Tuesday, 31 May 2011

Japanese economy beginning to recover

Japan's economy may have started to recover in April after a sharp contraction in March. From Reuters:

Japan's industrial output edged up in April after a record fall in March and companies expect bigger gains in the next two months, adding to evidence that a recovery from the March 11 earthquake and tsunami is under way.

Output rose 1.0 percent last month, below analysts' median 2.8 percent forecast, but manufacturers sharply increased their forecast for May, predicting output would rise 8.0 percent compared with the previous 2.7 percent forecast, data from the Ministry of Economy, Trade and Industry showed on Tuesday.

Companies expect the recovery to continue in June with production seen rising 7.7 percent, in a sign they are making headway in restoring supply chains and bringing back production lines idled by the disaster and power blackouts...

Underscoring lingering weakness in consumption, household spending fell 3.0 percent in April from a year earlier, after a record 8.5 percent annual drop seen the previous month and against a median forecast for a 2.9 percent annual decline, government data showed.

The jobless rate inched up to 4.7 percent from 4.6 percent seen in March, as expected, while the availability of jobs fell to 0.61 from 0.63 in March, below 0.62 expected by economists, meaning that there were more than three jobs available for every five job seekers.

In another indication that Japanese industry is recovering, Reuters also reports a rise in the manufacturing PMI in May.

Japanese manufacturing activity rebounded from a two-year low in May and expanded for the first time in three months as firms restored supply chains disrupted by the March 11 earthquake and tsunami, a survey showed on Tuesday.

The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 51.3 in May from 45.7 in April, which was the lowest since April 2009.

Monday, 30 May 2011

Eurozone economy shows signs of slowing

After accelerating in the first quarter, the economy in the euro area may have slowed in the second quarter.

In the first quarter of 2011, the eurozone economy grew by 0.8 percent, accelerating from an increase of 0.3 percent in the fourth quarter of last year.

Surveys of businesses and consumers conducted by the European Commission indicate that the economy has slowed since then. The findings of the latest survey were released on Friday and it showed that that the Economic Sentiment Indicator fell to 105.5 in May from 106.1 in April.

The ESI has fallen 2.5 points since it peaked at 108.0 in February. This is the largest three-month fall in the indicator since March 2009 when the economy was still in recession.

For the individual sectors, the indicator for industry fell to 3.9 in May from 5.6 in April, services fell to 9.2 from 10.4, retail trade fell to -2.5 from -1.8 and construction fell to -24.6 from -24.3. Only the consumer sector improved with its indicator rising to -9.8 from -11.6.

Among the major euro area economies, the ESI for Germany slipped by 0.1 but fell by 1.9 for France and 2.7 for Italy.

Another indication of a slowing eurozone economy had come at the beginning of last week. Markit Economics had reported on Monday that its flash eurozone composite output index had fallen to a seven-month low of 55.4 in May from 57.8 in April. The flash manufacturing PMI fell to a seven-month low of 54.8 in May from 58.0 in April while the services index fell to a five-month low of 55.4 from 56.7.

The fall in the composite index in May was the biggest since November 2008 when the economy was deep in recession.

Saturday, 28 May 2011

US and eurozone economies show signs of weakening

US economic data on Friday were weak.

MarketWatch reports that pending home sales fell in April.

The National Association of Realtors' pending home sales index fell 11.6% to a reading of 81.9 in April, from a downwardly revised 92.6 in March. (March’s index initially was reported to be 94.1.)

MarketWatch also reports that consumer spending lost momentum in April.

Consumer spending rose by the smallest amount in three months during April, government data showed Friday, in a further sign of erosion in spending momentum due to higher prices at the gas pump.

Consumers’ spending rose 0.4% last month, the Commerce Department estimated.

Meanwhile, personal incomes rose 0.4% in April. Income has risen for seven straight months...

Adjusted after-tax incomes were flat in April for the second straight month, and spending increased 0.1% for the second straight month.

Adjusted for inflation, spending on durable goods and non-durable goods was flat in April. Spending on services rose 0.1%...

Consumer prices rose 0.3% in April, as measured by the personal consumption expenditure price index. Prices were 2.2% higher compared with a year ago, up from 1.8% in March...

Core consumer prices, which exclude volatile food and energy prices, rose 0.2% in April and are up 1.0% in the past year. This is up from a record-low 0.7% in December but still well within the Fed’s comfort zone.

The good news is that consumer sentiment improved in May. Again from MarketWatch:

A gauge of consumer sentiment rose in May as expectations improved, according to the Thomson Reuters/University of Michigan survey data released Friday.

The overall sentiment gauge increased to 74.3 in May from 69.8 in April. However, the gauge remains below a reading of 77.5 in February before prices for gasoline spiked.

Eurozone economic data on Friday were also weak. Bloomberg reports:

European confidence in the economic outlook weakened for a third straight month in May as the region’s worsening debt crisis and surging commodity costs clouded growth prospects.

An index of executive and consumer sentiment in the 17- member euro region slipped to 105.5 from 106.1 in April, the European Commission in Brussels said today. Economists had forecast a drop to 105.7, the median of 27 estimates in a Bloomberg survey showed.

There was some consolation in the euro area in the form of a drop in German inflation in May. From Bloomberg:

Inflation in Germany, Europe’s largest economy, unexpectedly eased in May after oil prices dropped from a 2 1/2-year high.

The harmonized inflation rate fell to 2.4 percent from 2.7 percent in April, the Federal Statistics Office in Wiesbaden said today. Economists had expected inflation to hold at the highest level since September 2008, the median of 17 forecasts in a Bloomberg News survey showed. On the month, consumer prices declined 0.2 percent.

A fall in inflation would probably not have been welcomed in Japan. Thankfully, there was none, at least in April. From AFP/CNA:

Japan's core consumer prices rose for the first time in more than two years, mainly as a result of an increase in fuel prices, government data showed Friday.

The core consumer price index, which excludes volatile food prices, rose 0.6 percent in April from a year earlier, the first increase since December 2008.

And there were other encouraging signs on Friday for the Japanese economy. Reuters reports some stabilisation in retail sales in April.

Japanese retail sales fell 4.8 percent in April from a year earlier, but the pace of decline slowed from the previous month, government data showed on Friday, as worries about the impact from the March earthquake and tsunami started to ease.

Friday, 27 May 2011

US first quarter growth unchanged, stocks rise

US first quarter GDP growth was unchanged from the advance estimate. Bloomberg reports the latest numbers as well as other US economic data:

Consumer spending cooled in the first quarter more than previously estimated as the jump in food and fuel costs held back the biggest part of the U.S. economy.

