Friday, 24 October 2008

Economies weak but central banks ready to cut rates

The yen's recent strength certainly hasn't been the result of strong demand for its exports. From AFP/CNA:

Japan's trade surplus plunged 94 per cent in September from a year earlier due to weak exports and soaring energy import costs, official figures showed Thursday.

The surplus of 95 billion yen (US$973.14 million) was much lower than predicted...

In September, imports rose 28.8 per cent to 7.27 trillion yen, while exports edged up only 1.5 per cent by value to 7.37 trillion yen, weighed down by falling shipments to the United States and western Europe, the ministry said.

Demand for Europe's industrial goods also didn't look very strong in August. From Eurostat:

In August 2008 compared with July 2008, the euro area (EA15) industrial new orders index fell by 1.2%. In July the index increased by 2.0%. In the EU27 new orders decreased by 1.4% in August 2008, after growing by 2.9% in July. Excluding ships, railway & aerospace equipment industrial new orders increased by 0.6% in the euro area and by 2.0% in the EU27.

In August 2008 compared with August 2007, industrial new orders declined by 6.6% in the euro area and by 6.7% in the EU27. Total industry excluding ships, railway & aerospace equipment dropped by 7.5% in both zones.

Meanwhile, retail sales in the UK fell in September. From Reuters:

The Office for National Statistics said retail sales fell 0.4 percent last month, taking the annual rate of growth down to 1.8 percent, its weakest since February 2006.

The retail malaise didn't seem to affect the French though.

French household spending on manufactured goods including cars and clothes rose 0.6 percent in September, its biggest monthly gain since May, and well above the 0.1 percent fall expected by economists polled by Reuters.

But in any case, central banks are ready to lend support to the economy.

[BoE] Governor Mervyn King said the bank was ready to alter its key rate to offset the shocks of the global credit crunch.

Indeed, that was exactly what Sweden's Riksbank did yesterday. From Bloomberg:

Sweden cut its key lending rate by a half-point for the second time in two weeks and forecast another similar reduction within six months to cushion the economic slowdown. It also lowered forecasts for growth and inflation.

The Riksbank cut the repo rate to 3.75 percent, according to a statement today on its Web site in Stockholm. The cut was forecast by two of 21 economists surveyed by Bloomberg. Twelve forecast a quarter-point cut and seven no change.

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