Evelyn Reynolds

Germany’s economy has been struggling and the latest data has provided little hope for improvement.
Economists say the worst may soon be over, but are still not hopeful about economic growth in 2024 and suggest the country may enter a technical recession this year.
Headwinds include a slowdown of global trade, higher energy prices, and national and international political uncertainty.

Federal Chancellor Olaf Scholz (SPD, r-l), Robert Habeck (Alliance 90/The Greens), Federal Minister for Economic Affairs and Climate Protection, and Christian Lindner (FDP), Federal Minister of Finance, follow the debate at the start of the budget week.
Michael Kappeler | Picture Alliance | Getty Images

Good news has been sparse for the German economy. And the latest economic data has not done much to change this.
A few key 2023 data points, namely factory orders, exports and industrial production, were out last week and indicated a weak end to the year that saw questions about Germany being the “sick man of Europe” resurface.

“The data confirm that German industry is still in recession,” Holger Schmieding, chief economist at Berenberg Bank, told CNBC.
Industrial production declined by 1.6% in December on a monthly basis, and was down 1.5% in 2023 overall compared to the previous year. Exports – which are a major cornerstone of the German economy – fell by 4.6% in December and 1.4%, or 1.562 trillion euros ($1.68 trillion), across the year.
Meanwhile, factory orders data seemed promising at first glance as it reflected an 8.9% increase in December compared to November.
But this growth “is not much reason for comfort,” Franziska Palmas, senior Europe economist at Capital Economics told CNBC, explaining that it is thanks to several large-scale orders, which tend to be volatile. “Orders excluding large-scale orders actually fell to a post-pandemic low,” she added.
For 2023 overall in comparison to the previous year, factory orders were down 5.9%.

While this “hard” data from December does not yet suggest recovery is in sight, the most recent Purchasing Managers’ Index report indicates that the worst may be over soon in the manufacturing sector, Schmieding said.

“Although at 45.5 still below the 50 line that divides growth from contraction, it edged up to an 11-month high,” he noted.
Even so, economic growth is unlikely to be imminent, Erik-Jan van Harn, a macro strategist for global economics and markets at Rabobank, told CNBC.
“We are still nowhere near the kind of activity in the German industry that we saw pre-pandemic,” he explained. “We still expect a modest contraction in Q1, but it’s likely to be less severe than 23Q4,” van Harn said. He is then anticipating growth to pick up slightly, but sees full-year growth as being flat.
Others are even more pessimistic about the German economy.
“We stick to our forecast that the German economy will shrink by 0.3% in 2024 as a whole,” Commerzbank Chief Economist Jörg Krämer told CNBC.
This would be broadly in line with how Germany’s economy fared in 2023, when it contracted by 0.3% year-on-year, according to data released by the federal statistics office last month. The data also showed a 0.3% decline of the gross domestic product in the fourth quarter, but Germany still managed to avoid a technical recession, which is characterized by two consecutive quarters of negative growth.
This is due to the statistics office finding that the third quarter of 2023 saw stagnation rather than contraction. But should the economy contract as expected in the first three months of 2024, Germany would indeed fall into a recession.
“Companies simply have too much to digest — global rate hikes, high energy prices, less tailwind from China and an erosion of Germany as a business location,” Krämer explained, addressing reasons for the downturn.
Some of these headwinds may also play a key role when it comes to weakening export figures, Rabobank’s van Harn pointed out. Factors like cheap energy from Russia, strong demand from China and surging global trade buoyed Germany’s exports for decades, “but are now faltering,” he said.
Looking beyond the purely economical, national and international politics could also be a risk for the country’s economy, the experts say.

Germany’s coalition government has been under pressure after going through a budget crisis following a decision from the constitutional court that the re-allocation of unused debt taken on during the pandemic to current budget plans is unlawful.
This left a 60-billion-euro hole in the coalition’s budget plans, and as the funds were allocated for years to come, the crisis is likely to rear its head again at the end of the year when 2025 budget planning begins.
Voter satisfaction with the government is also low, with the opposition CDU party currently leading in the polls and being followed in second place by Germany’s far-right party, the AfD. Support for the latter has however declined in recent weeks amid protests against the far-right sweeping the country, with hundreds of thousands of Germans taking to the streets.
Elsewhere, the U.S. election could make things more difficult as well, Schmieding suggested.
“Trade war threats by Trump could be a significant negative for Germany,” he said – however this of course depends on the outcome of the election, and may not unfold in full force until 2025, he noted. More

People shop in a supermarket in the Manhattan borough of New York city on January 27, 2024.
Charly Triballeau | AFP | Getty Images

The prices consumers pay in the marketplace rose at an even slower pace than originally reported, according to closely watched revisions the government released Friday.
Updates to the consumer price index showed that the broad basket of goods and services measured increased 0.2% on the month, less than the originally reported 0.3%, the Labor Department’s Bureau of Labor Statistics said.