Household purchases rose at a 2.2 percent annual pace from January through March, less than the 2.7 percent calculated last month and short of the 2.8 percent median forecast of economists surveyed by Bloomberg News, according to Commerce Department figures issued today in Washington. The economy grew at a 1.8 percent pace last quarter, the same as previously calculated...

The number of workers filing applications for unemployment insurance benefits increased by 10,000 to 424,000 in the week ended May 21, according to data from the Labor Department. The median forecast of economists surveyed by Bloomberg projected claims would decrease to 404,000...

A monthlong slide in consumer confidence ended last week as gasoline prices retreated, another report showed. The Bloomberg Consumer Comfort Index rose to minus 48.4 in the period to May 22 from a nine-month low of minus 49.4 the prior week. Readings of minus 40 or less are generally associated with recessions and their aftermaths, the report said...

Today’s report also offered a first look at profits. Earnings before taxes were up 1.3 percent from the prior quarter, the smallest gain in more than two years, after rising 2.3 percent in the prior period. They climbed 8.5 percent from the same time last year.

The smaller increase in corporate profits did not stop investors from pushing up stocks on Thursday. Again from Bloomberg:

U.S. stocks gained a second day as higher-than-estimated corporate profits at companies including Tiffany & Co. (TIF) overshadowed data showing the economy grew at a slower rate than forecast and jobless claims unexpectedly rose...

The Standard & Poor’s 500 Index advanced 0.4 percent to 1,325.69 at 4 p.m. in New York. The Dow Jones Industrial Average increased 8.10 points, or 0.1 percent, to 12,402.76. Both benchmark gauges yesterday snapped a three-day decline.

Stock gains came despite more worries over eurozone sovereign debt.

Earlier today, stocks extended declines after Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said the International Monetary Fund may not release its portion of a 12 billion-euro ($17 billion) aid payment to Greece next month.

Thursday, 26 May 2011

Japanese exports and US durable goods orders fall

Japan's trade balance fell into deficit in April. AFP/CNA reports:

Japan fell into a trade deficit in April as exports tumbled at the fastest pace in 18 months on supply chain disruptions after the March 11 earthquake and tsunami, official data showed Wednesday.

It was the first time in 31 years that Japan suffered a trade deficit for the month of April, according to the finance ministry...

Exports fell 12.5 per cent, the fastest pace of decline since October 2009, with shipments of automobiles diving 67.0 per cent and electronics parts such as microchips dropping 19.0 per cent...

Overall imports in April rose 8.9 per cent to post growth for the 16th consecutive month as purchases of petroleum products shot up 62.2 per cent on higher prices and demand.

The reports from the US on Wednesday were also negative. Bloomberg reports:

Orders for U.S. durable goods dropped more than forecast in April, reflecting a slump in aircraft demand and disruptions in supplies of auto parts stemming from the earthquake in Japan.

The 3.6 percent decrease in bookings for goods meant to last at least three years was the biggest since October and followed a 4.4 percent surge in March that was larger than previously estimated, a Commerce Department report showed today in Washington. Economists projected a 2.5 percent April decline, according to the median forecast in a Bloomberg News survey...

While manufacturing has spearheaded the economic recovery, housing has struggled. Home prices dropped 2.5 percent in the first quarter from the prior three months, the Washington-based Federal Housing Finance Agency said today.

The OECD, though, has raised its forecast for economic growth in the US as well as the euro area. From Reuters:

Global economic recovery is on track, helped by a stronger United States, but threats ranging from high oil prices to European sovereign debt crises could yet combine to create a bout of stagflation, the OECD said on Wednesday...

In its twice-yearly Economic Outlook, the OECD forecast world growth would ease to 4.2 percent this year from 4.9 percent in 2010 before accelerating to 4.6 percent in 2012...

The OECD raised its outlook for the United States from its last report in November, forecasting growth this year of 2.6 percent, compared with an estimate of 2.2 percent in November.

It was also slightly more optimistic about the outlook for growth in the euro zone, forecasting the bloc's economy would expand 2.0 percent in 2011, up from 1.7 percent in November.

But it slashed Japan's forecasts after the country's triple disaster in March. It estimated the country's economy would contract 0.9 percent this year, having forecast growth of 1.7 percent in November.

Wednesday, 25 May 2011

US new home sales rise, eurozone industrial orders fall

Economic reports on Tuesday were mixed.

Bloomberg reports the US data:

Purchases of new houses rose in April for a second month as the market struggled to recover from a record low.

Sales climbed 7.3 percent to a 323,000 annual pace last month, figures from the Commerce Department showed today in Washington. The median estimate in a Bloomberg News survey of economists called for sales at a 300,000 annual rate...

Another report today showed manufacturing, which led the economy out of the recession, may be cooling. The Federal Reserve Bank of Richmond’s factory index dropped to minus 6 this month, the lowest reading since April 2009. Negative numbers indicate manufacturing was shrinking.

In the euro area, Bloomberg reports that industrial orders fell in March.

European industrial orders declined more than economists forecast in March, led by a drop in demand for durable consumer goods, such as appliances and furniture.

Orders in the euro area slipped 1.8 percent from February, when they increased 0.5 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 1.1 percent, the median of 17 estimates in a Bloomberg News survey showed. Orders jumped 14.1 percent from a year earlier.

But the euro area's largest economy had relatively positive data to report. From Bloomberg:

German business confidence remained unexpectedly unchanged in May as booming exports and rising company spending boosted economic growth.

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, held at 114.2 from April. Economists forecast a decline to 113.7, the median of 24 forecasts in a Bloomberg News survey showed...

German gross domestic product rose 1.5 percent in the first quarter from the previous three months, the Federal Statistics Office said today. That’s the fastest growth since the second quarter of 2010. Exports advanced 2.3 percent and construction spending jumped 6.2 percent.

In the UK, retail sales slowed in May but were better than expected. Reuters reports:

Retail sales grew more slowly in May, although they beat expectations, and firms are cautious about the outlook for growth next month, a survey by the Confederation of British Industry showed on Tuesday...

The CBI Distributive Trades survey's reported sales balance fell to +18 in May from +21 in April. That was above analysts' expectations for a reading of +10, but below its long-run average.

Tuesday, 24 May 2011

Markets hit as debt concerns worsen

Investors were unquestionably nervous on Monday. Bloomberg reports:

Global stocks sank the most in two months, while the euro touched an all-time low versus the Swiss franc and commodities plunged, amid signs Europe’s government- debt crisis is worsening and the economic recovery is slowing. Costs to protect Greek debt from default surged to a record.

