come under pressure from activist shareholders unhappy with her tenure. She announced an “aggressive strategic plan” that is expected to lead to the sale of parts of its business.

Yahoo’s fourth quarter earnings for 2015 were better than expected, coming in at $1.27bn. Overall, the revenue for 2015 was $4.9bn, up from $4.6bn the year before. But the company’s traffic acquisition costs (TAC), the amount Yahoo spends to attract users to its websites, rose to $271m in the fourth quarter, up from $74m a year earlier.

Yahoo said its strategic plan would simplify the company and narrow its focus. While revenue has gone up, Yahoo shares have fallen 33% over the past year. Over the past three months they have fallen by 17%.  The company also reinforced its commitment to spinning off its $31bn stake in Alibaba, the Chinese e-commerce business.


4 BP profits halve, shares plunge (BBC) Shares in BP have ended Tuesday almost 9% lower after it reported that annual profits had more than halved. The oil giant said its profits had fallen by 51% to $5.9bn (£4.1bn), compared with $12.1bn in 2014 following a dramatic slide in oil prices.

Oil prices fell sharply on Tuesday, with Brent crude down 5.3% to $32.42. BP's underlying fourth-quarter profits sank to $196m, compared with $2.2bn for the same period in 2014 and far worse than analysts had expected. A further 3,000 job cuts were also announced by BP on Tuesday.

Last year, it said 4,000 jobs would go in its upstream division as part of a $2.5bn restructuring programme. BP said its upstream business, which covers exploration and production, slumped to a $728m loss in the final quarter. Bob Dudley, BP chief executive, said the company was making good progress in managing and lowering costs and capital spending.

Monday, February 1, 2016

Alphabet overtakes Apple as most valuable company; WhatsApp has a billion users; Oil slump negative for US economy in short run; Dubai International stays world's busiest airport

1 Alphabet overtakes Apple as most valuable company (Simon Bowers in The Guardian) Google’s parent company Alphabet has become the world’s most valuable listed company after announcing that its global revenues rose 13% to $75bn last year, and the group’s tax rate fell to just 17%.

In after-hours trading, the share price for Alphabet, Google’s parent company, immediately jumped 9%, implying a total stock market value for Alphabet of $568bn. That meant it eclipsed rival Californian tech firm Apple, which has a value of $535bn, making Alphabet the most valuable company in the world.

As chief financial officer, Ruth Porat, summarised the group’s tax position, there was no mention of the £130m 10-year tax settlement with HMRC that has led to widespread outrage. Instead, Porat highlighted that a better-than-expected settlement with the US tax authorities – relating to separate multi-year dispute – had seen the group’s effective tax rate drop sharply during the last three months of the year.


2 WhatsApp reaches billion users (BBC) Mobile messaging service WhatsApp is now used by a billion people every month, Facebook has reported. The Facebook-owned app now outperforms the social network's own Messenger mobile app, which has 800 million monthly users.

The company said 42 billion messages and 250 million videos were sent over WhatsApp daily. But one analyst said WhatsApp still trailed behind local competition in some key markets. "There are big markets where WhatsApp isn't the dominant player," said Jack Kent, mobile analyst at IHS.

"WeChat in China has more than 500 million users, while Line is popular in Japan, and Kakao Talk is big in South Korea. But WhatsApp is certainly the most internationally successful. Part of that is down to its pure focus on communication, providing low cost chat that is very reliable.

"Other apps have focused on monetisation, games and stickers but WhatsApp's appeal is that it is light on monetisation and it has now dropped its small annual fee completely." Facebook bought the mobile messaging app in 2014, in a deal worth $19bn. The usage data the platform generates for Facebook could help the company improve its targeted advertising, which is its core business model, said Mr Kent.


3 Oil slump negative for US economy in short run (Straits Times) The US economy eked out anaemic growth in the final three months of 2015, and the struggling performance of the oil and gas sector was a major contributor to the slowdown.

Real gross domestic product rose at an annualised rate of 0.7 per cent in the fourth quarter, down from 2.0 per cent in the third and 3.9 per cent in the second, the Bureau of Economic Analysis (BEA) has reported. The economy was buffeted by a broad-based slowdown in consumer, business and government spending growth, as well as a deterioration in trade performance thanks to the strengthening currency.

The slowdown in oil and gas drilling accounted for the whole of the drop in business fixed investment in structures and probably contributed to the slowdown in equipment spending too. The economic slowdown during the second half of 2015 has sparked a vigorous debate about whether lower oil and gas prices have a positive or negative impact on the US economy.

Lower prices are clearly negative for oil and gas producers but positive for consumers, so to the extent the US is still a net importer of oil and gas the impact is clearly positive in the long run. But in the short run the impact is probably negative because the effect on oil and gas investment is immediate while the boost to consumer spending and energy-consuming businesses takes longer to filter through.

The dynamics are similar to the famous J-curve effect in international trade: a currency devaluation tends to worsen the trade balance in the short run because the rise in import costs is immediate while it takes longer for exporters to raise their foreign sales. Something similar appears to be happening to the US, which is not only one of the world's largest oil and gas consumers but one of its largest producers too.

The oil and gas industry was one of the biggest and fastest-growing sources of investment during the 2010-2014 boom, and provided an enormous boost for a huge web of suppliers. The collapse in oil and gas prices has been an enormous negative shock for an economy which is also struggling to cope with an appreciating exchange rate and too many stocks in many other parts of the supply chain as well.


4 Dubai International stays world’s busiest airport (Gulf News) Dubai International saw through over 78 million passengers in 2015, more than enough to retain its title of the world’s busiest airport for international passengers, operator Dubai Airports has said.

A total of 78,014,838 passengers passed through the airport in the 12 months to December 31, 2015, a 10.7 per cent increase on the 70,473,893 passengers that used the airport a year earlier. Its closest rival, London’s Heathrow, handled 69.8 million international passengers and a total of 74,959,000 passengers including domestic in 2015.

Dubai Airports Chief Executive Paul Griffiths said 2015 was “another banner year” for the airport, according to Monday’s statement. Griffiths also said the $1.2 billion Concourse D, part of Terminal 1, will open this quarter.

India was once again Dubai’s strongest market in 2015 with 10,391,376 passengers, up 17 per cent compared to 2014, travelling on routes between the country and emirate. The UK was the second largest market for passengers with 5,682,307 passengers, up 6 per cent, and closely followed by Saudi Arabia with 5,466,358 passengers, up 12 per cent.

Cargo volumes also continued to grow in 2015, despite all dedicated freighter services moving to the emirates second airport Al Maktoum International at Dubai World Central (DWC) in 2014, Dubai Airports said. Dubai International handled 2,506,092 tonnes of air freight, up 3.4 per cent. December freighter volumes rose 5 per cent to 214,408 tonnes.