While the change is only modest, it helped confirm that inflation was moderating as 2023 ended, giving more leeway to the Federal Reserve to start cutting interest rates later this year.
The revisions are done as a matter of course for the BLS, but garnered extra attention this year after the market reacted sharply to last year’s changes. Indications that inflation in 2022 rose more than anticipated drove Treasury yields higher and sparked worry from investors that the Fed might keep monetary policy more restrictive.
Fed Governor Christopher Waller, in particular, had called attention to the 2022 revisions, sparking market attention for the latest round.
Excluding food and energy, the so-called core CPI increased 0.3% for the month, the same as originally reported. Fed policymakers tend to focus more on core measures as they provide a better indication of long-run movements in inflation.
Also, the headline November reading was revised higher, up 0.2% versus the initial 0.1% estimate.

In aggregate, the revisions indicate that headline CPI accelerated at a 2.7% annualized rate in the fourth quarter, down 0.1 percentage point from the initially stated figures, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics. Further out, the second-half revisions put CPI higher — by 0.003 percentage point, according to Goldman Sachs calculations.
The revisions amounted to “a damp squib,” said Paul Ashworth, chief North America economist at Capital Economics, though they could exert some influence on the Fed.
“Since some Fed officials were apparently worried about a repeat of last year — when the revision pushed up the monthly changes in core prices in the final few months of last year — the lack of any meaningful change this year, at the margin at least, supports an earlier May rate cut,” Ashworth added.
The Fed prioritizes the personal consumption expenditures price index as its main inflation gauge. CPI readings feed into the Commerce Department’s PCE calculation. The difference between the two gauges is essentially that the CPI reflects what items cost while the PCE adjusts for what consumers actually buy, accounting for changes in behavior when prices rise and fall.
Futures market pricing was little changed after the data release.
Traders still largely expect the Fed to hold its benchmark overnight borrowing rate steady when it next meets in March, then cut in May, to be followed by four more quarter percentage point reductions by the end of the year, according to CME Group projections.
— Reuters contributed to this report.
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The history of Las Vegas has been marked by a relentless churn of hotels, casinos, theaters and restaurants. But only recently has the city’s landscape included major professional sports teams.The Golden Knights of the National Hockey League were the first to start play here in 2017. The Aces of the Women’s National Basketball Association started in 2018, and the National Football League’s Raiders arrived from Oakland in 2020. Last year, Major League Baseball’s Athletics were given the go-ahead to make the same Oakland-to-Las Vegas move, and the National Basketball Association is expected to add a team in the coming years.Las Vegas’s transformation into a pro sports town reflects not just the leagues’ interest in the city and their general embrace of sports betting, but also the power of the region’s primary economic driver, tourism. No other major city in the United States is as reliant on a single industry, and a broad coalition led by the top resort operators helped win lucrative subsidies to build new stadiums, with the thought that out-of-town visitors would follow.Those efforts will be on display on Sunday when Allegiant Stadium, home of the Raiders and built partly with public money, hosts Super Bowl LVIII between the Kansas City Chiefs and the San Francisco 49ers.“Our role here and what Vegas provides is a platform for people with great ideas to come in and make them real,” said Steve Hill, the president of the Las Vegas Convention and Visitors Authority and the man most responsible for helping to entice the teams to the city. “We’re a destination that is trying to say yes.”Not everyone has embraced that strategy, however. In Las Vegas, the decision to set aside public money for privately held teams has amplified scrutiny of the state’s funding of critical social services, most notably for education in the nation’s fifth-largest public school district, with about 300,000 students.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Beijing is facing a string of headwinds, including an ailing stock market, deflation, and a property crisis.
Not everyone on Wall Street, however, is convinced that China is destined for doom.
From Nobel laureate Paul Krugman to Hayman Capital’s Kyle Bass, here’s a look at a widening divide between China bulls and bears.

Many Chinese developers have halted or delayed construction on presold homes due to cash flow problems. Pictured here is a property construction site in Jiangsu province, China, on Oct. 17, 2022.
Future Publishing | Future Publishing | Getty Images

China’s economy is sputtering.
Its property market is crumbling, deflationary pressures are spreading across the nation, and its stock market has weathered a turbulent ride so far this year, with the country’s CSI 300 index erasing some 40% of its value from its 2021 peaks.