The MSCI All-Country World Index sank 1.8 percent at 4:30 p.m. in New York. The Standard & Poor’s 500 Index retreated 1.2 percent and Italy’s FTSE MIB Index slid 3.3 percent. Ten-year bond yields reached euro-era records in Greece and Ireland and climbed in Portugal, Spain and Italy. The euro fell below $1.40 for the first time since March as the dollar strengthened versus all 16 major peers. Oil and copper lost at least 2.4 percent.

U.S. equities followed European shares lower after Italy’s credit-rating outlook was cut by S&P on May 20 and Spanish Prime Minister Jose Luis Rodriguez Zapatero’s Socialist party suffered losses in local elections amid a backlash over austerity measures...

The Chicago Fed national index, which draws on 85 economic indicators, was minus 0.45 in April versus 0.32 in March. A reading of less than zero indicates below-trend growth in the national economy and a sign of easing inflation pressures.

Monday, 23 May 2011

Flash eurozone and China PMIs fall in May

The eurozone economy accelerated in the first quarter but PMI data released today suggest that it may not escape a slowdown in the second quarter. The Wall Street Journal reports:

Growth in the euro zone's private sector eased more than expected to its weakest pace in seven months in May, led by a sharp slowdown in manufacturing, the preliminary results of a survey by financial-information firm Markit showed Monday.

The flash reading of the euro zone's composite-output index, a gauge of activity based on partial results of a survey of manufacturing and services firms, dropped to 55.4 in May from 57.8 in April. A reading above the 50 level indicates an expansion in activity...

The manufacturing-purchasing-managers' index dropped much more than expected to 54.8 in May, from 58.0 the previous month, while the euro-zone services-business-activity index fell to a five-month low of 55.4, from 56.7 in April.

Earlier, China had also reported a slight fall in its manufacturing PMI. Bloomberg reports:

A Chinese manufacturing index fell to its lowest level in 10 months, adding to signs that economic growth is cooling after the government raised interest rates and curbed lending to rein in inflation.

The preliminary purchasing managers’ index compiled by HSBC Holdings Plc and Markit Economics dropped to 51.1 in May from a final reading of 51.8 in April. A number above 50 indicates expansion.

Saturday, 21 May 2011

Japan faces recession, China worries about bubbles, Europe concerned over sovereign debt

Despite the Japanese economy shrinking in the first quarter, the Bank of Japan did not add to monetary stimulus on Friday. AFP/CNA reports:

The Bank of Japan on Friday left its key rate unchanged at between zero and 0.1 per cent as it continues to assess measures to soothe an economy pushed into recession by the March 11 earthquake and tsunami.

"Japan's economy faces strong downward pressure, mainly on the production side, due to the effects of the earthquake disaster," the central bank said in a statement...

In its assessment Friday, the BoJ said the economy "is expected to return to a moderate recovery path from the second half of fiscal 2011 as supply-side constraints ease and production regains traction."

The BoJ's counterpart in China was also in the news on Friday. Again from AFP/CNA:

The head of China's central bank said Friday too many people were saving too much money, which could lead to asset bubbles, adding Beijing had to find a way to promote growth and curb inflation...

"China is an economy with a high savings rate, which may lead to high investments and may cause overheating and overcapacity in some sectors and fuel bubbles," Zhou Xiaochuan, governor of the People's Bank of China, said...

Zhou said the outlook for the global economic recovery was clearer now than last year but many uncertainties remained.

He added that China needed to take "counter-cycle" policies as its economic cycle was different from that of developed nations...

Zhou also reiterated China would take a "gradual" approach to making the yuan fully convertible, as Beijing continues to promote the international status of the currency.

While China worries about excessive savings, Europe has debt problems that threatened to get worse on Friday. From Bloomberg:

Greek bonds led declines among peripheral euro-area nations, sending 10-year yields to a record, on concern a restructuring of its debt would reignite Europe’s sovereign-debt crisis.

The spread, or yield difference, between benchmark Greek debt and German bunds widened to the most on record. Fitch Ratings said it downgraded Greece’s credit ratings by three levels to B+ from BB+, four notches below investment grade. German bonds rallied as European Central Bank Council member Jens Weidmann said the bank may no longer be able to accept Greek bonds as collateral if maturities are extended, stoking demand for the relative safety of Europe’s benchmark debt...

Yields on 10-year Greek debt surged 59 basis points to a record 16.59 percent, and was at 16.57 percent as of 4:45 p.m. in London. The 6.25 percent security due in June 2020 dropped 1.705, or 17.05 euros per 1,000-euro face amount, to 53.17. Two- year note yields jumped 36 basis points to 25.22 percent.

Friday, 20 May 2011

Data show struggling US economy

US data on Thursday looked weak. Bloomberg reports:

Sales of existing U.S. homes unexpectedly declined, manufacturing in the Philadelphia region slowed and consumer confidence dropped, pointing to an economy that is struggling to regain momentum following the surge in energy costs.

Purchases of existing homes decreased 0.8 percent to a 5.05 million annual pace in April, the National Association of Realtors said today in Washington...

Manufacturers, facing a less pressing need to rebuild inventories and supply disruptions following the earthquake and tsunami in Japan, may also be slowing down. The Federal Reserve Bank of Philadelphia’s general economic index fell to 3.9, the weakest reading since October, from 18.5 a month earlier...

The Bloomberg Consumer Comfort Index declined to minus 49.4 in the period to May 15, the worst reading since August, from the prior week’s minus 46.9. A gauge of personal finances plunged to the weakest level since October 2009, and a monthly measure of economic expectations held at a seven-month low...

The Conference Board’s index of leading indicators, a gauge of the outlook for the next three to six months, fell 0.3 percent in April, the first drop in 10 months, the New York- based group said. The measure was depressed by a pickup in jobless claims that reflected temporary setbacks including auto- plant shutdowns caused by the disaster in Japan.

On a more positive note, the unemployment picture brightened a little.

Another report today showed fewer Americans than forecast filed first-time claims for unemployment benefits last week. Applications declined by 29,000 to 409,000, according to figures from the Labor Department. Economists projected 420,000, according to the median forecast in a Bloomberg survey.

UK data on Thursday were positive. From Reuters:

The Royal wedding holiday and record warm weather encouraged shoppers to splash out in April, giving hard hit retailers a one-off boost but doing little to change the picture of a fragile economic recovery...

The Office for National Statistics said sales volumes including automotive fuel rose 1.1 percent last month, well above analysts' forecasts for an increase of 0.8 percent, and the biggest rise for a month of April since 2002...

