Tagged: recovery
ECB to hold fire, Fed loads second stimulus round
Yahoo | AFP | 31/10/2010
The European Central Bank governing council meets this week after European leaders moved to shore up eurozone stability and as the US Federal Reserve mulls a second round of monetary stimulus. The ECB is sure to maintain its main lending rate at a record low of 1.0 percent, analysts say, while focusing potentially tense talks on whether to continue unwinding its own unconventional measures.
A rift between ECB governors has opened over pursuing purchases of eurozone government debt, with German central bank chief Axel Weber saying he will stick to his guns even if it means passing on a chance to be the next ECB president. Weber insists the scheme should be phased out and said last week: "If that’s going to have implications for my future career, then I’d be happy to live with those consequences."
Commerbank economist Michael Schubert said: "Behind closed doors … the council is likely to discuss how to continue its gradual exit from unconventional measures" some eurozone banks have come to depend upon. "Discussions could become even more heated at Thursday’s meeting," he added.
Growth in powerhouse Germany is strong now but Greece is still in recession and faces an unsettled political situation that could worsen its debt crisis. In London meanwhile, the Bank of England is expected to maintain its main interest rate at a record low of 0.50 percent on Thursday.
India, China seen leading robust Asian recovery
Reuters |
In April, the ADB had forecast that China would grow at 9.6 percent and India at 8.2 percent this year, but the figures would be revised in September, he said. Growth in the two economies could decelerate in the second half due to the base effect. He said though downside risks remain in the U.S. economy, it was likely to maintain around 3 percent growth this year. “We do not think there will be double-dip recession in the U.S.,” he said, adding the euro zone was also performing better mainly on account of surge in German exports.
CAPITAL INFLOWS
The decision of the central banks in India and other Asian countries to raise interest rates could possibility lead to a surge in capital flows into the region as investors are looking for safer havens as well as higher returns on investment. “Asian countries are now raising Continue reading
Time to Buy Dollars as Euro Economies Reach Limits of Austerity
Time to Buy Dollars as Euro Economies Reach Limits of Austerity – Bloomberg 02/08/2010
FX Concepts LLC, the hedge fund that bought the euro in June just as it began a 9.7 percent surge against the dollar, now says it’s almost time to get out of the currency. The firm, which manages $8 billion in assets, expects the euro’s advance from a four-year low on June 7 to come undone by September, partly because European austerity programs will start to weigh on growth. Reports last week that showed Spanish consumer confidence falling to the lowest level this year and banks tightening credit standards in the region suggest the budget measures may already be undermining the recovery. The same fiscal measures that helped restore confidence in the euro may soon weaken the region’s economies and torpedo the rally. A July 30 survey of 21 money managers overseeing $1.29 trillion by Jersey City, New Jersey-based research firm Ried Thunberg ICAP Inc. found 75 percent don’t expect Europe’s common currency to strengthen over the next three months. “Austerity is really bad for growth,” said Jonathan Clark, vice chairman at New York-based FX Concepts, the world’s biggest currency hedge fund. “In the U.S., austerity is mainly on the state level, but in Europe they are whole-hog into cutting spending to reduce deficits. Under a pessimistic scenario, the European currencies are in a lot of trouble.”
Spending Cuts
Spain, Portugal and Greece will reduce spending by an average 4.3 percent of gross domestic product from 2009 to 2011, said Gilles Moec, an economist in London at Deutsche Bank AG, Germany’s largest lender. The euro area will expand 1.5 percent this year, less than a previous estimate of 2 percent, UBS AG, the biggest Swiss bank by assets, said in a July 16 report. The cuts contrast with the U.S., where President Barack Obama signed into law a $34 billion extension of unemployment benefits last month. The Congressional Budget Office projects a record $1.47 trillion deficit this fiscal year ending Sept. 30, and $1.42 trillion in 2011. While U.S. growth is slowing, it beats the European Union, where a 750 billion-euro ($981 billion) backstop for the region’s most indebted nations stabilized the currency after it slid from $1.5144 on Nov. 25 to the June 7 low. U.S. GDP grew at a 2.4 percent pace in the second quarter, compared with 3.7 percent in the prior period, the Commerce Department in Washington said July 30. Corporate spending on equipment and software jumped at a 22 percent annual rate, the biggest increase since 1997. The median second-quarter estimate for the euro region is 1.30 percent, and 1.10 percent for the year, based on a survey of 20 economists by Bloomberg. Continue reading
As Slump Hits Home, Cities Downsize Their Ambitions
The police department in this city of 470,000 has lost about 50 officers, and is hiring lower-paid civilians to do investigative work. The Little League has to pay the city $15 an hour to turn on ball-field lights. The library now closes its main location on Sundays, and city offices are open only four days a week. This holiday season, the city didn’t put up festive lights along the downtown streets.
