Europe's vulnerable economy faces geopolitical turbulence. Japan revises economic growth downward as data shows sluggish demand. A gold buying frenzy grips Vietnam and Thailand amidst mounting economic fears. Stay informed about the latest economic developments in Europe, Japan, and Southeast Asia on Simply Economics!
Sources:
https://foreignpolicy.com/2024/07/01/europe-eu-economy-gdp-markets-trade-china/
https://www.washingtonpost.com/business/2024/07/01/japan-economy-gdp-tankan/dfc23302-3773-11ef-93fe-36cbc6f6ab36_story.html
https://www.scmp.com/week-asia/economics/article/3268637/gold-buying-frenzy-grips-vietnam-and-thailand-economic-fears-mount
https://www.rttnews.com/3457270/european-economic-news-preview-germany-inflation-data-due.aspx
Outline:
(00:00:00) Introduction
(00:00:39) Europe’s Vulnerable Economy
(00:04:06) Japan revises economic growth in 1Q downward, as latest data show sluggish demand and rising prices
(00:07:21) Gold buying frenzy grips Vietnam and Thailand as economic fears mount
(00:09:29) European Economic News Preview: Germany Inflation Data Due
Simply Economics
Europe’s Vulnerable Economy, Japan’s Economic Contraction, Gold Buying Frenzy in Southeast Asia
Europe's vulnerable economy faces geopolitical turbulence. Japan revises economic growth downward as data shows sluggish demand. A gold buying frenzy grips Vietnam and Thailand amidst mounting economic fears. Stay informed about the latest economic developments in Europe, Japan, and Southeast Asia on Simply Economics!Sources:https://foreignpolicy.com/2024/07/01/europe-eu-economy-gdp-markets-trade-china/https://www.washingtonpost.com/business/2024/07/01/japan-economy-gdp-tankan/dfc23302-3773-11ef-93fe-36cbc6f6ab36_story.htmlhttps://www.scmp.com/week-asia/economics/article/3268637/gold-buying-frenzy-grips-vietnam-and-thailand-economic-fears-mounthttps://www.rttnews.com/3457270/european-economic-news-preview-germany-inflation-data-due.aspxOutline:(00:00:00) Introduction(00:00:39) Europe’s Vulnerable Economy(00:04:06) Japan revises economic growth in 1Q downward, as latest data show sluggish demand and rising prices(00:07:21) Gold buying frenzy grips Vietnam and Thailand as economic fears mount(00:09:29) European Economic News Preview: Germany Inflation Data Due
- Duration:
- 12m
- Broadcast on:
- 01 Jul 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Monday July 1st. On today's show, Europe's vulnerable economy takes center stage as Japan revises economic growth downward and gold-buying frenzy grips Vietnam and Thailand. Plus we have a preview of the upcoming Germany inflation data. Use coverage and more, up next. I'm David and you're listening to Simply Economics. We start off with news from Figma, the popular design and collaboration platform. As it awaits regulatory approval of its $20 billion acquisition by Adobe, Figma is adding new generative AI features to its FigJam whiteboard tool. The new features aim to make it easier for users to get started and organize projects on the platform. For more on this, we're joined by our technology correspondent. So tell us, what exactly is Figma adding to FigJam? Figma is introducing three key generative AI features to FigJam. First, there's a tool to help users create new FigJam boards more easily. When faced with a blank canvas, users can now describe what they need, like a calendar or project timeline, and the AI will generate a template to get them started. Second, as FigJam boards grow and become filled with sticky notes, Figma is using AI to help sort these notes into logical groupings by theme or task owner, making the boards more organized. Finally, Figma has developed a summarize feature that can automatically generate a summary of the key points from a sea of sticky notes on a full FigJam board. Interesting, now Figma is known for its designer user base. Are these new features aimed at designers specifically? Actually, Figma says that two-thirds of FigJam's weekly active users are not designers. The company has intentionally approached FigJam as a collaboration tool for cross-functional teams, including product managers, engineers, marketers, and project owners. This wide range of users is what led Figma to consider ways to make FigJam easier to use, and they decided generative AI could help solve some of the common challenges new users face. What are some of the challenges these new AI features are trying to address? One major challenge is simply getting started. A blank FigJam board can be intimidating for new users who aren't sure where to begin. By allowing users to describe what they need and having AI generate a template, Figma is lowering that initial barrier to entry. Another challenge is keeping boards organized as they grow. Sorting sticky notes by theme or owner will help keep things tidy and manageable. And finally, summarizing key points from a full board saves users the time and effort of synthesizing takeaways manually. Figma is using OpenAI as the large language model powering these features. Are there any guardrails in place to prevent misuse or harmful outputs? Yes, Figma says they have tweaked the OpenAI model to understand Figma and FigJam's specific concepts. They are also testing a warning system that won't allow users to proceed if their inputs could result in inappropriate or harmful content. OpenAI has some built-in controls for this as well. It's good to see Figma thinking proactively about responsible AI deployment as they roll out these new features. When can users expect to try out these new AI-powered tools in FigJam? The new features are launching today in an open beta so adventurous users can start playing with them immediately. It will be interesting to see how the FigJam community reacts and whether these AI enhancements meaningfully improve the user experience, especially for those new to the platform. Figma seems to be betting that AI can play a key role in driving adoption and engagement as they look to expand beyond their core designer user base. Thanks for the insights on Figma's new AI features in FigJam. Shifting gears now to global economic news, Japan's economy contracted more than initially estimated in the first quarter of the year according to revised government data. The country's GDP shrank at an annual pace of 2.9%, a steeper decline than the previous estimate. Meanwhile, a survey by the Bank of Japan showed that business sentiment remains sluggish. For more on this, we turned to our correspondent. Can you break down the factors behind Japan's economic contraction? The revised data shows that public investment and private residential investment were the main drags on growth in the first quarter. Public investment