There was some good news from a CBI survey that showed an improvement in factory orders in May. But firms expected output growth to weaken in the coming months, and separate data showed car output fell more than 12 percent last month.

Thursday, 19 May 2011

Japanese economy contracts in first quarter

Japan's economy shrank more than expected in the first quarter. Reuters reports:

Japan's economy shrank in the first quarter at nearly double the pace expected, effectively slipping into recession as the devastating earthquake in March hit business spending and private consumption.

Gross domestic product fell 0.9 percent in the first quarter, much more than a median market forecast for a 0.5 percent contraction.

For the third consecutive quarter, net exports contributed negatively to growth.

Net exports shaved 0.2 percentage point off GDP, against the median estimate that it would trim 0.1 point off growth.

Private consumption, which accounts for about 60 percent of the economy, was down 0.6 percent against the median forecast of a 0.5 percent decline, marking the second straight quarter of decrease.

Corporate capital spending fell 0.9 percent against the market forecast of a 1.2 percent decline.

Wednesday, 18 May 2011

US industrial production and housing starts weak, UK inflation jumps

US economic data on Tuesday were disappointing. Bloomberg reports:

Industrial production in the U.S. unexpectedly stalled in April and housing starts dropped, posing hurdles to a rebound from the first quarter’s economic slowdown.

Output at factories, mines and utilities was unchanged after a 0.7 percent gain in March, figures from the Federal Reserve showed today, led by a drop in auto production after parts supplies were disrupted by the earthquake and tsunami in Japan. Work began on 523,000 houses at an annual pace, down 11 percent, as tornadoes and floods in the South shut down construction sites.

Also disappointing was an unexpected acceleration in UK inflation in April. Reuters reports:

Annual inflation hit a 2-1/2 year high last month and core prices rose at a record pace, but central bank governor Mervyn King warned that reacting too quickly to rising prices could harm the economy.

Consumer prices rose a bigger-than-expected 4.5 percent year-on-year, the fastest pace of increase since October 2008, propelled by soaring travel costs around Easter and higher duty on alcohol and tobacco.

The Bank of England has so far reacted minimally to the high UK inflation figures and is likely to continue to do so.

"The MPC (monetary policy committee) judges that attempting to bring inflation to the target quickly risks generating undesirable volatility in output," King wrote, saying the overshoot was largely due to a rise in VAT sales tax in January and higher energy and import prices.

Tuesday, 17 May 2011

Japan's machinery orders rise even as consumer confidence plunges

There were some contradictory reports from Japan on Monday.

AFP/CNA reports that Japan's core machinery orders were up in March.

Japan's core machinery orders, a leading indicator of corporate capital spending, posted a surprise rise in March despite the devastating earthquake and tsunami, data showed Monday.

The core private-sector machinery orders grew 2.9 percent from February, beating market expectations of a fall of more than nine percent due to the severity of the March 11 disaster...

Core machinery orders for the three months to March rose 3.5 percent from the previous quarter and are expected to rise a further 10.0 percent in the April-June term, according to the Cabinet Office.

However, consumer confidence plunged in April. Again from AFP/CNA:

Japanese consumer confidence fell at the fastest pace on record in April from the previous month, data showed Monday, after March's earthquake, tsunami and a nuclear crisis cast a shadow on the economy.

The data showed consumer sentiment worsening to a two-year low of 33.1 in April from 38.6 in March, when the index plunged after Japan's biggest recorded earthquake and a tsunami on March 11 that devastated the northeast coast.

In the euro area, April inflation was confirmed at 2.8 percent and Portugal had its bailout approved to help it stave off a sovereign debt crisis.

Meanwhile, the US is also having its own debt problem. From Reuters:

U.S. Treasury investors were calm on Monday as the United States hit its debt limit, with prices rising on faith lawmakers will reach a deal to increase the debt ceiling before a default...

The U.S. Treasury Department said it can stave off default until early August, in part by tapping federal pension funds, as the nation reached its $14.294 trillion debt limit.

Relatively weak US economic data on Monday helped keep bond prices up. From Bloomberg:

The Federal Reserve Bank of New York’s general economic index fell to 11.9 from a one-year high of 21.7 in April, the central bank reported today. Measures of orders and sales fell less than the headline reading, while managers were more upbeat about the future and the group’s hiring index climbed to the second-highest level on record...

The National Association of Home Builders/Wells Fargo sentiment index held at 16 this month, data from the Washington- based group showed. A measure of sales expectations for the next six months fell to an eight-month low.

Monday, 16 May 2011

US inflation is mainly, but no longer just, about energy

Energy prices continued to drive inflation in the United States in April but prices of other items are also accelerating.

On Friday, the Labor Department reported that the consumer price index increased 0.4 percent in April. Compared to a year ago, the consumer price index in April increased 3.2 percent, a rate of increase higher than that in March when it rose 2.7 percent and, indeed, the highest rate since October 2008.

Energy was the main contributor to inflation in April. Energy prices rose 2.2 percent in April from the month before.

Perhaps more significantly, however, there was an acceleration in the rate of inflation in the prices of components that are widely considered as core. Consumer prices excluding food and energy rose 0.2 percent in April, higher than the 0.1 percent increase in March. The rate of increase in consumer prices excluding food and energy in the 12 months to April was 1.3 percent, increasing for the sixth consecutive month.

The Labor Department also reported producer price data last week that also showed signs of accelerating inflation.

Producer prices rose 0.8 percent in April compared with 0.7 percent in March. Producer prices rose 6.8 percent in the 12 months to April, sharply higher than the 5.8 percent increase in the 12 months to March and the highest rate of increase since September 2008.

Energy was again the main contributor to producer price inflation in April, rising by 2.5 percent from March.

Producer prices excluding food and energy rose 0.3 percent in April, the same rate as the month before. The rate of increase in producer prices excluding food and energy in the 12 months to April was 2.1 percent, increasing for the fifth consecutive month.

A third report from the Labor Department last week also showed signs of accelerating inflation.

Its report on import and export prices showed that import prices rose 2.2 percent in April. This followed a rise of 2.6 percent in March and marks the first time import prices have increased by more than two percent in consecutive months since June 2008. The latest increase means that import prices are 11.1 percent higher than one year ago.

Again, energy was the main source of higher prices. Fuel import prices rose 6.7 percent in April, accounting for approximately 80 percent of the overall increase in import prices.

However, nonfuel import prices also showed a substantial rise of 0.6 percent in April. Prices for nonfuel imports recorded a second consecutive 12-month increase of 4.3 percent in April, the largest year-over-year increase since October 2008.