Adding salt to the wound, January PMI numbers released by China’s National Bureau of Statistics showed manufacturing activity contracted for the fourth month in a row, driven by slumping demand. 
The slew of downbeat data has consequently triggered a wave of skepticism toward the world’s second-largest economy. Allianz for one, reversed its buoyant view of China, now forecasting Beijing’s economy to grow by an average 3.9% between 2025 to 2029. That’s down from a 5% forecast before the Covid-19 pandemic broke out.
Ex-International Monetary Fund official Eswar Prasad also told Nikkei Asia that “the likelihood of the prediction that China’s GDP will one day overtake that of the U.S. is declining.” 
Meanwhile, top economist and Allianz advisor Mohamed El-Erian highlighted China’s dismal stock market performance against those in the U.S. and Europe in a chart on X, saying it shows the stark divergence between all three equity markets.

China itself, however, isn’t willing to confess its economy is in tatters. Chinese leader Xi Jinping said on New Year’s Eve that the nation’s economy had grown “more resilient and dynamic this year.”

Feeding on such optimism, it’s fair to say there’s been some signs of hope for the beleaguered economy, but perhaps not enough to sway the bears. For instance, factory activity in China expanded for a third-straight month in January, while the nation’s luxury sector appears to be snapping back. 
Such data has prompted bullish chatter among investors, suggesting consensus on China clearly lacks uniform.

Era of stagnation 

Nobel laureate Paul Krugman has been among some of the most bearish voices toward China, saying the country is entering an era of stagnation and disappointment. 
China was supposed to boom after it lifted its stringent “zero-Covid” measures, Krugman wrote in a recent New York Times op-ed. But it did the exact opposite. 

From bad leadership to high youth unemployment, the country is facing headwinds from all corners, Krugman argued. And the country’s economic stumble isn’t isolated, Krugman warns, potentially becoming everyone’s problem.  

Property crisis

China’s well-known property troubles have been the crux of Wall Street bearishness toward the Asian nation. 
The International Monetary Fund said it expects housing demand to drop by 50% in China over the next decade. 
Speaking at the World Economic Forum in Davos last month, IMF chief Kristalina Georgieva said China’s real estate sector needs “fixing,” while Beijing needs structural reforms to avoid a decline in growth rates. 
Meanwhile, famed hedge fund manager and founder of Dallas-based Hayman Capital Kyle Bass said the country’s heavily indebted property market has triggered a wave of defaults among public developers. That’s a problem, given China’s real estate market can account for as much as a fifth of the nation’s GDP.
“This is just like the U.S. financial crisis on steroids,” Bass said, referring to China’s default-ridden property market. 
“China is going to get much worse, no matter how much their regulators say, ‘we’re going to protect individuals from malicious short-selling,'” he added. 
“The basic architecture of the Chinese economy is broken,” Bass continued. 

Glimmers of hope

A gloomy picture for China, however, isn’t shared by all. 
The Institute of International Finance said Beijing has the policy capacity to push China’s economy toward its growth potential and stuck to its above consensus forecast for 2024 growth at 5%, in a recent blog post. That view, however, depends on sufficient demand-side stimulus. The latest GDP numbers out of China for the last three months of 2023 missed analysts’ estimates, with a figure of 5.2%.

At the same time, Clocktower Group partner and chief strategist Marko Papic took an optimistic short-term view toward Chinese equities. In a Feb. 7 CNBC interview, Papic said he forecasts China stocks to jump at least 10% in the coming days as officials signal support efforts to bolster its flailing stock market.
A “10% to 15% rally in Chinese equities is likely in coming trading days,” Papic said.
JPMorgan Private Bank also outlined bull case scenarios for China in a recent post. “Despite the stock market’s slipping sentiment and persistent problems with the property market, certain segments of the Chinese economy have also proved their resilience,” it said.
The bank said China’s crucial role as a global manufacturer is unlikely to abate, adding that cyclical demand for its exports could remain intact.
Looking ahead, China has hurdles to overcome. Whether it has the firepower to do so, however, remains to be seen. More

