Thursday 30 September 2010

Japanese industrial production falls again

The Bank of Japan's latest Tankan survey provided a mixed picture of the Japanese economy. From AFP/CNA:

Japanese business confidence has improved for a sixth straight quarter but companies are looking ahead with caution amid increased global economic uncertainty, the Bank of Japan said Wednesday.

Sentiment among major manufacturers rose to a higher-than-expected reading of eight in September from one in June, according to the central bank's closely watched Tankan survey of more than 11,000 firms...

But the forecast for the December survey is for a reading of minus one, suggesting that companies expect conditions to worsen in the months ahead as Japan remains beset by deflation and a strong yen.

More worrying, perhaps, was a report that Japanese industrial production fell again in August. AFP/CNA reports:

Japan's industrial output slipped for a third consecutive month in August, official data showed Thursday, indicating that a fragile export-led recovery is continuing to lose steam.

Output fell 0.3 percent in August, the Ministry of Economy, Trade and Industry said, the figure missing expectations of a 1.1 percent rise...

The trade ministry said it expected production to fall 0.1 percent in September and 2.9 percent in October.

Confirming the weakness in Japanese manufacturing is another report showing that the Nomura/JMMA Manufacturing Purchasing Manager Index fell to 49.5 in September from 50.1 in August.

In contrast, China's manufacturing PMI rose in September. AFP/CNA reports:

Manufacturing in China hit a five-month high in September as production and new orders rose, according to an independent survey published Wednesday.

The HSBC China Manufacturing PMI, or purchasing managers index, rose to 52.9 up from 51.9 last month.

The eurozone economy also appears to be holding up well. From Bloomberg:

European confidence in the economic outlook unexpectedly improved this month as executives and consumers weathered tougher government budget cuts by countries struggling to convince investors that they won’t need external aid.

An index of executive and consumer sentiment in the 16 euro nations rose to 103.2, the highest since January 2008, from a revised 102.3 in August, the European Commission in Brussels said in an e-mailed statement today. That compares with economists’ forecast for a decline to 101.3, based on the median of 28 estimates in a Bloomberg News survey.

Wednesday 29 September 2010

Consumer confidence falls in US, rise in Germany and Italy

US consumer confidence fell in September. Bloomberg reports:

Mounting gloom over the outlook for jobs and wages caused American consumers to lose confidence in September, indicating spending will take time to recover.

The Conference Board’s sentiment index declined to 48.5 this month, lower than the median forecast of economists surveyed by Bloomberg News and the weakest level since February, according to figures from the New York-based private research group today. Another report showed home prices cooled, hurt by a slump in sales following the end of a government tax incentive.

Consumers in Europe, though, appear undeterred by economic uncertainty.

Reuters reports that UK retail sales surged in September at the fastest pace in 6 years.

Retail sales unexpectedly shot up in September at their fastest pace in six years, a survey showed on Tuesday, as consumers splashed out on new clothes, shoes and furniture.

The CBI's monthly distributive trades survey's reported sales balance jumped to +49 in September from +35 in August, the highest reading since May 2004. Analysts had forecast +25.

There were similarly positive reports from the euro area, according to Reuters.

Consumer sentiment in Germany and Italy brightened and French consumer spending rose during the summer, data showed on Tuesday, suggesting the recovery in core euro zone states may hold up better than expected in the second half...

The GfK consumer sentiment indicator, based on a survey of 2,000 Germans, rose to 4.9 for October from an upwardly revised 4.3 for the previous month, the Nuremberg-based group said...

ISAE's confidence index [for Italy] rose to 107.2 in September from an unrevised 104.1 in August, beating all forecasts in a Reuters poll of 15 analysts that pointed to 104.0...

French spending in August dropped 1.6 percent on the month after a surprise 2.7 percent surge in July, which was driven by a sharp increase in spending on textiles and leather goods, thanks to summer sales events.

Tuesday 28 September 2010

Japan prepares stimulus as exports weaken

Japan is preparing another round of fiscal stimulus. AFP/CNA reports:

Japan's Prime Minister Naoto Kan Monday ordered a supplementary budget for fresh stimulus measures be put together to shore up the flagging economy, a senior official said.

Democratic Party of Japan secretary general Katsuya Okada suggested the measures would be similar to those proposed by rival parties, indicating that the budget may land somewhere between 4-5 trillion yen (47-59 billion US dollars).

This comes as a report on Monday showed Japanese exports deteriorating in August. From Bloomberg:

Japan’s exports grew at the slowest pace this year in August as a decrease in global demand and an advance in the yen threaten to undermine the nation’s recovery.

Overseas shipments increased 15.8 percent from a year earlier, the slowest since December, the Finance Ministry said in Tokyo today. The median estimate of 21 economists surveyed by Bloomberg News was for a 19 percent increase...

From a month earlier, exports fell 2.3 percent, today’s report showed. Imports climbed 17.9 percent in August from a year earlier. The trade surplus fell for the first time in 15 months to 103 billion yen ($1.2 billion).

It doesn't help Japan that the US economy also appears to be slowing. The Chicago Fed reported on Monday that national economic activity weakened in August.

Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index decreased to –0.53 in August from –0.11 in July. None of the four broad categories of indicators that make up the index made a positive contribution in August.

The index’s three-month moving average, CFNAI-MA3, declined to –0.42 in August from –0.27 in July. August’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

Monday 27 September 2010

China's one-child policy

China marked 30 years of its one-child policy over the weekend. The People's Daily reports:

China's one-child policy has proved to be efficient for population control and economic development, despite concerns over gender imbalance and an aging population as a result of the 30-year-old program, demographers said Saturday...

On September 25, 1980, the Communist Party of China Central Committee issued an open letter calling for CPC and Communist Youth League members to have only one child in a bid to keep the population below 1.2 billion by 2000 and to improve Chinese people's livelihood...

Vice Premier Li Keqiang said earlier this week that China would stick to its national family planning policy and advance the balanced development of the population in the long term.

However, Zhang Feng, director of Guangdong provincial population and family planning commission, said his province will relax the one-child policy. "Guangdong will gradually allow qualified couples - with either the husband or wife being the only child - to have a second child after 2020. And all couples in the province will be allowed to have a second child starting 2030," Zhang was quoted by the Southern Metropolis Daily as saying.

As it is, the one-child policy has slowed population growth to an extent that it could create problems in the future.

