China's services sector growth slows, calls for economic stimulus rise. Thailand at risk of economic slowdown on delayed fiscal spending. The rise of Global Africa: Africa and the Caribbean forge new economic partnership. Australian Dollar extends gains due to solid economic data.
Sources:
https://www.kaohooninternational.com/economics/541670
https://www.kaohooninternational.com/economics/541663
https://african.business/2024/07/finance-services/the-rise-of-global-africa-africa-and-the-caribbean-forge-new-economic-partnership
https://www.fxstreet.com/news/australian-dollar-extends-gains-due-to-solid-economic-data-202407030149
Outline:
(00:00:00) Introduction
(00:00:42) China's Services Sector Growth Slows, Calls for Economic Stimulus Rise
(00:02:45) Thailand at Risk of Economic Slowdown on Delayed Fiscal Spending
(00:05:32) The rise of Global Africa: Africa and the Caribbean forge new economic partnership
(00:08:55) Australian Dollar extends gains due to solid economic data
Simply Economics
China’s Services Sector Slows, Thailand Faces Economic Slowdown, Africa-Caribbean Economic Partnership, Australian Dollar Gains
China's services sector growth slows, calls for economic stimulus rise. Thailand at risk of economic slowdown on delayed fiscal spending. The rise of Global Africa: Africa and the Caribbean forge new economic partnership. Australian Dollar extends gains due to solid economic data.Sources:https://www.kaohooninternational.com/economics/541670https://www.kaohooninternational.com/economics/541663https://african.business/2024/07/finance-services/the-rise-of-global-africa-africa-and-the-caribbean-forge-new-economic-partnershiphttps://www.fxstreet.com/news/australian-dollar-extends-gains-due-to-solid-economic-data-202407030149Outline:(00:00:00) Introduction(00:00:42) China's Services Sector Growth Slows, Calls for Economic Stimulus Rise(00:02:45) Thailand at Risk of Economic Slowdown on Delayed Fiscal Spending(00:05:32) The rise of Global Africa: Africa and the Caribbean forge new economic partnership(00:08:55) Australian Dollar extends gains due to solid economic data
- Duration:
- 12m
- Broadcast on:
- 03 Jul 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Wednesday, July 3rd. On today's show, China's services sector growth slows as calls for economic stimulus rise and Thailand is at risk of an economic slowdown due to delayed fiscal spending. Plus, Africa and the Caribbean forge a new economic partnership in the rise of global Africa. Let's coverage in more up next. I'm David, and you're listening to Simply Economics. We start off with news from China, where a private survey has revealed that the services sector expanded at the slowest pace in eight months in June, with business confidence hitting a four-year low. Location S&P Global Services Purchasing Managers Index, or PMI, fell to 51.2 from 54.0 in May. For more on this, we turn to our correspondent. What factors are contributing to this slowdown in China's services sector? The survey, which primarily covers private and export-oriented companies, aligns with the findings of an official PMI that showed services sector activity hitting a five-month low. China's economy has been experiencing uneven growth lately, leading to calls for additional policy support to meet the government's growth target of around 5%. In June, the new orders sub-index dropped significantly and overseas demand softened slightly despite strong exports in May. The survey also mentioned a decrease in business confidence levels. What's driving this sentiment? Service confidence levels fell to the lowest point since March 2020, largely due to concerns over the global economy and increased competition. As a result, service providers scaled back hiring after briefly adding employment in May. However, there was some relief for businesses as input and output price inflation slowed, easing the pressure from high material, labor, and transport costs. With the upcoming third plenum leadership gathering in mid-July, are there any potential reforms or measures that could help address these economic challenges? Policy advisors suggest that measures aimed at redistributing income from central to local governments are likely to be prioritized during the plenum. The goal is to reduce reliance on land sales and boost local economies. Additionally, Wang Jie, a senior economist at Kaishin Insight Group, stressed the importance of fiscal and tax reforms in fostering more optimistic expectations among market participants. As China navigates this economic slowdown, it will be crucial to monitor the outcomes of the upcoming plenum and any potential reforms that could help stimulate growth in the services sector and the broader economy. Thank you for your insights on this developing story. Shifting our focus to Southeast Asia, Thailand's economy is expected to grow by 2.4% this year according to the World Bank, a downgrade from their previous 2.8% projection in April. The slower growth is being blamed on weaker than expected exports and public investment in the early part of the year. For more on this, we're joined now by our correspondent in Bangkok. So what factors are expected to support Thailand's economic growth going forward despite the downgrade? The World Bank says Thailand's growth will be underpinned by sustained consumer spending, a gradual recovery in the crucial tourism sector, and a rebound in exports. Tourist arrivals in particular are forecast to surge significantly in 2024 to 36.1 million, up from 28.2 million this year. That would bring visitor numbers close to pre-pandemic levels. And looking further ahead to 2025, arrivals are projected to exceed 41 million, driven mainly by the return of Chinese tourists. This pickup in tourism, along with robust domestic and international demand, is expected to support GDP growth of 2.8% in 2025. Thailand's growth has lagged behind some of its regional peers. How does the government plan to bolster the economy and what concerns are being raised about their approach? The centerpiece of the government's economic stimulus plan is a $500 billion bot, or $13.6 billion handout scheme they want to roll out in the fourth quarter. This was a key campaign promise of the Fotai Party, which won the election earlier this year. But some economists are questioning the fiscal responsibility of the handouts, pointing to uncertainties over how they will be funded and the potential impact on public debt. There are also doubts about the implementation of the scheme, which has already been delayed twice. And what is the World Bank advising in terms of monetary policy to support the economy? World Bank