DENVER. — If the global economy hits the skids, the warning may come from the hop-covered taproom of the Denver Beer Co, where yearly sales are up 17 percent and founder Charlie Berger says the new “Juicy Freak” India Pale Ale is a bestseller despite its $1-per-pint higher price tag.
Bars and restaurants have been mainstays of a US economic expansion that rests squarely on consumer spending, and if businesses like Berger’s start to slow it’s a short step from there to jobs, wages, business sentiment and world demand.
“These were numbers we couldn’t believe,” Berger said of the growth in his main taproom sales and the 30 percent jump in output over the past year, to 20,000 barrels, at the company’s main production brewery.
If the view from this open-air bar remains rosy, it’s amid a decidedly mixed picture elsewhere in the United States and the world as economists and policymakers take note of what has become a consumer-dependent – and potentially fragile – global growth picture.
The International Monetary Fund this week downgraded its outlook for world growth in 2019 to 3 percent, the slowest pace since the global financial crisis more than a decade ago. Officials cited stalled trade and investment as the culprit, leaving household spending as the main support for private-sector growth.
That may itself be coming under pressure.
In China, shopkeepers tell of waning demand that has made them more cautious, in some cases delaying personal purchases and amplifying the effect of that uncertainty. Embroiled in a trade war with the United States, China saw its economic growth slow to 6.2 percent in the second quarter on a year-on-year basis, its weakest pace in at least 27 years. Retail sales growth is the weakest since early 2003, and Chinese car sales declined last year for the first time since the 1990s.
“Our business has not been so good – fewer migrant workers are coming to our shop, so I might have to save up for another two years before I can buy a car,” said Luo Shuzhen, a 48-year-old shop owner in the southern city of Dongguan, who was hoping to buy this year.
It’s a decision that, magnified across China, is being felt in Germany, where auto exports have slumped, and down the supply chain.
In Japan and Europe, any good news on household spending is clouded by an offset in the other direction.
A Bank of Japan consumer index rose to its second-highest level on record in August, evidenced by strong sales of luxury cars as well as a shift to servings of higher-quality beef among the lunchtime restaurant crowd. But real wages fell for the eighth straight month in August, complicating the outlook for consumption that is likely to take a further hit from a hike in the sales tax this month to 10 percent from 8 percent.
German consumers seemed spurred by recent moves by the European Central Bank to support the euro zone economy, and French consumers by recent tax relief. But there was some evidence British consumers may be starting to hunker down, shifting spending from restaurants and hotels to food to be consumed at home. – Reuters