However, Wu Yaowu, a senior researcher specializing in population economics at the Chinese Academy of Social Sciences, told the Beijing-based Global Times that the population decline may slow down the country's GDP growth in the future.

"Population is a kind of capital. With an insufficient workforce, economic growth will slow down," Wu said.

In fact, the turning point could come soon. Wang Feng and Andrew Mason projected in a UN paper that the ratio between producers and consumers will peak in 2013. "Labour-force growth will cease altogether by 2020 and turn strongly negative thereafter," they projected.

Saturday 25 September 2010

Economic data help drive markets up

Friday's economic data were relatively positive.

Bloomberg reports the US economic reports.

Orders for U.S. capital equipment rebounded in August, signaling business investment is holding up better than some economists projected.

Bookings for goods like computers and communications gear climbed 4.1 percent after a 5.3 percent decline in July that was smaller than previously estimated, according to figures from the Commerce Department issued today in Washington...

Total orders for durable goods dropped 1.3 percent, depressed by a 10 percent decrease in transportation gear like airplanes and automobiles that is often volatile...

Bookings excluding transportation equipment rose 2 percent, twice as much as the median forecast of economists surveyed...

Sales of new homes were unchanged at a 288,000 annual rate last month, matching July as the second-lowest in data going back to 1963, another report from the Commerce Department showed...

Germany also had some positive news to report.

German business confidence unexpectedly rose to the highest level in more than three years in September, suggesting companies can weather weaker demand from abroad as the global economic recovery slows.

The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 106.8 from 106.7 in August. That’s the highest since June 2007. Economists had expected a drop to 106.4, according to the median of 36 forecasts in Bloomberg News survey.

While the economic data were not, on the whole, unambiguously bullish, they were enough to drive strong gains for stocks on Friday.

Stocks surged, sending benchmark U.S. indexes to the highest levels since May, while Treasuries retreated and the Dollar Index slid to an almost eight-month low as demand for American capital equipment rebounded and German business confidence improved. Silver reached a 30-year high.

The Standard & Poor’s 500 Index climbed 2.1 percent to 1,148.67 at 4 p.m. in New York, its biggest gain in three weeks. The MSCI Emerging Markets Index rallied to the highest level since July 2008. Ten-year Treasury yields rose 5 basis points to 2.61 percent. The Dollar Index, a measure against six major peers, lost 0.9 percent to 79.279 as the Swiss franc touched a record versus the U.S. currency.

Friday 24 September 2010

US existing home sales and leading index rise, eurozone composite index falls

US economic data on Thursday were mostly positive. Bloomberg reports:

Sales of U.S. previously owned homes climbed from a record low in August and a gauge of the outlook for the economy increased, confirming the Federal Reserve’s forecast for a “modest” pace of expansion.

Purchases of existing houses climbed to a 4.13 million annual pace, the second-lowest on record, the National Association of Realtors said today in Washington. The New York- based Conference Board said its index of leading economic indicators rose 0.3 percent, exceeding forecasts.

But not all increases were good for the economy.

Initial jobless claims rose by 12,000 to 465,000 in the week ended Sept. 18. The total number of people receiving unemployment insurance declined, while those getting extended payments increased.

Meanwhile, the much-anticipated slowdown in the eurozone economy may be a bit sharper than previously thought. From Bloomberg:

Growth in Europe’s services and manufacturing industries weakened more than economists forecast in September, adding to evidence the recovery in the region is losing steam.

A composite index based on a survey of euro-area purchasing managers in both industries declined to 53.8 from 56.2 in August, London-based Markit Economics said today. Economists expected a reading of 55.7, according to the median of 15 forecasts in a Bloomberg News survey. A reading above 50 indicates expansion.

Thursday 23 September 2010

Emerging market stocks at highest levels since 2008

Stocks in emerging markets are at their highest levels since 2008. Bloomberg reports:

Emerging-market stocks rose, driving the benchmark index to the highest level since July 2008, and currencies gained on speculation the U.S. Federal Reserve will ease monetary policy further.

The MSCI Emerging Markets Index added 0.4 percent to 1,047.84 at 11:29 a.m. New York time, heading to the highest since July 23, 2008. Brazil’s Bovespa stock index rose, led by Empresa Brasileira de Aeronautica SA, the world’s fourth-largest aircraft maker. The Czech koruna, Polish zloty and Hungarian forint gained at least 1 percent versus the dollar. The rand appreciated 0.3 percent after South Africa’s current-account gap fell to a six-year low.

The economic data from advanced economies on Wednesday were mixed.

Japan reported relatively positive data. The all industry activity index rose 1.0 percent in July. Land price declines slowed in June for the first time since 2007.

Meanwhile, house price declines slowed in the US in July. Bloomberg reports:

U.S. home prices dropped 3.3 percent in July from a year earlier, the eighth consecutive decline, as foreclosed properties flooded the market.

Prices fell 0.5 percent from June, the Federal Housing Finance Agency in Washington said in a report today. Economists had projected prices to fall 0.2 percent from the previous month, based on the average of 15 estimates in a Bloomberg survey. The agency revised the previously reported May-to-June decline to 1.2 percent from 0.3 percent.

Wednesday also saw the euro area report that industrial orders fell in July. Bloomberg reports:

European industrial orders declined more than economists forecast in July, led by a drop in capital goods such as factory machinery.

Orders in the 16-nation euro area decreased 2.4 percent from June, when they rose 2.4 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast orders to drop 1.4 percent in July, the median of 17 estimates in a Bloomberg News survey showed. From a year earlier, July industrial orders jumped 11 percent after rising 23 percent in June.

Wednesday 22 September 2010

Fed ready to ease, housing starts rise

We could get another round of easing from the Fed soon. From Bloomberg after the latest FOMC meeting:

The Federal Reserve said it’s willing to ease monetary policy further to spur growth and support prices while refraining today from expanding its holdings of securities.

“The committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate,” the Federal Open Market Committee said today in a statement in Washington.

Policy makers said the pace of recovery and job growth have “slowed in recent months.” The committee also said “measures of underlying inflation are currently at levels somewhat below those the committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.”

Gold rose, the dollar fell and the yield on two-year Treasuries hit a record low on speculation Chairman Ben S. Bernanke will purchase additional U.S. government securities in coming months in an effort to lower long-term interest rates. The FOMC retained its stance from last month of keeping its portfolio stable at around $2 trillion to keep money from draining out of the financial system.