Imports may have been a source of disinflationary pressure in the US for much of the past 20 years or so but that is no longer the case now.

Saturday, 14 May 2011

Euro area reports strong growth in first quarter, US reports mixed data

The eurozone economy performed surprisingly well in the first quarter. From Reuters:

Powerful performances by the German and French economies propelled growth in the euro zone well above forecasts in the first quarter while also highlighting the yawning gap between the bloc's strong and weak.

The 17-nation currency area expanded by 0.8 percent in the first three months of the year, data showed on Friday, fueled by startling 1.5 percent GDP growth in Germany, while the French economy grew 1.0 percent, driven in part by consumer demand...

The European Commission forecast quarter-on-quarter growth in the euro zone would slow to 0.3 percent in the second quarter and then stabilize at 0.4 percent for the next two quarters.

The countries with debt concerns showed mixed performances.

Portugal's economy shrank 0.7 percent in the first quarter, sending the economy back into recession. Its government has admitted that, having sought a bailout, its economy will shrink both this year and next. The Commission expects 2.2 percent contraction in 2011 and 1.8 percent in 2012.

Greece actually achieved quarterly growth -- of 0.8 percent -- for the first time since late 2009 but that followed a vicious 2.8 percent contraction in the last quarter of 2010.

The Commission expects Athens to announce new austerity measures this year to meet its bailout targets. It forecast the economy would shrink 3.5 percent this year if policies are unchanged, but expects 1.1 percent growth in 2012.

Spain gained some support for its efforts to persuade markets it can avoid being sucked into the debt crisis -- its economy expanded 0.8 percent on an annualized basis, its strongest rate since the second quarter of 2008. On the quarter, growth was 0.3 percent.

On Thursday, the UK economy had released somewhat-disappointing data. Again from Reuters:

A disappointing performance by industry and a rise in the number of home repossessions dealt a blow to Britain's recovery prospects on Thursday, and doused any hopes for an upgrade to first-quarter growth...

The Office for National Statistics said industrial output rose 0.3 in March after a 1.2 percent fall in February, less than half the gain forecast by economists, partly due to ongoing maintenance work in oil and gas fields...

Figures from the Council of Mortgage Lenders showed the squeeze on incomes is already having an impact on households, with home repossessions between January and March up 15 percent on the quarter. Separate data showed a 3 percent quarterly rise in court orders to repossess homes.

Also on Thursday, Bloomberg had reported mixed data from the US.

Retail sales rose in April at the slowest pace in nine months and consumer sentiment declined last week, highlighting the risks that rising gasoline prices pose for the U.S. economy.

Purchases increased 0.5 percent, the smallest gain since July, after a 0.9 percent March advance that was more than double the previous estimate, Commerce Department figures showed today in Washington. The Bloomberg Consumer Comfort Index dropped to minus 46.9 in the period to May 8, the lowest reading since March...

Applications for jobless benefits decreased 44,000 in the week ended May 7 to 434,000, Labor Department figures showed. Economists forecast 430,000 claims, according to the median estimate in a Bloomberg survey.

The producer-price index rose 0.8 percent, compared with a 0.6 percent median estimate of economists surveyed, other figures from the Labor Department showed. The so-called core measure, which excludes volatile food and energy costs, increased 0.3 percent, more than projected.

Data on Friday confirmed that overall inflation is high in the US and showed that the retail sales number in April really was not particularly impressive. Again from Bloomberg:

The cost of living in the U.S. rose in April, led by increases in food and fuel that are starting to filter through to other goods and services.

The consumer-price index increased 0.4 percent, matching the median forecast of economists surveyed by Bloomberg News and following a 0.5 percent advance in March, figures from the Labor Department showed today in Washington. Excluding food and energy, the so-called core gauge rose 0.2 percent.

Friday's data on consumer sentiment was more positive though.

The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 72.4, a three-month high, from a final reading of 69.8 in April, the group reported today. The gauge was projected to rise to 70, according to the median forecast of 62 economists surveyed by Bloomberg.

China raises reserve requirement, Japan's economy shows weakness

Note: This post was supposed to have been put up yesterday but was delayed because of problems with Blogger.

China has tightened monetary policy again. AFP/CNA reports:

China's central bank on Thursday said it would raise the amount of money that lenders must keep in reserve as official concerns persist over inflation and rising housing costs.

The People's Bank of China said it would raise its reserve requirement ratio by 0.50 percentage points, effective May 18 - the fifth such hike this year.

When the new reserve ratio requirement takes effect, China's commercial banks will be required to hold 21 per cent of their deposits in reserve, based on earlier announcements made by the bank.

Japan, in contrast, is far from any monetary policy tightening after data on Thursday showed a sharp plunge in exports in March. AFP/CNA reports:

Japan's current account surplus in March shrank 34.3 per cent from a year earlier, data showed Thursday, underlining the impact of a devastating quake and tsunami on the world's third-largest economy.

The plunge in the surplus followed a 3.0 per cent rise in February...

Thursday's data showed that Japan's trade surplus tumbled by 77.9 per cent to 240.3 billion yen with exports falling 1.4 per cent despite a 16.6 per cent rise in imports.

The finance ministry also said in a separate report Thursday that Japan fell into a trade deficit in the first 20 days of April.

Japan ran a deficit of 786.8 billion yen for the 20 days, reversing a surplus of 154.6 billion yen in the same period last year.

Exports fell 12.7 per cent year-on-year, the sharpest fall since October 1-20 in 2009, while imports rose 14.2 per cent.

Data from Japan on Wednesday had also shown a weak economy in March. From Reuters:

Japan's index of coincident economic indicators fell a preliminary 3.2 points in March from February, the Cabinet Office said on Wednesday, after the March 11 earthquake and tsunami damaged factory output and triggered a nuclear crisis...

The index of leading economic indicators, compiled using data such as the number of job offers and consumer sentiment and a gauge of the economy a few months ahead, fell 4.5 points from February.

But the economy may have stabilised somewhat in April. Again from Reuters:

Japan's service sector sentiment index rose to 28.3 in April, a Cabinet Office survey showed on Thursday, improving from a record fall posted the previous month, helped by efforts to repair supply constraints, prevent power shortages and contain a nuclear crisis caused by the March earthquake and tsunami.

The survey of workers such as taxi drivers, hotel workers and restaurant staff -- called "economy watchers" for their proximity to consumer and retail trends -- showed their confidence about current economic conditions rose from 27.7 in March...

The outlook index, indicating the level of confidence in future conditions, was at 38.4, up from 26.6 in March.