A congressional investigation determined that U.S. funding helped fuel the growth of a sector now viewed by Washington as a security threat.A congressional investigation has determined that five American venture capital firms invested more than $1 billion in China’s semiconductor industry since 2001, fueling the growth of a sector that the United States government now regards as a national security threat.Funds supplied by the five firms — GGV Capital, GSR Ventures, Qualcomm Ventures, Sequoia Capital and Walden International — went to more than 150 Chinese companies, according to the report, which was released Thursday by both Republicans and Democrats on the House Select Committee on the Chinese Communist Party.The investments included roughly $180 million that went to Chinese firms that the committee said directly or indirectly supported Beijing’s military. That includes companies that the U.S. government has said provide chips for China’s military research, equipment and weapons, such as Semiconductor Manufacturing International Corporation, or SMIC, China’s largest chipmaker.The report by the House committee focuses on investments made before the Biden administration imposed sweeping restrictions aimed at cutting off China’s access to American financing. It does not allege any illegality.In August, the Biden administration barred U.S. venture capital and private equity firms from investing in Chinese quantum computing, artificial intelligence and advanced semiconductors. It has also imposed worldwide limits on sales of advanced chips and chip-making machines to China, arguing that these technologies could help advance the capabilities of the Chinese military and spy agencies.Since it was established a year ago, the committee has called for raising tariffs on China, targeted Ford Motor and others for doing business with Chinese companies, and spotlighted forced labor concerns involving Chinese shopping sites.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Bank tremors serve as a reminder: Just because a crisis hasn’t hit immediately doesn’t mean commercial real estate pain isn’t coming.Graceful Art Deco buildings towering above Chicago’s key business district report occupancy rates as low as 17 percent.A set of gleaming office towers in Denver that were full of tenants and worth $176 million in 2013 now sit largely empty and were last appraised at just $82 million, according to data provided by Trepp, a research firm that tracks real estate loans. Even famous Los Angeles buildings are fetching roughly half their prepandemic prices.From San Francisco to Washington, D.C., the story is the same. Office buildings remain stuck in a slow-burning crisis. Employees sent to work from home at the start of the pandemic have not fully returned, a situation that, combined with high interest rates, is wiping out value in a major class of commercial real estate. Prices on even higher-quality office properties have tumbled 35 percent from their early-2022 peak, based on data from Green Street, a real estate analytics firm.Those forces have put the banks that hold a big chunk of America’s commercial real estate debt in the hot seat — and analysts and even regulators have said the reckoning has yet to fully take hold. The question is not whether big losses are coming. It is whether they will prove to be a slow bleed or a panic-inducing wave.The past week brought a taste of the brewing problems when New York Community Bank’s stock plunged after the lender disclosed unexpected losses on real estate loans tied to both office and apartment buildings.So far “the headlines have moved faster than the actual stress,” said Lonnie Hendry, chief product officer at Trepp. “Banks are sitting on a bunch of unrealized losses. If that slow leak gets exposed, it could get released very quickly.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The United States bought more goods from Mexico than China in 2023 for the first time in 20 years, evidence of how much global trade patterns have shifted.In the depths of the pandemic, as global supply chains buckled and the cost of shipping a container from China soared nearly twentyfold, Marco Villarreal spied an opportunity.In 2021, Mr. Villarreal resigned as Caterpillar’s director general in Mexico and began nurturing ties with companies looking to shift manufacturing from China to Mexico. He found a client in Hisun, a Chinese producer of all-terrain vehicles, which hired Mr. Villarreal to establish a $152 million manufacturing site in Saltillo, an industrial hub in northern Mexico.Mr. Villarreal said foreign companies, particularly those seeking to sell within North America, saw Mexico as a viable alternative to China for several reasons, including the simmering trade tensions between the United States and China.“The stars are aligning for Mexico,” he said.New data released on Wednesday showed that Mexico outpaced China for the first time in 20 years to become America’s top source of official imports — a significant shift that highlights how increased tensions between Washington and Beijing are altering trade flows.The United States’ trade deficit with China narrowed significantly last year, with goods imports from the country dropping 20 percent to $427.2 billion, the data shows. American consumers and businesses turned to Mexico, Europe, South Korea, India, Canada and Vietnam for auto parts, shoes, toys and raw materials.Imports from China fell last yearU.S. imports of goods by origin

Sources: U.S. Census Bureau; U.S. Bureau of Economic AnalysisBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Twisted and charred aluminum mixed with shards of glass still lines the floor of the industrial warehouse where Victoria Martocci once operated her scuba diving business. After a wildfire tore through West Maui, all that remained of her 36-foot boat, the Extended Horizons II, were a pair of engines.That was six months ago, but Ms. Martocci and her husband, Erik Stein, who are weighing whether to rebuild the business, which he started in 1983, said the same questions filled their thoughts. “What will this island look like?” Ms. Martocci asked. “Will things ever be close to being the same?”In early August, what began as a brush fire burst into the town of Lahaina, a popular tourist destination, all but leveling it, destroying large swaths of West Maui and killing at least 100 people in the nation’s deadliest wildfire in more than a century.The local economy remains in crisis.Rebuilding the town, according to some estimates, will cost more than $5 billion and take several years. And tense divisions still remain over whether Lahaina, whose economy long relied almost entirely on tourism, should consider a new way forward.Debates about the ethics of traveling to decimated tourist destinations played out on social media after an earthquake in Morocco and wildfires in Greece last year. But the situation is particularly dire for Maui.State and federal officials scrambled last summer to find shelter for thousands of residents who had lost their homes, relocating people to local hotels and short-term rentals where many still live, often sharing a wall with vacationing families whose realities feel far from their own. Other displaced residents live in tents on the beach, and some restaurant owners pivoted to working out of food trucks.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More