But meanwhile, the US housing market seems to be stabilising. Again from Bloomberg:

Housing starts in the U.S. increased more than forecast in August, outstripping a gain in building permits that signals residential construction will stay close to record lows.

Builders began work on 598,000 homes at an annual rate, up 10.5 percent and the most since April, the Commerce Department said today in Washington. Economists surveyed by Bloomberg News forecast a 550,000 pace. Permits, an indicator of future activity, were issued at a 569,000 rate.

Tuesday 21 September 2010

US recession over, housing slump continues

The NBER has declared that the US recession ended in June 2009. Reuters reports:

The recession ended in June 2009, making it the longest downturn since the Great Depression of the 1930s, the National Bureau of Economic Research said on Monday.

The NBER, considered the arbiter of U.S. recessions, said its declaration did not mean the economy had "returned to operating at normal capacity" and cautioned that economic activity sometimes remains below normal well into expansion.

If US economic activity remains below normal, a lot will be due to the fact that the housing market remains depressed, as Bloomberg reports:

Confidence among U.S. homebuilders in September unexpectedly held at the lowest level in more than a year, showing the housing market remains depressed following the expiration of a government tax credit.

The National Association of Home Builders/Wells Fargo confidence index was unchanged at 13, matching the August reading as the lowest since March 2009, data from the Washington-based group showed today. The gauge was projected to rise to 14, according to the median forecast of 50 economists surveyed by Bloomberg News.

Monday 20 September 2010

Deflation not yet imminent in the US

Last week's economic reports provided few signs that deflation is an imminent threat in the United States.

Despite concerns of a slowing economy and a possible double dip, last week's US economic data were mixed at worst.

Consumer spending appears to be holding up. A Commerce Department report on Tuesday showed that retail sales rose 0.4 percent in August, better than the 0.3 percent rise in July. Excluding autos, gasoline and building materials, retail sales rose 0.6 percent in August after a 0.1 percent decline in July.

Nevertheless, consumer confidence is weakening. The University of Michigan's preliminary September reading on consumer sentiment released on Friday fell to 66.6, the weakest reading since August 2009, from 68.9 in August.

Meanwhile, industrial production is slowing. A Federal Reserve report on Wednesday showed that industrial output rose 0.2 percent in August, down from a rise of 0.6 percent in July.

Furthermore, the longer-term trends for both retail sales and industrial production suggest that their rates of recovery have probably peaked.

Meanwhile, other reports last week showed that inflation persists in the US economy.

A report on Friday by the Labor Department showed that consumer prices rose 0.3 percent in August, the same as in July. Consumer prices rose 1.1 percent in the twelve months to August.

A day earlier, the Labor Department had reported that producer prices rose 0.4 percent in August, up from 0.2 percent in July. They were up 3.1 percent from a year earlier.

A slowing economy though could put the economy at risk of deflation. The Federal Reserve report on Wednesday showed that industrial capacity utilisation increased to 74.7 percent in August from 74.6 percent in July. The August reading means that capacity utilisation remains well below the average utilisation rate of 80.6 percent for the period from 1972 to 2009, providing significant deflationary pressure on the economy.

On the bright side, the trend in capacity utilisation remains positive. The August reading was the highest since November 2008. So while there is deflationary pressure, it is actually diminishing.

A pronounced loss of momentum in the economy, of course, would change the outlook.

Until clearer evidence of that appears, however, deflation is probably not imminent in the US.

Saturday 18 September 2010

US consumer prices rise, confidence falls

Reuters reports the US economic data released on Friday.

Underlying U.S. inflation pressures were muted in August and consumer morale hit a 13-month low this month, keeping fears of deflation alive and spurring bets on further monetary easing.

Consumer prices rose 0.3 percent last month as food prices rebounded and energy costs marched higher, the Labor Department said on Friday. But core prices, which ignore volatile food and energy costs, were unexpectedly flat...

Another report showed consumer sentiment deteriorated in early September. The Thomson Reuters/University of Michigan's preliminary September reading on consumer sentiment moved down to 66.6, the weakest reading since August 2009, from 68.9 in August.

Friday 17 September 2010

India raises interest rates again

The Reserve Bank of India raised interest rates on Thursday. AFP/CNA reports:

India's central bank raised its main interest rates more than expected on Thursday, springing the fifth hike in six months to tame inflation in Asia's third-biggest economy.

The Reserve Bank of India (RBI) raised its main repo rate -- the rate at which it lends to commercial banks -- by 25 basis points to 6.0 percent, a move that was in line with analysts' forecasts.

But it hiked the reverse repo rate -- the rate it pays to banks for deposits -- more aggressively than forecast, increasing it by 50 basis points to 5.0 percent.

Rate hikes are less likely among the major developed economies, although US economic data released on Thursday did show some improvements as Bloomberg reports:

The number of Americans seeking unemployment benefits unexpectedly declined and manufacturing in the Philadelphia area contracted, highlighting forecasts for an uneven pace of economic recovery.

Initial jobless claims dropped by 3,000 to 450,000 in the week ended Sept. 11, the lowest level in two months, the Labor Department reported today in Washington. The Federal Reserve Bank of Philadelphia said its general economic index rose to minus 0.7 in September from minus 7.7 in August...

Wholesale prices climbed 0.4 percent in August after rising 0.2 percent the prior month, figures from the Labor Department showed. The increases have helped ease concern weak growth would lead to a period of deflation, or protracted declines that hurt the economy. Producer prices dropped from April through June.

Meanwhile, the euro area has reported a decline in exports in July. From Bloomberg:

European exports declined for the first time in three months in July as a global slowdown started to curb orders for companies across the euro region.

Exports from the economy of the 16 nations that use the single currency dropped a seasonally adjusted 0.6 percent from June, when they rose 5.3 percent, the European Union’s statistics office in Luxembourg said today. Imports fell 1.5 percent and the trade gap was 200 million euros ($260 million), down from a deficit of 1.4 billion euros in the previous month.

And August saw car sales falling in Europe. Again from Bloomberg:

Fiat SpA, Ford Motor Co. and Toyota Motor Corp. led a fifth consecutive monthly drop in European car sales as the end of government incentives hit demand. Volkswagen AG’s Audi luxury unit gained market share.

Registrations fell 12 percent to 731,503 vehicles in August from a year earlier, the Brussels-based European Automobile Manufacturers’ Association said today. Eight-month deliveries decreased 3 percent to 9.3 million.

