Vietnam's economic growth accelerates, potentially hitting 7%. Meanwhile, the American economy experiences a complex narrative of positive data and negative sentiment. Plus, gold prices soar amid economic uncertainties, and concerns arise over the Federal Reserve's handling of economic risks.
Sources:
https://www.bangkokpost.com/business/general/2824186/vietnams-accelerating-economic-growth-could-hit-7-this-year
https://www.csmonitor.com/Business/2024/0705/jobs-report-economy-inflation-biden
https://www.baselinemag.com/news/gold-prices-soar-amid-economic-uncertainties/
https://www.aei.org/economics/the-fed-is-blind-to-economic-risks/
Outline:
(00:00:00) Introduction
(00:00:36) Vietnam accelerating economic growth could hit 7%
(00:02:37) Economic signals are blinking green. Why Americans are still seeing red.
(00:05:17) Gold prices soar amid economic uncertainties
(00:08:08) The Fed Is Blind to Economic Risks
Simply Economics
Vietnam’s Economic Growth Surges, American Sentiment Remains Mixed
Vietnam's economic growth accelerates, potentially hitting 7%. Meanwhile, the American economy experiences a complex narrative of positive data and negative sentiment. Plus, gold prices soar amid economic uncertainties, and concerns arise over the Federal Reserve's handling of economic risks.Sources:https://www.bangkokpost.com/business/general/2824186/vietnams-accelerating-economic-growth-could-hit-7-this-yearhttps://www.csmonitor.com/Business/2024/0705/jobs-report-economy-inflation-bidenhttps://www.baselinemag.com/news/gold-prices-soar-amid-economic-uncertainties/https://www.aei.org/economics/the-fed-is-blind-to-economic-risks/Outline:(00:00:00) Introduction(00:00:36) Vietnam accelerating economic growth could hit 7%(00:02:37) Economic signals are blinking green. Why Americans are still seeing red.(00:05:17) Gold prices soar amid economic uncertainties(00:08:08) The Fed Is Blind to Economic Risks
- Duration:
- 11m
- Broadcast on:
- 06 Jul 2024
- Audio Format:
- mp3
Good morning, and welcome to Simply Economics. It's Saturday, July 6th. On today's show, Vietnam is accelerating economic growth and could hit 7% while economic signals are blinking green. Plus gold prices soar amid economic uncertainties. This coverage and more up next. I'm David, and you're listening to Simply Economics. We start off with some promising economic news out of Vietnam. The country's economy is showing signs of accelerating growth, with the potential to meet or even exceed the government's target of 6.5% this year. Here with more details is our Simply Economics correspondent. What's driving this economic momentum in Vietnam? The main factors propelling Vietnam's economy forward are the improving industrial and construction sectors. According to planning and investment minister Guianchi Dung, these sectors are providing a significant boost to the country's overall growth. In fact, Dung stated during a recent cabinet meeting that economic expansion could reach as high as 7% in 2023 if current trends continue. It's an impressive projection considering the challenges many economies are facing globally. What specific indicators suggest Vietnam is on track to achieve or surpass its growth target? Minister Dung expressed confidence that if the current growth momentums are maintained and even accelerate further, Vietnam's economy is likely to meet or exceed the target set by the National Assembly for 2024 as well. This optimistic outlook is based on the robust performance of key sectors like industry and construction which have demonstrated resilience and ongoing expansion. While Vietnam's economy seems to be on an upward trajectory, the situation appears quite different in neighboring Thailand. Can you shed some light on the economic challenges Thailand is grappling with? Thailand finds itself in a period of economic stagnation with its growth potential on the decline according to the Bank of Thailand's chief. This contrasts sharply with Vietnam's accelerating growth and positive economic prospects. The factors contributing to Thailand's economic woes would require a deeper analysis, but it's clear that the two Southeast Asian nations are experiencing divergent economic paths at present. It will be interesting to see how these economic trends in Vietnam and Thailand play out in the coming months and years. Thank you for those insights from Simply Economics. Shifting our focus to the US, the American economy is sending mixed signals these days. On one hand, key economic indicators like unemployment and inflation are looking positive, but on the other hand, many Americans are still feeling economic pain and uncertainty. Here to break this down is our economics correspondent. So correspondent, what's behind this disconnect between the data and public sentiment? It really comes down to the fact that even though the overall economic numbers have improved significantly from the worst of the pandemic, a lot of households are still feeling the sting of high prices, especially for essentials like housing. Mortgage rates have come down a bit recently, but are still nearly double what they were just a couple years ago. And while inflation has eased from its peak last year, prices are still much higher than they were pre-pandemic for a wide range of goods and services. And yet despite those challenges, the job market remains remarkably strong. The latest jobs report showed the unemployment rate ticking up to 4.1%, but that's still a historically low level. How do we square that with the economic anxiety many are feeling? The job market has definitely been a bright spot, with employers continuing to add jobs at a healthy clip. But there are some signs that may be starting to change. That uptick in the unemployment rate could be an early indicator that the labor market is finally starting to soften a bit as the Fed's interest rate hikes continue to work their way through the economy. And if the economy does slow more significantly, as many economists expect, that could lead to rising unemployment down the road. So with all that in mind, what are the political implications as we look ahead to the 2024 presidential election? How might the economy factor into President Biden's re-election chances? Historically, the state of the economy has been a pretty reliable predictor of presidential elections. Incumbents tend to do well when