In any case, the Japanese economy is unlikely to get much more help from the Bank of Japan. From Bloomberg:

With his nation’s economy contracting under disaster damage of as much as 25 trillion yen ($310 billion), Bank of Japan Governor Masaaki Shirakawa is signaling that his biggest worry is inflation.

At stake for the student of Milton Friedman is protecting the bank’s independence from financing public spending, as urged by lawmakers after the record March 11 earthquake. Shirakawa, 61, instead oversaw a 40-trillion yen boost in short-term funds, eschewing the scale of longer-dated asset purchases the Federal Reserve mounted after confidence in credit markets collapsed and the U.S. entered its worst recession since the Great Depression.

Apparently, many don't agree with Shirakawa's parsimony.

The governor gets mixed results in a survey of Bloomberg users this month. While 50 percent of respondents said the BOJ’s stance is appropriate, Shirakawa was behind Fed Chairman Ben S. Bernanke, European Central Bank Chairman Jean-Claude Trichet and Bank of England Governor Mervyn King in a ranking of who did the best job managing their region’s crisis. He got 9 percent of votes, versus 42 percent for Bernanke. Shirakawa’s favorability rating rose to 44 percent from 31 percent in October 2009.

He's certainly not getting the same adulation that "maestro" Alan Greenspan received when the latter was Fed chief.

Thursday, 12 May 2011

China cools, US trade deficit rises, BoE signals rate hike

There were further signs of cooling in China's economy on Wednesday although the inflation rate eased only slightly in April. From Reuters:

China's industrial output growth eased much more than expected in April to suggest the world's second-biggest economy is cooling, reducing the need for further aggressive monetary policy tightening even as inflation remains stubbornly high.

Consumer inflation eased modestly to 5.3 percent in April from a 32-month high in March of 5.4 percent. The outcome topped expectations but still underlined the view that price pressures are peaking and may start to ease in the second half of 2011.

Industrial output rose 13.4 percent from a year earlier, but that was more than a full percentage point below both expectations and a strong pace in March.

Retail sales growth eased more than expected while annual increases in money supply and outstanding yuan loans hit their lowest pace in 29 months, signs that measures to slow the economy are starting to bite.

In the US though, the trade deficit widened in March. Bloomberg reports:

The U.S. trade deficit widened more than forecast in March as the highest oil prices in more than two years boosted imports, eclipsing record exports.

The trade gap rose 6 percent to $48.2 billion, the biggest since June, from $45.4 billion in February, the Commerce Department reported today in Washington. The median forecast of 72 economists surveyed by Bloomberg News projected it would widen to $47 billion...

Imports climbed 4.9 percent to $220.8 billion, the highest level since August 2008, from $210.4 billion. A jump in fuel prices and increasing demand for autos and computers led the gain.

A barrel of crude oil cost an average $93.76 in March, the most since September 2008, the Commerce Department said. Excluding petroleum, the trade gap shrank to $16.9 billion from $20 billion in February.

Exports increased 4.6 percent, the biggest gain since March 1994, to $172.7 billion. Increasing demand overseas for autos, chemicals and industrial machinery contributed to the advance. The gain also reflected record sales to customers in South and Central America, and the highest purchases from countries in the European Union since June 2008.

The UK also saw a wider trade deficit in March. Reuters reports:

The country's goods trade deficit widened more than expected in March, giving back some of the strong improvement seen in the first two months.

The Office for National Statistics said that the goods trade gap widened to 7.66 billion pounds from 6.99 billion in February, some way above the 7.25 billion pounds economists had expected.

But sterling rallied anyway on Wednesday after the Bank of England released its latest inflation forecasts. Bloomberg reports:

Bank of England Governor Mervyn King said that inflation remains “uncomfortably high,” and officials signaled they may need to raise interest rates later this year even as the economy struggles to build momentum.

“The recent pattern of revisions to the projections over the next year -- downward to growth and upward to inflation -- has continued,” King told reporters in London today. Inflation “remains uncomfortably high and well above the 2 percent target. And there is a good chance that, if utility prices rise further later in the year, inflation will reach 5 percent.”

The pound rose after the release of the bank’s forecasts, which showed that a quarter-point interest-rate increase by the end of the year may be needed to control inflation, which officials see “markedly higher” in the short-term than they did in February. The central bank kept its benchmark rate at a record low of 0.5 percent last week to aid economic growth.

Wednesday, 11 May 2011

China trade surplus and US import prices up in April

China's trade surplus jumped in April. AFP/CNA reports:

China's politically-sensitive trade surplus ballooned to US$11.4 billion in April and exports hit a record monthly high, data showed Tuesday, as Washington pressured Beijing for a stronger currency.

The trade surplus -- a constant thorn in the side of Sino-US relations -- dwarfed the US$139 million surplus posted in March and a Dow Jones forecast for $1 billion in April.

Exports rose 29.9 per cent year-on-year to $155.7 billion -- a record high value for a single month -- while imports increased by 21.8 per cent to US$144.3 billion, customs authorities said in a statement.

However, Chinese imports are no longer able to keep overall US import prices down. From Bloomberg:

Prices of goods imported into the U.S. rose more than forecast in April as a slumping dollar and growing economies overseas pushed up the cost of fuel and food.

The 2.2 percent increase in the import-price index followed a revised 2.6 percent gain in March, according to figures from the Labor Department today in Washington. Other reports showed distributors boosted inventories and small businesses lost confidence.

Tuesday, 10 May 2011

Commodities rebound, Greek debt downgraded

Commodities managed to rebound on Monday but there was more bad news for Greece. Bloomberg reports:

Commodities rebounded from the biggest weekly slide since 2008 amid optimism about economic growth and speculation recent declines were excessive, helping drive a rally in U.S. stocks. European equities fell and Greek bonds tumbled as Standard & Poor’s cut its rating on the nation.

The S&P GSCI Index of 24 raw materials jumped 3.6 percent, its biggest gain since 2009, at 4 p.m. in New York following last week’s 11 percent slide. Silver futures climbed 5.2 percent and oil rebounded 5.5 percent to above $102 a barrel. The S&P 500 increased 0.5 percent to 1,346.29 as energy and raw-material producers led gains, while the Stoxx Europe 600 Index lost 0.3 percent. Greece’s 10-year note yield rose 21 basis points to 15.71 percent. The euro strengthened 0.4 percent to $1.4367 versus the dollar after gaining as much as 0.9 percent earlier.

Mark Gongloff at WSJ's MarketBeat wonders why markets seemed shocked at the S&P downgrade of Greece.

Financial markets seemed briefly shocked by S&P’s downgrade of Greece this morning, but they shouldn’t have been. The credit-default swap market was warning of just such a downgrade for months...

