Thursday, 30 June 2011

Greece votes for austerity, economy slows in Europe, recovers in Japan

Reuters reports the latest development in Greece:

Greece approved the first of two austerity measures on Wednesday despite worsening street violence, in a vote vital to winning fresh international aid so it can pay its debts on time and stave off bankruptcy.

Lawmakers voted by a clear margin for the five-year framework of $28 billion in spending cuts, tax rises and state asset sales, handing a 155-138 vote victory to Prime Minister George Papandreou.

"We must avoid the country's collapse at all costs. Now is not the time to step back," the Socialist premier told lawmakers just before the vote.

The solid margin suggested the government should be able to push through a second package of laws on Thursday, implementing the specific budget measures and asset sales. This would clear the last obstacle to release of 12 billion euros ($17.3 billion) of emergency loans from the International Monetary Fund and European Union, which are essential to meet debt payments by mid-July.

The Greek vote was good news for Europe. Not so good was the latest reading on eurozone economic sentiment. From Bloomberg:

European confidence in the economic outlook dropped to the lowest in eight months in June as policy makers struggled to craft a second bailout package for Greece.

An index of executive and consumer sentiment in the 17- nation euro region fell to 105.1 from 105.5 in May, the European Commission in Brussels said today. That’s the lowest since October. Economists had forecast a decline to 105, the median of 27 estimates in a Bloomberg survey showed.

Also, French economic growth for the first quarter has been revised down. Bloomberg reports:

France’s economy, the 17-member euro region’s second largest after Germany, expanded less than previously estimated in the first quarter as rising energy prices squeezed household spending.

Gross domestic product rose 0.9 percent from the fourth quarter instead of a previously estimated 1 percent, Paris-based Insee said today in an e-mailed statement. That’s the fastest pace since the second quarter of 2006. In the year, the economy grew 2.2 percent.

Meanwhile, the UK economy is looking weak in the second quarter. Reuters reports:

Economic recovery looks set to remain sluggish during the current quarter, after official data showed the biggest slump in services output for more than a year in April as well as weak bank lending in May...

Services output contracted by 1.2 percent in April after a 0.8 percent increase in March, driven by a sharp fall in wholesale activity, the Office for National Statistics said on Wednesday. The fall was the biggest since January 2010, when heavy snow caused disruption...

Separate data from the Bank of England showed mortgage approvals ticked up only slightly to 45,940 in May, falling short of analysts' forecast of 46,100.

Consumer credit was up only 173 million pounds, with credit card borrowing rising by just 34 million pounds, the smallest amount since April 2010...

At the same time, however, the Citi/YouGov survey showed Britons' near term inflation expectations jumped in June to 3.9 percent, the highest in over 2-1/2 years. Long-term views hit the highest level since the survey's launch in late 2005.

And UK consumers have become more pessimistic. Bloomberg reports:

U.K. consumer sentiment fell more than economists forecast in June, erasing part of the boost brought from public holidays as Britons lost confidence in the economy, a report by GfK NOP Ltd. showed.

An index of sentiment slipped 4 points to minus 25 from May, when it increased 10 points, the London-based research group said in an e-mailed report today. All five measures of the index declined, with confidence in the economic outlook for the next year dropping 3 points to minus 18.

However, outside Europe, the economic reports on Wednesday were somewhat more positive.

In the US, pending home sales jumped in May. Bloomberg reports:

The number of contracts to buy previously owned U.S. homes rose almost three times as much as forecast as falling prices made properties more affordable.

The surprising 8.2 percent increase in the index of pending home resales from April followed a revised 11 percent drop the prior month, the National Association of Realtors said today in Washington. Economists forecast a 3 percent gain, according to the median estimate in a Bloomberg News survey.

There was also a sharp rise in Japanese industrial production in May. AFP/CNA reports:

Japan's industrial production jumped 5.7 per cent in May from the previous month, reflecting a steady recovery in earthquake-hit supply chains following the March 11 quake and tsunami.

The level beat the market expectation for a 5.5-per cent increase and followed a revised 1.6-per cent monthly rise in April.

The Japanese recovery remains tenuous though. From Reuters:

Japanese manufacturing activity slowed slightly in June as new business orders stagnated, but output grew by the most in four months as companies brought forward production to avoid possible power shortages during the summer, a survey showed on Thursday.

The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 50.7 in June from 51.3 in May. The index remained above the 50 threshold that separates contraction from expansion for a second straight month.

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