The Last Flight on Mars.
A striking turn of fortunes.
1. The US has pulled further ahead of China in the race for world’s biggest economy, thanks in part to a vibrant American consumer. US gross domestic product rose 6.3% in nominal terms — that is, unadjusted for inflation — last year, outpacing China’s 4.6% gain. While some of the outperformance reflected America’s elevated price increases, the 2023 outturn underscores a broader point: The US economy is emerging from the pandemic period in a better place than China’s. “It is a striking turn of fortunes,” said Eswar Prasad, who once led the International Monetary Fund’s China team and is now at Cornell University. “The strong performance of the US economy, in tandem with all the short-term and long-term headwinds the Chinese economy is facing, renders it a less obvious proposition that China’s GDP will someday overtake that of the US.” (Source: bloomberg.com)
2. The recession never showed up in 2023. Consumers made sure of it. The U.S. economy grew 3.1% over the past year, the Commerce Department said Thursday. A resilient labor market supported strong consumer spending and brushed aside a feared downturn. A year ago economists saw a recession as very likely and projected anemic 0.2% growth for the year. Instead, last year’s gain was a sharp pickup from a comparable 0.7% advance in 2022. The year was capped by a fourth quarter in which the economy grew at a 3.3% seasonally and inflation-adjusted annualized pace, fueled by household and government spending. The quarterly reading was a slowdown from the summer’s 4.9% pace but still a healthy rate. (Source: wsj.com)
3. Chinese leaders have signaled deepening concerns about the economy by unleashing a burst of measures aimed at reviving growth and steadying markets. The response—triggered most recently by a stock-market selloff—shows new urgency and marks a shift from only a week ago, when Chinese authorities sought to project confidence in the economy. Premier Li Qiang told business and political leaders gathered at the World Economic Forum in Davos, Switzerland, that choosing to invest in the world’s second-largest economy was “not a risk but an opportunity,” with its unrivaled strengths in manufacturing and a “supersize” market of middle-income consumers. (Source: wsj.com)
4. China’s central bank unveiled broad plans to guide money into sectors of national importance to boost the faltering economy this year, after making an unusual reserve requirement ratio announcement. The People’s Bank of China surprised investors on Wednesday by revealing a bigger-than-expected RRR cut weeks in advance, providing markets with a much-needed boost. Economists see the central bank following up that move by steering credit into select areas, along with a handful of trims to the amount of cash banks must hold in reserve and modest policy-rate cuts. “RRR cuts will likely be more infrequent going forward, and only used as a signal tool when markets are performing particularly poorly,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. (Source: bloomberg.com)