Also falling recently is UK retail sales. Reuters reports:

Retail sales fell unexpectedly in August for the first time in seven months, in a sign the recovery may be stalling even as some of the country's biggest stores announced jumps in profits.

The Office for National Statistics said on Thursday that sales volumes fell 0.5 percent last month, defying expectations of a 0.3 percent rise and raising concern that waning consumer confidence is beginning to dent retail demand even before next year's planned VAT and income tax hikes...

Separately, the Confederation of British Industry's monthly survey showed British factory orders fell in September, contrary to expectations, but it also saw inflationary pressures picking up.

Thursday 16 September 2010

US industrial production slows, Japan sells yen

US economic data on Wednesday indicate that the economy is slowing. Bloomberg reports:

Factory production cooled in August, pointing to a slower pace of growth as the U.S. struggles to sustain a recovery from the worst recession since the 1930s.

Industrial output rose 0.2 percent after a 0.6 percent gain in July that was smaller than previously estimated, figures from the Federal Reserve showed today...

The Fed Bank of New York’s so-called Empire State index fell to 4.1 this month, the lowest reading since July 2009, from 7.1 in August. Readings greater than zero signal expansion. Measures of orders, sales and employment all improved, signaling the drop was mainly a reflection of waning confidence.

The cost of goods imported into the U.S. rose 0.6 percent in August, more than forecast, as crude oil and food costs jumped, masking contained inflation elsewhere, Labor Department figures also showed today.

Meanwhile, the euro area released data on inflation and employment. Again from Bloomberg:

European inflation slowed in August, led by energy costs and as companies held back from hiring amid signs the recovery is losing momentum.

Consumer prices in the 16 euro nations increased 1.6 percent from a year earlier after rising 1.7 percent in July, the European Union statistics office in Luxembourg said today. That’s in line with an initial estimate published on Aug. 31. Payrolls in the region were unchanged in the second quarter from the previous three months, a separate report showed.

There were also employment data from the UK on Wednesday. Reuters reports:

The number of Britons claiming jobless benefit rose last month for the first time since January, raising fears the recovery could be faltering even before the bulk of public spending cuts kick in.

The Office for National Statistics said claimant count unemployment rose by 2,300 in August, confounding expectations for a modest decline and bringing to an end a six-month period in which it had fallen by more than 150,000.

But markets on Wednesday were mostly abuzz with Japan's intervention in the currency market. From Reuters:

Japan's bold strike to weaken its currency on Wednesday sent the yen tumbling more than 3.0 percent against the U.S. dollar, but unsettled allies who feared the unilateral move may complicate efforts to restore balanced global economic growth.

Japan unleashed waves of yen selling, estimated at more than $20 billion, which spread from Tokyo through New York trading. The sales, conducted alone without help from its Group of Seven partners, are expected to continue in the days ahead, Japanese news agency Nikkei reported.

Wednesday 15 September 2010

US retail sales rise

US economic data on Tuesday were stronger than expected. Bloomberg reports:

Sales at U.S. retailers climbed in August for a second consecutive month, allaying concern the economy will stumble in the second half of the year.

Purchases increased 0.4 percent following a 0.3 percent gain in July, Commerce Department figures showed today in Washington. Sales excluding automobiles advanced 0.6 percent, twice as much as the median forecast of economists surveyed by Bloomberg News...

Inventories at all businesses increased 1 percent in July, the most since July 2008, the other report from the Commerce Department showed. Companies had enough goods on hand to supply 1.26 month’s worth of sales at July’s pace, the same as in the prior month.

Data elsewhere on Tuesday were not as positive.

In the UK, consumer confidence rebounded a little in August but Reuters reports that inflation persisted and house prices fell again.

British inflation defied expectations for a fall in August but property prices weakened further and the Bank of England's newest recruit signalled he was in no rush to raise interest rates.

Consumer price inflation held steady at 3.1 percent last month, more than a percentage point above target, after big rises in airfares and clothing prices offset easing fuel costs...

RICS's headline house price index dropped to -32 from -8, the sharpest one-month fall since June 2004, and newly-agreed sales suffered their biggest fall in two years.

In the euro area, industrial production unexpectedly stagnated in July. Bloomberg reports:

European industrial production unexpectedly stagnated in July, adding to signs that the euro region’s export-led recovery is losing momentum.

Economists had projected a gain of 0.1 percent in July, the median of 35 forecasts in a Bloomberg survey showed. In June, output in the economy of the 16 euro nations fell 0.2 percent, the European Union’s statistics office in Luxembourg said today. A separate release showed that euro-region labor costs rose 1.6 percent in the second quarter from a year earlier, the weakest since the data were first compiled in 2000.

In Japan, revised July industrial production data turned an increase into a decrease. Again from Bloomberg:

Japan’s industrial production fell in July, the government said in revised figures today, reversing an initial estimate that showed output rose.

Factory output fell 0.2 percent from a month earlier, compared with the previously reported 0.3 percent gain, the Trade Ministry said in Tokyo today. Production fell 1.1 percent in June.

Tuesday 14 September 2010

Global economy still slowing

The global economy remains headed towards slower growth.

On Monday, the Organisation for Economic Co-operation and Development released its report on composite leading indicators (CLIs) showing that the CLI for the OECD area fell by 0.1 point in July. In its report, the OECD said that the indicators for July "point to clearer signs of a moderation in the pace of expansion compared to last month’s assessment".

OECD composite leading indicators
 Ratio to trend,
amplitude adjusted
Change from previous month
20102010
MarAprMayJunJulMarAprMayJunJul
OECD area103.3103.2103.3103.2103.10.40.20.1-0.1-0.1
United States102.5102.8102.9102.7102.50.60.30.0-0.2-0.2
Euro area103.8104.0104.1104.1104.10.30.20.10.00.0
Japan102.5102.7102.8102.8102.80.50.30.10.0-0.1

Other recent reports support the view of a slowing global economy.

Last week, reports from Japan had shown that its economic growth is weakening. While the composite coincident index crept up to 101.8 in July from 101.3 in June, the composite leading index fell to 98.2 from 99.0. The Cabinet Office's economy watchers survey showed that the diffusion index for current conditions fell to 45.1 in August from 49.8 in July while the diffusion index for future conditions plunged to 40.0 from 46.6.