As far back as January, the CDS market was treating Greece as if it already had the “B” credit rating S&P slapped on it today, according to data provider Markit.

And that still might be too high. Since January, Greece’s implied rating has fallen to CCC, Markit says. Portugal and Ireland are also trading like CCC credits, while Italy is priced like a BBB. The major ratings agencies all have higher ratings on those countries.

Monday, 9 May 2011

Demographics, financial markets and the economy

Wesley Gray at the Empirical Finance Blog brings to our attention a recent paper by Robert Arnott and Denis Chaves entitled "Demographic Changes, Financial Markets, and the Economy".

From the abstract of the paper:

... In our work, we find that a growing roster of young adults (age 15–49) is very good for GDP growth, a growing roster of older workers is a little bad for GDP growth, and a growing roster of young children or senior citizens is very bad for GDP growth.

We find surprisingly powerful results when we apply the same technique for exploring the links between demography and capital markets returns, net of the strong and well-documented effects of valuation and yield levels. Stocks perform best when the roster of people age 35–59 is particularly large, and when the roster of people age 45–64 is fast-growing. Bonds follow a similar pattern, with an age-shift: they’re best when the roster of people age 50–69 is growing quickly...

The authors use their results to make some forecasts for GDP growth and market returns in a number of countries. From the conclusion:

... Our projections are bleak in the case of GDP growth for most of the developed world. The developed countries, and Japan in particular, have alarmingly low birth rates and high number of retirees. But, especially for the younger of the developed economies, the picture is relatively good for bonds and mixed in the case of stocks...

Saturday, 7 May 2011

US and Canadian employment rise more than expected

US employment rose much more than expected in April Reuters reports:

U.S. companies created jobs at the fastest pace in five years in April, pointing to underlying strength in the economy even as the jobless rate rose to 9.0 percent.

Private sector hiring, including a big jump at retailers, boosted overall nonfarm payrolls by 244,000, the largest increase in 11 months, the Labor Department said on Friday. Economists had expected a gain of only 186,000.

The private sector created 268,000 jobs, the most since February 2006, while government payrolls shrank.

Canada also added more jobs than expected in April. Bloomberg reports:

Canada added almost three times more jobs than economists forecast in April and the unemployment rate declined, suggesting the central bank will raise interest rates in the next few months.

Employment rose by 58,300 after a March decline of 1,500, Statistics Canada said today in Ottawa. The jobless rate fell to 7.6 percent from 7.7 percent, as the labor force grew by 47,400. Economists forecast no change in unemployment and 20,000 new jobs in Bloomberg News surveys that had 24 and 25 estimates. The largest estimate was for 40,000 new jobs.

There was also good news in Europe with Germany reporting another increase in industrial production in March. Again from Bloomberg:

German industrial production rose for a third month in March as construction surged, adding to signs Europe’s largest economy gathered strength in the first quarter.

Output increased 0.7 percent from February, when it rose 1.7 percent, the Economy Ministry in Berlin said today. Economists had forecast a gain of 0.5 percent, the median of 21 estimates in a Bloomberg News survey showed. In the year, production rose 11.2 percent when adjusted for working days.

Friday, 6 May 2011

ECB and BoE hold rates, commodities plunge

The ECB's rate of monetary tightening will be slower than some had expected. From Bloomberg on Thursday:

European Central Bank President Jean- Claude Trichet signaled the bank will wait until after June to raise interest rates again, wrong-footing some investors who had expected a quicker move to fight inflation. The euro plunged.

“We are never pre-committed and we can increase rates whenever we judge it appropriate,” Trichet said at a press conference in Helsinki today after the ECB left its benchmark interest rate at 1.25 percent. He refrained from using the phrase “strong vigilance” that would have signaled a June rate increase, saying only that the ECB will monitor inflation risks “very closely.”

The BoE also left interest rates unchanged on Thursday.

The Bank of England kept its benchmark rate at a record low of 0.5 percent today...

However, the relatively dovish signals from two of the most important central banks in the world failed to keep markets up on Thursday. From Bloomberg:

Commodities plunged the most since 2009, led by oil and silver, and stocks posted the biggest three-day drop since March as selling of energy futures drove down equities. The dollar strengthened and Treasuries jumped.

The Standard & Poor’s GSCI index of 24 commodities sank 6.5 percent at 4:32 p.m. in New York and has lost 9.9 percent this week. Oil tumbled 8.6 percent, the most in two years, to $99.80 a barrel. Silver dropped 8 percent, extending the biggest four- day slump since 1983 to 25 percent. The MSCI All-Country World Index of shares in 45 nations fell 1.1 percent. The dollar rose 2 percent versus the euro, making commodities quoted in the greenback more expensive for holders of other currencies.

Economic reports on Thursday were not helpful for market sentiment.

In the US, claims for unemployment benefits rose last week. Bloomberg reports:

The number of claims for U.S. unemployment benefits unexpectedly rose last week, pushed up by auto-plant shutdowns and other unusual events that seasonal variations failed to take into account, the Labor Department said.

Applications for jobless benefits jumped by 43,000 to 474,000 in the week ended April 30, the most since August, Labor Department figures showed today. A spring break holiday in New York, a new emergency benefits program in Oregon and auto shutdowns caused by the disaster in Japan were the main reasons for the surge, a Labor Department spokesman said as the data was released to the press.

In Germany, factory orders fell in March. Bloomberg reports:

Factory orders in Germany, Europe’s largest economy, unexpectedly dropped in March, led by a slump in demand for investment goods at home and abroad.

Orders, adjusted for seasonal swings and inflation, slipped 4 percent from February, when they rose a revised 1.9 percent, the Economy Ministry in Berlin said in a statement today. Economists had forecast a gain of 0.4 percent, according to the median of 22 estimates in a Bloomberg News survey. In the year, orders rose 9.7 percent, when adjusted for work days.

And in the UK, services slowed in April. Reuters reports:

Britain's dominant service sector slowed more than expected in April, suggesting the economy failed to pick up speed after its sluggish start to the year and giving the Bank of England more reason to keep rates on hold.

The Markit/CIPS headline services PMI index eased to 54.3 in April from 57.1 in March, staying in positive territory for a fourth straight month, but undershooting the 55.7 forecast.

Thursday, 5 May 2011

Economic data weaker than expected

US non-manufacturing activity came in well below expectations in April. Bloomberg reports:

Service industries in the U.S. expanded in April at the slowest pace in eight months as companies cut back in response to higher energy costs.