contracted at a 1.9% rate, a significant downward revision from the earlier estimate of 3% growth. Housing investment also fell more sharply than initially thought, declining 2.9% instead of the previous estimate of a 2.5% contraction. These figures suggest that domestic demand remains weak in Japan. The Bank of Japan's quarterly survey showed a modest improvement in business sentiment among large and medium-sized manufacturers. However, you mentioned that the details of the survey point to ongoing weakness in demand. Can you elaborate on that? Yes, while the overall sentiment index held steady at 12, economists note that this level is consistent with quarterly GDP growth of around 0%. The slight improvement in manufacturing sentiment was largely attributed to a resumption of normal production among automakers after they had slowed factory lines due to computer chip shortages last year. However, the survey also indicated that firms were predicting a slump in industrial production for June, suggesting that the economic recovery remains fragile. Japan's economy barely avoided a technical recession in the last quarter of 2022, growing at a mere 0.1% annual pace. What are some of the factors weighing on the country's economic growth? One major challenge for Japan is the weakness of the yen against the US dollar. While a weaker yen benefits exporters by inflating their overseas profits in yen terms, it also significantly increases the cost of imported commodities and products, particularly oil and gas. Additionally, price increases have outpaced wage growth, eroding consumers' purchasing power, and dampening domestic demand, which is a key driver of Japan's economy. How does Japan's monetary policy compare to that of other major economies, such as the United States, and what impact is it having on the country's economic situation? Unlike the Federal Reserve in the US, which has kept interest rates high to combat inflation, the Bank of Japan has maintained its benchmark rate near zero. The central bank's goal is to keep credit cheap and encourage spending and investment. However, this policy has had limited success in spurring economic growth, as household spending fell in the first quarter of the year when adjusted for inflation. The divergence in monetary policy between Japan and other major economies has also contributed to the yen's weakness. Thanks for the update on Japan's economic challenges, David. Shifting our focus to another economic trend, gold prices have soared to new heights this year, peaking at an all-time high of $2,450 an ounce in May. Southeast Asia's rush for gold has pushed prices up over the last six to twelve months, as everyday investors and central banks alike seek a safe haven amidst economic turmoil, geopolitical insecurity, and currency devaluations. For more on this, we turn to our correspondent, James. What's driving this gold-buying frenzy in Southeast Asia? There are a couple key factors at play here. For everyday investors, especially those without much money, currency depreciation is a major concern. When the goods they buy and sell are priced in US dollars and their local currency is going down, it's a double whammy. They're getting hit by both inflation and currency depreciation. Gold provides a safe haven to preserve their savings in the face of this economic uncertainty, and it's not just individual investors seeking refuge in gold, right? Central banks are also stockpiling the precious metal at a remarkable pace. Absolutely. According to the World Gold Council, over 80% of central banks expect to increase their gold holdings over the next twelve months. They're using gold as a bulwark against heightened geopolitical risks and mounting macroeconomic uncertainties. As Shao Kai Fan from the World Gold Council put it, "extraordinary market pressure, unprecedented economic uncertainty, and political upheavals around the world have kept gold front of mind for central banks." We're seeing this gold rush extend beyond just Southeast Asia too, correct? Investors in China are also chasing gold as a safe haven. That's right, in China, waning confidence in property and stock markets has driven investors towards gold. It's a similar story of seeking stability and security amidst economic anxiety. Gold has long been a traditional safe haven investment, and in times of turmoil like we're seeing now, its appeal only grows stronger. It's a fascinating trend to watch, as both individual investors and central banks around the world turn to gold in the face of mounting economic fears. Thank you for that insight, James. Putting our attention to Europe, a busy day for economic news is on tap with flash inflation data from Germany and final manufacturing flour, purchasing managers' survey results from the Eurozone headlining the docket. For more on what to expect, let's bring in our economics correspondent. So what are the key data points to watch for today? The headline figure will likely be the flash inflation reading out of Germany. More prices in Europe's largest economy are forecast to have risen 2.3% year over year in June. That would mark a slight easing from the 2.4% inflation rate recorded in May. Still, it's notable that inflation remains stubbornly above the European central bank's target of 2%, even as economic growth in the Eurozone has slowed considerably. And on the growth front, we're also getting final purchasing managers' index survey data for the manufacturing sector from several key economies. What's the outlook there? Economists expect the Eurozone manufacturing PMI to come in at 45.6% for June, unchanged from the initial flash reading and down from 47.3% in May. A reading below 50% indicates contraction in the sector. Country-level data is likely to show ongoing weakness as well. The manufacturing PMIs for Germany, France, Italy, and Spain are all forecast to remain in contractionary territory, reflecting the challenges faced by European factories amid slowing global growth and trade tensions. Outside of the Eurozone, we're also getting some notable data from the UK and Switzerland, right? That's right. In the UK, economists expect mortgage approvals to have ticked down to around 60,000 in May from just over 61,000 in April. Meanwhile, the final UK manufacturing PMI for June is forecast to confirm the slight improvement indicated in the initial reading, rising to 51.4 from 51.2 in May. Over in Switzerland, retail sales are expected to have grown 2.5% year over year in May, a touch softer than the 2.7% growth rate seen in April. Thanks for that preview of today's European Economic Calendar, David. 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]