Last Friday, the Economic Cycle Research Institute reported that its weekly leading index for the United States economy rose to 122.0 for the week ended 3 September from 120.5 the week before. The annualised growth rate of the index, though, edged up to just minus 10.1 percent from minus 10.2 percent the week before. The growth rate has been hovering around minus 10 percent for the past two months, well down from over 20 percent at the beginning of the year.

On Monday, the European Commission released its interim forecast showing that it forecasts growth in the euro area to slow from 1.0 percent in the second quarter to 0.5 percent in the third quarter and to 0.3 percent in the fourth quarter. The EU noted in its report that while growth in the euro area has "surprised markedly on the upside", weaker global growth is likely to dampen export growth in Europe.

Update on 22 September: One of the references to the composite leading index in the fourth paragraph has been corrected to refer to the composite coincident index.

Monday 13 September 2010

Basel III

The new global bank capital requirements are out. Reuters reports:

Global regulators, aiming to prevent any repeat of the international credit crisis, agreed on Sunday to force banks to more than triple the amount of top-quality capital they must hold in reserve.

The biggest change to global banking regulation in decades, known as "Basel III," will require banks to hold top-quality capital totaling 7 percent of their risk-bearing assets, up from just 2 percent under current rules.

The rules may oblige banks to raise hundreds of billions of dollars of fresh capital over the next decade. Germany's banking association, for example, has estimated its 10 biggest banks may need 105 billion euros ($141 billion) of additional capital.

But to ease the burden on banks and financial markets, regulators gave the banks transition periods to comply with the rules. These periods, extending in some cases to January 2019 or later, are longer than many bankers originally expected.

Saturday 11 September 2010

China's trade surplus shrinks but economy maintains momentum

A report on Friday showed that China's trade surplus shrank in August as exports slowed. AFP/CNA reports:

China's trade surplus unexpectedly shrank to 20.03 billion dollars in August as imports accelerated, official data showed Friday, possibly undermining calls for Beijing to let its currency strengthen...

China's exports in August totalled 139.3 billion dollars, growing 34.4 per cent year-on-year but at a slower rate than July, when they rose 38.1per cent to a monthly record high of 145.52 billion dollars.

Imports meanwhile picked up pace in August, growing a larger-than-expected 35.2 per cent to 119.27 billion dollars, suggesting the slowdown in the Chinese economy is not as severe as some had feared...

Property price appreciation has also slowed.

House prices in 70 major cities rose 9.3 per cent year-on-year in August, the National Bureau of Statistics said Friday, from 10.3 per cent in July.

However, reports on Saturday show that on the whole, the Chinese economy remains hot. From Bloomberg:

China’s industrial output rose at a faster pace than analysts estimated in August, signaling that the world’s third-biggest economy is maintaining momentum as growth moderates.

Production gained 13.9 percent from a year earlier, more than that 13 percent median estimate of 29 economists, a statistics bureau report showed in Beijing today. Consumer prices jumped 3.5 percent, the most in 22 months, as food costs climbed. Retail sales increased 18.4 percent...

Urban fixed-asset investment grew 24.8 percent in the first eight months of 2010 from a year earlier, the statistics bureau said today. That compared with a 24.9 percent gain for January- through-July. Producer price inflation slowed to an annual 4.3 percent pace from 4.8 percent...

In a separate statement, the central bank reported August new loans of 545.2 billion yuan ($80 billion) and a 19.2 percent increase in M2, the broadest measure of money supply. Both numbers were above economists’ estimates. The rebound in M2 growth was the first in nine months.

The latest reports suggest that Chinese authorities could tighten policy further.

Australia and New Zealand Banking Group Ltd. said today that China should gradually “normalize” interest rates, initially raising the deposit rate. Credit Suisse AG economist Tao Dong said that while he favors higher rates, policy makers may make no “imminent” move, preferring to support growth.

Policy-makers will be aware that despite its breakneck growth rate, China may have a large unemployment problem. From AFP/CNA:

With more than one billion workers in China, the world's most populous nation is facing a huge unemployment problem as only 780 million labourers are employed, the government said Friday.

The numbers included in China's "white paper" on the nation's human resources, released on Friday, suggested that around 22 per cent of China's labour force is without jobs.

Friday 10 September 2010

BoE maintains policy, Japanese second quarter GDP revised up

The Bank of England meeting on Thursday ended uneventfully. Reuters reports:

The Bank of England kept interest rates at 0.5 percent for the 18th month in a row and announced no new quantitative easing purchases, in a widely expected decision on Thursday.

UK economic data on Thursday was not encouraging. Again from Reuters:

The Office for National Statistics said Britain's goods trade gap widened to 8.667 billion pounds in July from 7.532 billion in June, wrong-footing analysts who had expected a broadly unchanged reading...

Imports rose 3.1 percent on the month in value terms, driven by an increase in imports of organic chemicals, pharmaceuticals and oil, the latter due to maintenance work on North Sea oil rigs.

Exports, by contrast, fell 0.9 percent, led again by chemicals and oil.

In contrast to the UK, the US trade deficit fell in July. From Bloomberg:

The U.S. trade deficit narrowed more than forecast in July and filings for jobless benefits plunged last week, tempering concern the world’s largest economy is slipping back into a recession.

The trade gap shrank 14 percent, the most since February 2009, to $42.8 billion, the Commerce Department said today in Washington. The deficit was less than the lowest forecast in a Bloomberg News survey of economists. New applications for unemployment insurance fell by 27,000 to 451,000, the lowest since July 9, according to the Labor Department...

Overseas shipments increased 1.8 percent to $153.3 billion, the highest since August 2008, while purchases from abroad declined 2.1 percent...

Some good news also came from Japan today. From Bloomberg:

Japan’s economy expanded more than initially estimated in the second quarter, driven by exports and an upward revision to capital spending.

Gross domestic product grew at an annualized 1.5 percent rate in the three months ended June 30, faster than the 0.4 percent reported last month, the Cabinet Office said today in Tokyo. The figure matched the median of 21 estimates in a Bloomberg News survey of economists. In nominal terms, GDP shrank 0.6 percent from the previous quarter.

The outlook for the Japanese economy remains a concern, however. On Thursday, a report had shown that consumer confidence continues to decline. Nikkei reports:

Japanese consumer confidence fell for the second straight month in August, with the index down 0.9 point from a month earlier to 42.4, the Cabinet Office said Thursday.

And business confidence may be peaking. Bloomberg reports:

Japan’s largest manufacturers are becoming less optimistic about business conditions toward the end of the year as the yen’s advance threatens profits.