key measures like inflation and unemployment are low. But there have been some notable exceptions in recent years. Donald Trump lost in 2020 despite a relatively strong pre-pandemic economy. So a lot may depend on how effectively Biden and his eventual Democratic opponent are able to make their case to voters. And of course, if Biden decides not to run again, that could scramble the political calculus even further. Thanks for helping us break down those moving pieces to watch in the months ahead. Lifting gears to the markets, gold prices are maintaining levels not seen in the last decade, driven by speculation about potential interest rate cuts from the Federal Reserve. Lower dollar and treasury yields are reinforcing this trend, making gold an attractive safe haven for investors. For more on this, we turn to our simply economics correspondent. What's behind this surge in gold prices? There are a few key factors at play. With global monetary policies turning more protective and the world economy slowing down, demand for gold is surging. Gold has always had a reputation as a safe financial asset during times of economic instability. Even with the Federal Reserve tempering expectations in June, many seasoned investors continue to back gold, seeing it as a smart long-term investment that has consistently rebounded to a stable, rising trajectory over time. And how are other precious metals faring in comparison to gold? It's a bit of a mixed bag, while gold registered a modest 0.1% increase to $2,059.56 per ounce, silver rose by 0.2% to $27.97 per ounce. On the other hand, palladium fell by 0.3% to $2,734.29 per ounce, and platinum dropped by 0.5% to 1,076 and 28 per ounce. Super prices for September remain stable around $4.55 per pound. There were some substantial gains in the gold market on Wednesday. What drove that upswing? Traders are anticipating a potential rate cut in September, driven by underperforming economic data and poor inflation figures that suggest the U.S. economy may be flagging. This puts more pressure on the Fed to cut the benchmark interest rate. If that happens and it leads to an economic rebound, it could spur further growth in the gold market. Rising international trade tensions are also driving more investors towards the safe haven of gold. But the Fed has expressed some doubts about rate cuts. How is that impacting market sentiment? You're right. The Fed's June meeting did dampen some of the speculation around imminent rate cuts. Officials expressed uncertainty about lowering borrowing costs given the mixed economic signals. It's still unclear how the Fed will ultimately respond. In the meantime, other commodities are showing some instability. Copper trended downward in June on worries about China and a global downturn. Oil, gas and agricultural commodities have fluctuated due to changes in supply chains, geopolitics and weather patterns impacting crop yields. As always, global trade relations and economic factors remain key to predicting market dynamics in the short term. Thanks for that update and analysis from our Simply Economics team. Speaking of economic risks, the Federal Reserve is facing criticism for its current monetary policy stance, with some economists arguing that the central bank is blind to major economic risks on the horizon. Here to discuss this further is our economics correspondent. So tell us, what are the key risks that the Fed is being accused of downplaying right now? There are several significant risks that critics say the Fed is not taking seriously enough. One is the possibility of a regional banking crisis in the U.S. stemming from the Fed's high interest rate policy, which has caused over $1 trillion in losses on bank bond and loan portfolios. This policy is also exacerbating problems in the commercial real estate sector, where vacancy rates are at record highs. According to one study, up to 400 small and medium-sized banks could fail as a result. That certainly sounds concerning. Are there also worries about the global economic picture that the Fed may be overlooking? Absolutely. China's economy is slowing sharply as its housing and credit bubbles deflate. This is a huge deal given China's role as a major global growth engine in recent decades. Japan is also facing a potential fiscal reckoning, with the yen plunging as the Bank of Japan remains hesitant to raise rates. And in Europe, political uncertainty in France is drawing attention to the unsustainable debt loads in countries like France and Italy. A debt crisis there could dwarf the impact of the Greek crisis last decade. Those are definitely some storm clouds on the horizon. I know de-globalization is another risk being talked about, especially if there's a change in U.S. political leadership. How might that play out? Right. If former President Trump or someone with similar views comes into office, we could see much tougher stances on trade. Trump has talked about putting tariffs on all imports, which would almost certainly prompt retaliation from trading partners. That tit-for-tat protectionism is exactly what worsened the Great Depression in the 1930s. So it's a dangerous path to go down, but one that looks increasingly plausible given the current political environment. When you add it all up, it paints a pretty grim picture. So the argument is that the Fed needs to be much more proactive in responding to these risks. That's right. Monetary policy famously operates with long and variable lags, so if the Fed waits until these risks fully materialize before shifting course, it will likely be too late to engineer a soft landing for the economy. The concern is that excessive devotion to fighting yesterday's inflation battle could come at the cost of a painful recession or worse. Of course, the Fed would likely argue that it has to stay focused on price stability. But as the old saying goes, the Fed's job is to take away the punchbowl just as the party gets going. And right now, there are a lot of signs that this party may be ending sooner than the Fed thinks. So bring analysis, indeed. Thank you for walking us through those risks and the dilemmas facing the Fed. We'll have to see how policymakers navigate these challenging cross-currents in the months ahead. And with those insights from our economics correspondent, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]