economist Kiyurpong Ariapucia wrote in a note that the Bank of Thailand should hold its benchmark interest rate steady at 2.5%, given the uncertainties in the outlook. The central bank has already raised rates by a total of 1.5 percentage points since August of last year to tame inflation. Most analysts expect they will now keep rates on hold for the rest of this year to support the economic recovery. Thank you for that update on the Thai economy, David. Shifting our focus to another part of the world, the 31st annual meeting of the African Export-Import Bank, or Afrexim Bank, was recently held in Nassau, the capital of the Bahamas. The choice of location reflects the Caribbean nation's ambition to become a bridge between Africa and its diaspora. The event brought together a diverse group of attendees, including African and Caribbean leaders, senior government officials, policy makers, bankers, business leaders, academics, and even cultural icons. Here to discuss the significance of this meeting and the concept of global Africa is our correspondent. So what exactly is the idea behind global Africa and why is it gaining traction? The concept of global Africa envisions African nations and their diaspora as a united front, working together for shared economic prosperity. It's an idea that recognizes the immense potential of collaboration and cooperation between Africa and people of African descent around the world. By leveraging the strengths, resources, and networks of this global community, the aim is to drive economic growth, foster innovation, and create new opportunities for trade and investment. How does the decision to hold the Efrexim Bank meeting in the Bahamas fit into this vision? The choice of the Bahamas as the location for this year's Efrexim Bank meeting is highly symbolic. It demonstrates the Caribbean nation's desire to serve as a bridge between Africa and its diaspora, particularly in the Americas. By hosting this important gathering, the Bahamas is positioning itself as a key player in facilitating economic ties and partnerships between Africa and the Caribbean. It's a strategic move that aligns with the broader goals of the global Africa movement. The event featured an impressive lineup of attendees, including cultural icons like actor Viola Davis, singer Wycliffe Jean, and actor Boris Kojo. What role do these figures play in the global Africa conversation? The presence of prominent cultural figures at the Efrexim Bank meeting underscores the importance of cultural ties in the global Africa movement. These individuals serve as ambassadors, using their influence and platforms to raise awareness about the shared heritage and aspirations of Africans and people of African descent worldwide. By engaging with the business and political leaders at the event, they help to bridge the gap between the cultural and economic spheres, fostering a sense of unity and common purpose. Moving ahead, what impact could the global Africa movement have on economic development and cooperation between African nations and their diaspora? The potential impact of the global Africa movement is significant. By fostering closer ties and collaboration between African nations and their diaspora, it could lead to increased trade, investment, and knowledge sharing. This in turn could drive economic growth, job creation, and technological advancement across the African continent and beyond. Moreover, by leveraging the collective strength and influence of the global African community, the movement could help to address common challenges such as poverty, inequality, and climate change, and promote sustainable development for all. The 31st annual meeting of the Efrexim Bank in Nassau Bahamas has highlighted the growing momentum behind the global Africa movement. As African nations and their diaspora work together to forge stronger economic and cultural ties, the potential for shared prosperity and progress is immense. Shifting our focus to another region, the Australian dollar is gaining ground today after the release of some solid economic data. Retail sales in Australia rose more than expected in May, and a key purchasing managers index also showed improvement in June. For more on this, we turn to our correspondent. What can you tell us about these latest figures out of Australia? The Australian economy seems to be showing resilience based on the data released today. Retail sales, which are a measure of consumer spending, increased by 0.6% month over month in May. This was triple the 0.2% rise that economists had been expecting and a notable acceleration from the 0.1% gain seen in the previous month. At the same time, the judo banks purchasing managers indexes for the services sector and the overall economy both ticked up in June, defying expectations for a slight decline. These PMI readings above 50 indicate that business activity is still expanding. How is the foreign exchange market reacting to these upbeat economic indicators from Australia? The Australian dollar is appreciating for the second day in a row on the back of this positive data, a stronger economy supports the currency. However, gains may be limited due to a rebound in the US dollar today. Yields on short-term US government bonds have ticked up, and this is halting a four-day slide in the greenback. Traders are also cautious ahead of some key data due later from the United States, including a private payroll report, a services sector survey, and the minutes from the latest Federal Reserve meeting. And what about the broader context? Central banks around the world have been aggressively raising interest rates to fight inflation. How does that backdrop affect the outlook for the Australian dollar? It's a challenging environment for sure. While strong retail sales and business activity are positives for Australia, the Reserve Bank of Australia may have to keep interest rates higher for longer if consumer demand remains robust. Other major central banks like the US Federal Reserve are also closely watching economic data as they weigh their next policy moves. Fed Chair Jerome Powell just recently said he wants to see further evidence that inflation is cooling before cutting rates. So the tug-of-war between growth and inflation and how central banks respond will continue to be a key focus for currency markets in the coming months. Thanks for that context and analysis. While the Australian dollar is having a good day, it seems clear there are still a lot of economic crosscurrents to navigate. We'll continue to monitor the data and the central bank responses closely. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]