The same percentage of big manufacturers reported they are pessimistic about the fourth quarter as those saying they are optimistic, resulting in an index reading of zero, a government report showed in Tokyo today. For the three months to September the figure rose for the fifth quarter in a row, to 13.3 points from 10.

But it's not just Japan. The OECD sees the economic recovery for the world slowing and has revised its GDP growth projections downwards.

The world economic recovery may be slowing faster than previously anticipated, according the OECD’s latest Interim Economic Assessment. Growth in the Group of Seven countries is expected to be around 1½ per cent on an annualized basis in the second half of 2010 compared with the previous estimate of around 1¾ per cent in the OECD’s May Economic Outlook.

The OECD says the loss of momentum in the recovery is temporary although uncertainty has increased.

Thursday 9 September 2010

BoC raises interest rate

The Bank of Canada raised its interest rate on Wednesday. Bloomberg reports:

The Bank of Canada raised its benchmark interest rate today for a third time this year, and said it expects households and businesses to spend even as the outlook for the U.S. economy weakens.

The bank raised its target rate for overnight loans between commercial banks to 1 percent from 0.75 percent, matching estimates from 14 of 20 economists surveyed by Bloomberg. While the country’s recovery will be “slightly” slower than it had projected because of a weaker outlook for the U.S. economy, inflation is in line with expectations, it said.

This came as the Ivey purchasing managers index showed a large jump in August. Again from Bloomberg:

Canadian business spending increased more than expected in August, reaching its highest level in more than two years, the Ivey purchasing managers’ index showed.

The index rose to 65.9 in August from 54 the month before, according to the survey of 175 purchasing managers by the Richard Ivey School of Business in London, Ontario. Figures higher than 50 indicate purchasing increased. Economists expected a reading of 55.5, based on the median of 10 estimates compiled by Bloomberg.

Japan also released some positive data on Wednesday. Bloomberg reports:

Japan’s machinery orders and current account surplus exceeded forecasts in July even as the yen appreciated, supporting the central bank’s decision to hold off from further monetary easing yesterday.

Orders rose 8.8 percent from June, the biggest gain this year, the Cabinet Office said in Tokyo today. July’s current- account surplus widened 26 percent from a year earlier to 1.676 trillion yen ($20 billion), a separate report showed.

Surprisingly, some of the weaker data on Wednesday came from Germany. From Bloomberg:

German exports fell and industrial production rose less than economists forecast in July, suggesting the recovery in Europe’s largest economy is losing momentum.

Sales abroad dropped 1.5 percent from the previous month, while production increased 0.1 percent, reports from the Federal Statistics Office in Wiesbaden and the Economy Ministry in Berlin showed today. Separate reports showed that industrial production declined in the Netherlands in July, while annual production output in Spain rose the least in five months.

In the UK, the economy may also be slowing although growth in manufacturing held up in July. Reuters reports:

British factory output maintained a healthy pace of growth in July, official data showed on Wednesday, but a slowdown in both manufacturing and the broader economy looks inevitable to economists.

Factory output rose 0.3 percent on the month, the same pace as June and May, continuing its recovery from last year's deep recession. That lifted the annual growth rate to 4.9 percent, the highest since December 1994...

The broader measure of industrial output also rose 0.3 percent on the month, recovering from a 0.5 percent drop in June caused by an early start to oil rig maintenance. The statistics office said there was scope for further gains as more oil rigs came back on stream in August...

Forecasters at the National Institute of Economic and Social Research think-tank calculated that British GDP growth slowed sharply to 0.7 percent in the three months to August from 1.3 percent in the three months to July.

And the Federal Reserve reported on Wednesday that US economic growth is also slowing. From Bloomberg:

The Federal Reserve said the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks.

Five regional banks reported “economic growth at a moderate pace” and two pointed to “positive developments or net improvements.” The remaining five banks said conditions were mixed or decelerating.

Wednesday 8 September 2010

Stocks fall as European yield spreads widen

With the Bank of Japan and the Reserve Bank of Australia leaving interest rates unchanged on Tuesday, the focus in markets shifted back to Europe.

From Bloomberg:

Stocks slid, while Greek, Portuguese and Irish bonds tumbled, gold rose to a record and the yen surged to a 15-year high versus the dollar on concern Europe’s debt crisis will worsen. U.S. and German bonds rallied.

The MSCI World Index slid 1.1 percent and the Standard & Poor’s 500 Index lost 1.2 percent at 4 p.m. in New York. The gaps between 10-year German bond yields and Irish and Portuguese debt grew to all-time highs, while the German-Greek yield spread increased to the widest since May. The yen rose to as little as 83.52 per dollar as the Bank of Japan refrained from increasing bank loans. Ten-year Treasury yields lost 10 basis points to 2.6 percent. Gold futures closed at $1,259.30 an ounce.

Banks led stocks lower on concern European lenders will require more capital to compensate for holdings of bonds in the region’s weakest economies. Germany’s banking association said yesterday that the nation’s banks need to raise $135 billion and Pacific Investment Management Co. said Greece still faces “substantial” default risk.

Helping to keep German bund yields down was a report on Tuesday showing that German factory orders unexpectedly fell in July. From Bloomberg:

Orders, adjusted for seasonal swings and inflation, declined 2.2 percent from June, when they surged a revised 3.6 percent, the Economy Ministry in Berlin said today. That’s the biggest drop since February 2009. Economists forecast a 0.5 percent gain, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, orders climbed 18 percent, when adjusted for working days.

Tuesday 7 September 2010

Stocks rise to four-week high, UK manufacturing and retail sales grow

Stocks picked up on Monday where they left off on Friday. From Bloomberg:

Global stocks rose to a four-week high and industrial metals rallied amid growing optimism about the prospects for economic growth. European bonds rebounded from three days of losses.

The MSCI World Index of shares in 24 developed markets climbed 0.4 percent at 5 p.m. in New York, where exchanges were closed for the Labor Day holiday. Standard & Poor’s 500 Index futures advanced 0.1 percent in Chicago. Brazil’s Bovespa index advanced. German bunds and U.K. gilts rose, while copper and nickel gained and oil fell.

There were few economic reports on Monday, two of which came from the UK.

Bloomberg reports that UK manufacturing grew at a record pace in the third quarter.

The number of manufacturers saying sales rose in the three months through September exceeded those reporting declines by 33 percent, compared with 30 percent in the second quarter, the EEF and accountancy firm BDO Stoy Hayward LLP said in a quarterly survey released today in London. That’s the highest since the report began in 1995. A gauge of exports also rose to a record.