The Institute for Supply Management’s index of non- manufacturing companies declined to 52.8 last month, lower than the median forecast of economists surveyed by Bloomberg News, from 57.3 in March. Readings greater than 50 signal growth...

Employment also came in below expectations.

Employment at U.S. companies increased by 179,000 in April, the smallest gain in five months, according to figures today from ADP Employer Services. The median estimate in a Bloomberg survey called for a 198,000 gain.

Eurozone data were also weaker than expected. Bloomberg reports:

European services and manufacturing growth accelerated in April, led by factory output, suggesting the 17-member euro-region economy is weathering surging energy costs and tougher budget cuts.

A composite index based on a survey of euro-area purchasing managers in both industries rose to 57.8 from 57.6 in March, London-based Markit Economics said in a statement today. That’s in line with an initial estimate on April 19. A reading above 50 indicates expansion. Euro-region retail sales fell 1 percent in March from the previous month, when they rose 0.3 percent, the European Union’s statistics office said in a statement today...

The euro-area services indicator fell to 56.7 from 57.2 in March, Markit said, below a preliminary reading of 56.9 released last month...

It was the similar story in the UK. From Reuters:

Growth in the construction industry slowed more than expected last month, an industry survey showed Wednesday, casting further doubt on the strength of the country's patchy economic recovery.

The sharp fall in the Markit/CIPS construction PMI survey followed weaker-than-expected figures for mortgage and consumer lending from the Bank of England, as well as a marked decline in house prices.

Wednesday, 4 May 2011

India rates interest rates

Asian central bank tightening continued on Tuesday. From AFP/CNA:

India's central bank on Tuesday raised lending rates by a bigger-than-expected 50 basis points, its ninth hike in 15 months to curb inflation, and warned that the move could slow economic growth.

The Reserve Bank of India raised its repo - the rate at which it lends to commercial banks - to 7.25 per cent and increased its reverse repo - the rate it pays to banks for deposits - to 6.25 per cent.

There was no move from the Reserve Bank of Australia though, which left interest rates at 4.75 percent on Tuesday.

However, data from the euro area on Tuesday show that inflation is likely to remain a concern there. From Bloomberg:

European producer-price inflation unexpectedly accelerated to the fastest in 2 1/2 years in March, adding to concerns that surging energy costs will feed through to consumers and prompt the European Central Bank to raise interest rates further.

Factory-gate prices in the euro region jumped 6.7 percent from a year earlier, the fastest since September 2008, after a 6.6 percent gain in February, the European Union’s statistics office in Luxembourg said today. Economists had projected a March increase of 6.6 percent, according to the median of 13 estimates in a Bloomberg news survey. In the month, prices advanced 0.7 percent.

Meanwhile, in the US, there was confirmation on Tuesday that manufacturing growth remains robust. From Bloomberg:

Orders placed with U.S. factories rose more than forecast in March on increasing demand for machinery and computers that points to further gains in business spending.

Bookings for manufacturers’ goods climbed 3 percent, a fifth consecutive increase, after a 0.7 percent February advance, the Commerce Department said today in Washington. The report also revised up estimates for capital equipment bookings issued last week.

Data from the UK were mixed though. Reuters reports:

Manufacturing expanded at its slowest pace in 7 months in April and a slowdown in new orders dimmed hopes that the UK economy would pick up after a weak recovery at the start of the year.

The Markit/CIPS manufacturing PMI headline index fell to 54.6, well below even the most bearish analyst's forecast, suggesting the recent strong performance by manufacturers is starting to weaken as domestic demand wanes...

Separate figures from the CBI business lobby group showed retail sales recorded solid annual growth in April, although the outlook is gloomy.

The CBI distributive trades survey's April sales balance unexpectedly rose to a four-month high of +21, up from +15 in March and better than the +13 consensus forecast.

However, the expected sales balance for May sank to its lowest since June last year and retailers said they expect seasonally adjusted sales this month to be their worst since September 2009.

Tuesday, 3 May 2011

Manufacturing expands in US, accelerates in euro area

The economic reports on Monday were quite positive.

US data showed growth in manufacturing activity and construction spending. Bloomberg reports:

Manufacturing expanded faster than forecast in April, driven by gains in exports and inventories that are keeping the industry at the forefront of the U.S. economic expansion.

The Institute for Supply Management’s factory index fell to 60.4 last month from 61.2 in March, the Tempe, Arizona-based group said today. Readings greater than 50 signal expansion and the measure has exceeded 60 for four consecutive months, the best performance since 2004...

Another report showed construction spending rose more than forecast in March as companies put up factories and power plants, while home improvement outlays also rebounded. The 1.4 percent gain was the biggest since April 2010 and followed a revised 2.4 percent decrease in February that was larger than previously estimated, Commerce Department figures showed.

Also today, results from a Federal Reserve survey showed banks made borrowing easier in the first quarter as they forecast the economy will improve. Looser standards for business loans reflected more competition among banks, while some financial institutions “also pointed to a more favorable or less uncertain economic outlook,” the Fed said in its quarterly poll of senior loan officers.

In the euro area, manufacturing activity accelerated in April. Bloomberg reports:

European manufacturing growth accelerated more than estimated in April, driven by higher output in Germany and France, suggesting the region’s economy is weathering surging energy costs.

A gauge of manufacturing in the 17-nation euro area rose to 58 from 57.5 in March, London-based Markit Economics said in an e-mailed report today. That’s above an initial estimate of 57.7 on April 19. A reading above 50 indicates growth.

Monday, 2 May 2011

China's economy slowing

China's economic growth may be slowing. From AFP/CNA today:

Manufacturing activity in China slowed slightly in April and the costs of raw materials fell, according to official data released Sunday, as Beijing tries to cool the world's second-largest economy.

The purchasing managers index (PMI) slipped to 52.9 in April from 53.4 in March, the China Federation of Logistics and Purchasing said in a statement.

However, there is a longer-term slowing of the Chinese economy that will take place in coming years as a result of demographics. From Bloomberg last week:

China declared victory over rapid population growth as the release of its decennial census signaled the focus will turn to managing the impact of a faster- than-expected rise in the number of older people.

China had 1.34 billion people as of Nov. 1, the Beijing- based National Bureau of Statistics said yesterday. While still the most populous country, the higher birth rate of India’s 1.2 billion people puts it on course to take the title when the South Asian nation holds its next census in 2021...

“The working age population is due to start falling within the next three or four years,” said Jim Walker, managing director at Hong Kong-based Asianomics Ltd. and former chief economist at CLSA Asia-Pacific Markets. “These 9, 10 percent growth rates people have become accustomed to are not sustainable for very much longer.”