KUALA LUMPUR: The ringgit ended lower against the US dollar today as the greenback climbed to its highest this year, backed by optimism over possible stimulus to counter the global economic slowdown.
At 6pm, the ringgit finished at 4.1810/1860 against the greenback from 4.1750/1790 on Monday.
VM Markets Pte Ltd managing partner Stephen Innes said the dollar remains supported by US growth differentials.
“The strong US economic data versus the weaker data in Europe and China makes the greenback more attractive,“ he told Bernama.
There are also a lot of nervous investors ahead of US-China trade talks scheduled for next month.
“I think until there is a definitive or positive sign from those talks only then will the ringgit significantly strengthen,“ he added.
The ringgit was traded mixed against other major currencies.
The local note was better against the British pound at 5.0569/0646 from 5.0593/0645 on Monday and versus the euro to 4.6334/6393 from 4.6338/6399.
It was weakened against the yen at 3.9321/9372 from 3.9183/9228 and against the Singapore dollar to 3.0164/0204 from 3.0144/0184. — Bernama
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WASHINGTON: The U.S. economy likely grew at its slowest pace in more than two years in the second quarter as an acceleration in consumer spending was probably offset by weak exports and business investment.
The anticipated moderation in growth will come against the backdrop of rising risks to the economy’s outlook, especially from a trade war between the United States and China as well as slowing growth overseas, which are seen encouraging the Federal Reserve to cut interest rates next Wednesday for the first time in a decade.
With a strong labor market supporting consumer spending, a recession is, however, not on the horizon. The Commerce Department will publish the second-quarter gross domestic product (GDP) report on Friday at 8:30 a.m. EDT (1230 GMT).
“The slowing in the economy spooked the Fed and markets, but the sky is not falling,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “If we do get a recession next year it would be because we shot ourselves in the foot with the trade tensions.”
Gross domestic product probably increased at a 1.8% annualized rate in the second quarter, also because of a smaller inventory build, according to a Reuters survey of economists, after surging at a 3.1% pace in the January-March period.
But with the volatile exports and inventory categories accounting for much of the expected step-down in GDP, the slowest growth pace since the first quarter of 2017 will likely mask some underlying strength in the 10-year economic expansion, the longest in history.
The survey was completed before the release of June wholesale and retail inventories as well as durable goods and goods trade deficit data, which led the Atlanta Fed to cut its forecast by three-tenths of a percentage point to a 1.3% rate.
The economy is slowing largely as the stimulus from the White House’s $1.5 trillion tax cut package fades. The tax cuts together with more government spending and deregulation were part of measures adopted by the Trump administration to boost annual economic growth to 3.0% on a sustained basis.
The economy grew 2.9% in 2018 and growth this year is expected to be around 2.5%. Economists estimate the speed at which the economy can grow over a long period without igniting inflation at between 1.7% and 2.0%.
“As the benefits of fiscal stimulus fade and trade policy uncertainty and slowing global demand remain headwinds to business investment, U.S. GDP growth should moderate,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
The GDP report is also expected to show a pickup in inflation last quarter, but the overall trend likely remained benign. The government will also publish revisions to GDP data from 2014 through the first quarter of 2019.
STRONG CONSUMER SPENDING
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, is expected to have surged after slowing to a 0.9% rate in the first quarter, the weakest in a year. Some of the slowdown in consumer spending early in the year was blamed on a 35-day partial shutdown of the government. Spending is being supported by the lowest unemployment rate in nearly 50 years, which is lifting wages.
The jump in consumer spending was, however, likely blunted by a sharp drop in exports, in a reversal of the strong growth experienced in the first quarter. Weak exports are expected to have resulted in the deterioration of the trade deficit in the second quarter. Trade is believed to have subtracted from GDP growth last quarter after contributing 0.94 percentage point in the January-March period.
The acceleration in consumer spending likely helped businesses to whittle down an inventory overhang, resulting in a smaller inventory build. While that probably weighed on GDP growth in the second quarter, it is a potential boost to manufacturing. Businesses have been placing fewer orders with factories while working through stockpiles of unsold goods, which contributed to undercutting manufacturing production.
Business investment was probably weak in the second quarter, with spending on equipment expected to have contracted again after declining at its steepest pace in three years in the January-March period.
Fed Chairman Jerome Powell early this month flagged business investment as one area of weakness in the economy, noting it had “slowed notably,” and that this might “reflect concerns about trade tensions and slower growth in the global economy.”
Design problems at aerospace giant Boeing have hurt business investment, with some spillover to exports.
Boeing reported its biggest-ever quarterly loss on Wednesday due to the spiraling cost of resolving issues with its 737 MAX airplane and warned it might have to shut production of the grounded jet completely if it runs into new hurdles with global regulators to getting its best-selling aircraft back in the air.
The plane was grounded worldwide in March after two fatal crashes in Ethiopia and Indonesia. Production of the aircraft has been reduced and deliveries suspended. Economists estimate the 737 MAX troubles cut at least two-tenths of a percentage point from GDP growth in the second quarter.
“There could be more noticeable effects on various growth components, with weakness in related equipment spending and exports and a partially offsetting increase in inventories,” said Daniel Silver, an economist at JPMorgan in New York.
Business spending on structures, which include oil and gas well drilling, is expected to have declined last quarter. Spending on intellectual products, including research and development, likely increased.
Strong growth in government investment is expected, but spending on homebuilding likely contracted for a sixth straight quarter. – Reuters
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BEIJING: China today rebuffed a suggestion from US President Donald Trump that Beijing needs a trade deal with the United States because its economy is slowing, saying this was “totally misleading” and that both countries wanted an agreement.
Trump, in a Monday tweet, seized on slowing economic growth in China as evidence that US tariffs were having “a major effect” and warned that Washington could pile on more pressure.
Official data on Monday showed China’s economic growth cooled to 6.2% in the second quarter, the weakest annual pace in at least 27 years, amid trade pressure from the United States. In the first half, the economy grew 6.3% compared with a year earlier.
Chinese Foreign Ministry spokesman Geng Shuang said China’s first-half pace was a “not bad performance” considering global economic uncertainty and slowing world growth, and in line with outside expectations.
China’s stable growth was good for the world and also the US economy, Geng told a daily news briefing.
“As for United States’ so-called ‘because China’s economy is slowing so China urgently hopes to reach an agreement with the US side’, this is totally misleading,” he added.
Both China and the United States wanted to reach a trade deal, not China alone, Geng said.
Many people in the United States strongly opposed the tariffs and the trade war, he added.
“I again call on the US side to work hard with China, meet each other halfway, and on the basis of mutual respect and treatment, strive to reach a mutually beneficial, win-win agreement. This accords with the interests of both countries and is what the international community expects.”
Trump and Chinese President Xi Jinping last month agreed to another truce in the year-long trade spat between the world’s two largest economies. That agreement, announced after the leaders met in Osaka, Japan, was aimed at kickstarting stalled negotiations, but no deadline has been set for the process to conclude.
Hu Xijin, editor of the widely-read Chinese tabloid Global Times, published by the ruling Communist Party’s official People’s Daily, responded on Twitter to Trump’s comment, asking if it was “noble for a president to gloat”.
Hu tweeted: “6.2% is much higher than US growth. Wait until US growth hits 6.2% then laugh at China. Chinese economic growth slows down because of restructuring. The credit doesn’t go to the White House.”
The People’s Daily said it was “laughable” to say the Chinese economy was being given trouble by the US tariffs.
“From trade and investment to technology, China is contributing more and more positive energy to global development,” it said in a commentary. “These irrefutable facts are not negated by anyone raising a hubbub.”
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