Reuters reports that UK retail sales growth picked up in August.

Retail sales growth accelerated last month, helped by clothes sales, a survey showed on Tuesday, but discounting played a part in the improvement and consumers remain reluctant to splash out on expensive items.

The British Retail Consortium said retail sales values were 1.0 percent higher than a year ago in August on a like-for-like basis. Total sales, which include new floorspace, were 2.8 percent higher.

Monday 6 September 2010

Global PMI shows slowing economy

The global economy is slowing, according to purchasing managers.

The following table shows the JPMorgan global composite indices since the output index hit a peak in April.

JPMorgan Global All-Industry Indices
 AprMayJunJulAug
Output57.757.055.454.653.9
New orders56.955.353.353.552.3
Input prices60.959.254.553.356.8
Employment50.851.450.851.450.5

All the indices are still above 50 though. In the latest global PMI report, JPMorgan director of Global Economics Coordination David Hensley said:

August PMI data pointed to a further downshift in the rate of recovery of the global economy. Growth of global GDP is likely to slow to around 2.5% in the third quarter, down from a peak of almost 4% in the second quarter. However, what we are seeing is more in line with a moderation than a sharp slowdown, suggesting that there is still sufficient momentum heading forward to maintain the recovery.

Saturday 4 September 2010

US private sector adds jobs

US employment provided a positive surprise in August. Bloomberg reports:

Companies in the U.S. added more jobs than forecast in August, easing concern the world’s largest economy is sliding back into a recession.

Private payrolls climbed 67,000 after a revised 107,000 increase in July that was more than initially estimated, Labor Department figures in Washington showed today. The unemployment rate rose to 9.6 percent as more people looked for work...

Overall employment, including government agencies, fell 54,000 for a second month, compared with a median forecast for a decline of 105,000 in the Bloomberg survey. The decrease reflected a 114,000 drop in temporary workers hired by the government to conduct the 2010 census.

However, the ISM's non-manufacturing report provided a negative surprise.

Service industries expanded in August at the weakest pace in seven months, a report from the Institute for Supply Management showed today.

The group’s index of non-manufacturing businesses, which covers about 90 percent of the economy, fell to 51.5 from 54.3 in July. Readings above 50 signal growth and economists projected a decline to 53.2, according the median estimate in a Bloomberg survey.

In contrast, eurozone services provided a positive surprise in August but July retail sales came in below expectation. Again from Bloomberg:

Growth in Europe’s services and manufacturing industries weakened and retail sales rose less than economists forecast, adding to signs the region’s export- led recovery is losing momentum.

A composite index based on a survey of euro-area purchasing managers in both industries declined to 56.2 in August from 56.7 in July, London-based Markit Economics said today. That’s above an initial estimate of 56.1 published on Aug. 23. The gauge for services increased. A separate report showed retail sales rose 0.1 percent in July, less than the 0.2 percent median forecast of 20 economists in a Bloomberg News survey...

The index of services, which account for about 60 percent of the region’s GDP, rose to 55.9 from 55.8. A gauge of manufacturing declined to 55.1 in August from 56.7 in July, according to a Sept. 1 report.

In the UK, the services PMI became yet another piece of evidence of a slowing economy. Reuters report:

British service sector activity grew last month at its slowest pace since April 2009, with a marked fall in hiring as employers worried about an economic slowdown and public spending cuts, a survey showed on Friday.

The headline Markit/CIPS services purchasing managers' index dropped to 51.3 in August from July's 53.1, a much sharper fall than the decline to 52.9 forecast in a Reuters poll.

The downbeat services reading follows bigger-than-expected falls in the PMIs for manufacturers and construction, though all are still above the 50 line that divides growth from contraction.

Friday 3 September 2010

ECB raises growth forecast, Riksbank raises rate

The ECB has raised its economic growth forecasts for the euro area but is taking no chances with monetary policy. Reuters reports on Thursday:

The European Central Bank extended its liquidity safety net for vulnerable euro zone banks into next year, delaying its exit from crisis measures for now as it urged caution about the economic recovery.

The ECB left rates at a record low of 1 percent for the 16th month in a row on Thursday and said policy remained accommodative as the region battles with an uneven recovery and concerns about bank vulnerability.

ECB staff raised economic growth forecasts but President Jean-Claude Trichet said risks were to the downside and the recovery would be moderate with uncertainty prevailing...

Staff see euro zone growth of about 1.6 percent this year, from about 1 percent in June, and about 1.4 percent in 2011, from 1.2 percent.

The quarterly forecasts also showed inflation under control, with consumer price gains seen at about 1.6 percent in 2010 and 1.7 percent in 2011 -- below the bank's 2 percent ceiling.

However, Sweden's Riksbank went ahead with another interest rate hike. Bloomberg reports:

Sweden’s central bank raised its benchmark lending rate for a second time since July as policy makers try to steer the largest Nordic economy through the European Union’s biggest rebound.

The world’s oldest central bank raised the repo rate by a quarter of a percentage point to 0.75 percent, it said today on its website. The decision was expected by 16 of the 21 economists surveyed by Bloomberg. Five had predicted no change.

Continuing mixed data from the US means that central banks will remain cautious about tightening policy. From Bloomberg on Thursday:

Pending sales of existing houses unexpectedly climbed in July from a record low, indicating the real-estate market is steadying following the end of a government tax credit.

The index of purchase contracts rose 5.2 percent after a revised 2.8 percent drop the prior month, figures from the National Association of Realtors showed today in Washington...

The number of Americans seeking jobless benefits fell last week to a level that indicates the labor market has not improved this year. Initial jobless claims dropped by 6,000 to 472,000 in the week ended Aug. 28, the Labor Department said. Applications exceeded the 463,000 average so far this year...

Factory orders rose 0.1 percent in July, less than forecast, restrained by a slump in demand for business equipment, a Commerce Department report showed today. The 0.1 percent rise in bookings followed a 0.6 percent decrease in June.

Thursday 2 September 2010

Stocks surge as manufacturing accelerates in US and China

September trading got off to a roaring start on Wednesday. Bloomberg reports:

Global stocks surged the most since May, Treasuries tumbled and copper rallied as manufacturing in the U.S. and China grew faster than economists estimated, bolstering optimism in the economy. The dollar, yen and Swiss franc weakened.

