China's economy slowed only slightly in the second quarter. AFP/CNA reports:
China said Wednesday its economy expanded at a slower but still robust pace in the second quarter as Beijing battles to bring politically sensitive inflation under control.
Gross domestic product in the world's number two economy grew 9.5 per cent year-on-year in the April-June period, the National Bureau of Statistics said, as policymakers clamped down on bank lending to tame soaring prices.
The figure was higher than the 9.4 per cent growth forecast in a poll of analysts by Dow Jones Newswires, but slower than the 9.7 per cent posted in the first three months of the year and 9.8 per cent in the fourth quarter of 2010...
Other data showed industrial output from China's millions of factories rose 14.3 per cent year-on-year in the first half, while fixed asset investment, a measure of government spending on infrastructure, rose 25.6 per cent.
Retail sales were up 16.8 per cent year-on-year in the first six months.
There was also positive news from Japan. From Reuters:
Japan's government left its assessment of the economy unchanged in a monthly report on Wednesday, while raising its views on private consumption and capital spending, suggesting that economic recovery from the earthquake in March is progressing...
"Upward movements are observed in the Japanese economy while difficulties continue to prevail due to the earthquake," the government said in its economic report for July.
Corroborating the government's assessment of the economy was the upwardly revised reading of industrial production for May. From Reuters:
Japan's industrial output rose 6.2 percent in May, revised government data showed on Wednesday, suggesting the economy is on course for a rapid recovery following the massive earthquake in March.
The figure compared with an initial reading of a 5.7 percent rise, and was the second-biggest increase on record after a 7.9 percent increase in March 1953, the data from the Ministry of Economy, Trade and Industry showed. In April, industrial production rose 1.6 percent.
Less impressive was industrial production growth in the euro area. From Bloomberg:
European industrial production increased less than economists forecast in May, adding to signs the euro-region recovery is losing some momentum.
Production in the 17-nation euro area advanced 0.1 percent from April, when it rose 0.2 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a gain of 0.4 percent, the median of 31 estimates in a Bloomberg News survey showed. Production increased 4 percent from a year earlier after rising 5.3 percent in April.
The news from the UK was mixed. From Bloomberg:
U.K. unemployment claims rose at their fastest pace since May 2009 last month, casting doubt on whether the economy is generating enough jobs to offset the deepest government budget cuts since World War II.
Jobless benefit claims rose by 24,500 from May to 1.52 million, the highest level since March 2010, the Office for National Statistics said today in London. The median forecast of 21 economists in a Bloomberg News Survey was for a gain of 15,000. Unemployment measured by International Labour Organization methods fell by 26,000 to 2.45 million people in the quarter through May.
But just to keep attention on the sovereign debt crisis, Greece received another downgrade on Wednesday. Bloomberg reports:
Greece’s credit rating was cut three levels to Fitch Ratings’ lowest grade for any country in the world as the company followed rivals and said that a default is a “real possibility.”
The move to CCC from B+ “reflects the absence of a new, fully funded and credible” program by the International Monetary Fund and the European Union, the ratings company said yesterday in a statement in London. It also reflects “heightened uncertainty surrounding the role of private creditors in any future funding, as well as Greece’s weakening macroeconomic outlook.”
However, Europe is not the only region with debt concerns. The credit rating of US debt is coming under increasing scrutiny by rating agencies. From Bloomberg:
Moody’s Investors Service raised the pressure on U.S. lawmakers to increase the government’s $14.3 trillion debt limit by placing the nation’s credit rating under review for a downgrade.
The U.S., rated Aaa since 1917, was put on review for the first time since 1995 on concern the debt threshold will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low, Moody’s said in a statement yesterday. The rating would likely be reduced to the Aa range and there is no assurance that Moody’s would return its top rating even if a default is quickly cured...
Standard & Poor’s put the U.S. government on notice on April 18 that it risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt. The firm said at the time that there’s a one-in-three chance that the rating might be cut within two years and that its “baseline assumption” is that Congress and the Obama administration will come to terms on a plan to reduce record deficits.
While debate over the debt ceiling continues, the Fed at least still seems ready to buy US Treasuries. From Bloomberg:
Federal Reserve Chairman Ben S. Bernanke told Congress the central bank is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling.
“The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support,” Bernanke told the House Financial Services Committee in Washington today. The Fed “remains prepared to respond should economic developments indicate that an adjustment of monetary policy would be appropriate.”
If the Fed is preparing for further monetary stimulus, it can take some comfort from the fact that some inflation pressure is easing. From Bloomberg:
Prices of goods imported into the U.S. dropped in June for the first time in a year as oil and food expenses retreated.
The 0.5 percent fall in the import-price index followed a revised 0.1 percent gain in May, Labor Department figures showed today in Washington. Economists projected a 0.6 percent decrease for June, according to the median estimate in a Bloomberg News survey. Prices excluding petroleum fell 0.2 percent, the first decline since July 2010.