The MSCI World Index rallied 2.9 percent at 4 p.m. in New York, its biggest gain since May 27, and the Standard & Poor’s 500 Index jumped 3 percent to 1,080.29. Ten-year Treasury yields rose 11 basis points to 2.58 percent. Copper and aluminum advanced more than 2.4 percent to pace gains in metals. The Australian dollar strengthened against all 16 major counterparts after the nation’s economic growth topped forecasts.

Unexpectedly strong growth in manufacturing was a major driver for markets, and China had provided much of the initial impetus with its PMI reports. From AFP/CNA:

Manufacturing in China rebounded in August, surveys showed Wednesday, easing concerns the economy was heading for a sharp slowdown in the second half of 2010...

The HSBC China Manufacturing PMI, or purchasing managers index, rose to a three-month high of 51.9 last month from 49.4 in July.

A separate survey published by a government agency -- the China Federation of Logistics and Purchasing (CFLP) -- showed manufacturing activity reached 51.7 last month compared with 51.2 in July.

Later on Wednesday, the eurozone PMI report did not show an acceleration in manufacturing but it did provide a positive surprise nevertheless. From Bloomberg:

Growth in Europe’s manufacturing industry slowed in August and export demand fell to the lowest in seven months, adding to signs the economy is cooling after the second-quarter surge.

A gauge of manufacturing in the 16-nation euro region declined to 55.1 from 56.7 in the previous month, London-based Markit Economics said today. That’s above an initial estimate of 55 released on Aug. 23. It’s the 11th straight month with a reading above 50, indicating expansion.

Manufacturing also slowed in the UK. Reuters reports:

Growth in the country's manufacturing sector slowed more than expected last month, led by the weakest expansion in new orders for more than a year, a purchasing managers' survey showed on Wednesday.

The Markit/Chartered Institute of Purchasing and Supply Manufacturing PMI fell to 54.3 in August -- below all forecasts in a Reuters poll -- from a downwardly revised 56.9 in July. That was the lowest since November last year although it was still above the 50 mark which separates growth from contraction.

While the UK report may have been disappointing, the situation in Japan is looking even more precarious after a report on Monday had shown that manufacturing barely grew in August. Again from Reuters:

Japanese manufacturing activity expanded in August at its slowest pace in 14 months, a survey showed on Tuesday, as overseas demand ebbed while a strong yen weighs down the nation's exports.

The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 50.1 in August from 52.8 in July, the lowest level since 48.2 in June 2009.

In contrast, the ISM report on Wednesday eased concerns of a downturn in US manufacturing. Bloomberg reports:

Manufacturing in the U.S. expanded at a faster pace than forecast in August as factories added workers and cranked up production.

The Institute for Supply Management’s factory index rose to a three-month high of 56.3 from 55.5 in July, the Tempe, Arizona-based group said today. Readings greater than 50 signal growth, and the figure was projected to drop to 52.8, according to the median forecast in a Bloomberg News survey.

But the market action notwithstanding, other US economic data released on Wednesday had actually not been as positive.

While factories are helping extend the recovery, the housing slump keeps taking a toll on the economy. Construction spending in July fell twice as much as forecast, led by a slump in homebuilding that will depress growth, Commerce Department figures showed today.

The 1 percent drop brought spending to $805.2 billion, the lowest level in a decade, after a revised 0.8 percent decrease in June that wiped out a previously estimated gain...

Another report today raised concern about employment. Companies in the U.S. unexpectedly cut employment in August, data from a private report based on payrolls showed. Employment fell by 10,000, according to figures from ADP Employer Services.

Wednesday 1 September 2010

US consumer confidence improves

Consumer confidence in the US improved in August. Bloomberg reports:

Consumer confidence climbed more than forecast in August as Americans turned less pessimistic about the outlook for jobs, easing concern households will retrench.

The Conference Board’s confidence index rose to 53.5 from a five-month low of 51 in July, according a report today from the New York-based research group...

Still, there were other signs of a slowing economy.

A report from the Institute for Supply Management-Chicago Inc. showed its business barometer fell to 56.7 this month, the lowest since November, from 62.3 in July. Figures greater than 50 signal expansion...

Another report showed home prices in 20 U.S. cities rose more than forecast in June from a year earlier, reflecting the influence of a government tax incentive and a sign the market was stabilizing before sales plunged in July.

European data on Tuesday brought few surprises. From Bloomberg:

European inflation slowed this month and unemployment held at the highest in almost 12 years in July as companies continued to cut costs to help shore up earnings.

Euro-area consumer prices rose 1.6 percent from a year earlier after increasing 1.7 percent in July, the European Union statistics office in Luxembourg said today. The jobless rate held at 10 percent for a fifth month, according to a separate report. That’s the highest since August 1998.

There was some mixed data from the UK. Reuters reports:

The Bank of England reported that net mortgage lending fell to 86 million pounds in July from 518 million pounds in June -- a four-month low and a sharp contrast to the rise to 700 million that economists had expected...

Some 48,722 home purchase mortgages were approved in July -- better than last week's industry figures had suggested and up on June's 48,562 but well below the 59,117 recorded in November...

A relative bright spot was unsecured lending to consumers, which rose by 173 million pounds last month versus economists' forecasts for it to remain little changed on the month.

This followed a surprise strengthening in the monthly GfK/NOP consumer confidence survey released earlier on Tuesday, after households' pessimism about the economic outlook eased somewhat.

Meanwhile, the Canadian economy slowed sharply in the second quarter. Bloomberg reports:

Canada’s economy grew at a slower- than-projected 2 percent rate in the second quarter, almost one- third the pace of the January-March period, amid a widening trade gap and slower household and government spending.

Ottawa-based Statistics Canada also cut its estimate for first-quarter growth in gross domestic product to 5.8 percent from an initially reported 6.1 percent. Economists predicted a 2.5 percent expansion in the second quarter, and the growth rate was weaker than all 18 forecasts gathered by Bloomberg News.

In contrast, India saw its economy picking up even further in the same quarter. Reuters reports:

India's economy grew at its fastest pace in nearly three years in the April-June quarter on strong manufacturing growth and better farm output that may keep the Reserve Bank of India (RBI) on its gradual monetary tightening path.

Tuesday's data showed annual rate of growth picked up to 8.8 percent from 8.6 percent in the previous quarter, underscoring continued growth momentum in Asia's third-largest economy amid a slowing pace of global recovery.