Mesa’s tax receipts, depressed by the recession, will likely come back one of these days. But Mayor Scott Smith doesn’t believe city services will return to…
Recovery or Bubble?
C.P. Chandrasekhar | MRzine.org | 06.12.2009
Fears of a new speculative boom on which the global recovery rides are being expressed in different circles. There are as many aspects to these fears as there are to the so-called recovery, which include the huge profits being recorded by some major banking firms, the surge in capital flows to emerging markets, the speculative rise in stock markets’ values worldwide and the property boom in much of Asia. Potential victims of the reversal of this boom, however, now complain that the source of it all is a return in the US to a policy of easy money — involving huge liquidity infusions and extremely low interest rates — to save the financial system and real economy from collapse, while resorting to a fiscal stimulus to trigger a recovery. A similar policy was and is being adopted by many other countries, even if not with the same intensity in all cases, but the US, which was home to the most toxic assets and damaged banks, led by a long margin.
This policy did generate the signals that suggested that economies were on the mend. But these are also signs; argue some, of a bubble similar to the one which generated the high profits and the credit-financed housing and consumer-spending boom that preceded the 2008 downturn. That dangers associated with that bubble were ignored because of the short-run growth benefits it delivered. This one could be ignored because of the impression of a recovery it generates. Even as satisfaction is being expressed in some quarters about the recovery, however halting, fears of a second downturn or double dip recession are being expressed in other circles. Thus, just before the US President Barack Obama arrived in Beijing on his much-publicised visit to China, that country’s banking regulator, Liu Mingkang, criticised the US Federal Continue reading
UK Economy Shrank Less Than Previously Estimated
Bloomberg | November 25, 2009 | 05:12 EST
The U.K. economy shrank less than previously estimated in the third quarter as consumer spending stopped falling and the service industries slump eased, bringing the longest recession on record closer to an end. Gross domestic product fell 0.3 percent from the previous three months, compared with a prior measurement of a 0.4 percent drop, the Office for National Statistics said today in London. The result matched the median prediction of 28 economists in a Bloomberg News survey. Prime Minister Gordon Brown this week called for stimulus to stay in place to avoid “choking off recovery” as an election looms within six months. The Bank of England has expanded its bond-purchase plan three times since March to ensure Britain’s escape from recession and Governor Mervyn King said yesterday the pickup isn’t “particularly strong.”
“Over the coming quarters the economy will accelerate pretty sharply,” said Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam and a former U.K. Treasury official. “In third quarter the U.K. was one of the sick men of Europe but it’s going to step up a few gears and will be one of the stronger performers in Europe next year.” The pound erased gains against the dollar and was trading at $1.6702 as of 10:05 a.m. in London. U.K. government bonds extended gains, pushing yields lower. The yield on the 2-year gilt fell 5 basis points to 1.17 percent. Continue reading
Struggling in a recovering economy
BBC NEWS | 2009/10/29 | 00:03:07 GMT
I've been out of work a few months here or there but never like this -Jon Polis
America slowly appears to be emerging from recession, rebounding from its worst slump in decades. For many Americans the pain is still dragging on. More than 200 years ago, Slater Mill in Rhode Island helped kick off America’s industrial revolution. For centuries, manufacturing, mainly in textile mills, provided jobs in this small north-eastern state, but not anymore. Rhode Island now has the third highest unemployment rate in the country, after Michigan and Nevada. According to the US Labor Department, the rate of unemployment climbed to 13% in September. This does not come as a surprise to Jon Polis. Each day, he searches for work on his computer and in the local newspaper. He says his eight years working for a medical supplies company was over in eight minutes. He was laid off a year-and-a-half ago. Now his benefits have run out and he is living on his savings. “I can last maybe next March or April,” says Jon. “After that I’ll just have to go to my family and ask for money.” At age 53, this is not the first recession he has lived through, but it is the worst. “I’ve been out of work a few months here or there but never like this,” he says. Continue reading
Surprise fall in US home building
BBC NEWS | 2009/11/18 | 14:21:13 GMT
The construction of new homes and apartments in the US showed a surprise fall in October. New US housing starts tumbled 10.6% to an annual rate of 529,000 homes – the lowest level since April. The decline in construction was led by a fall in demand for both single-family and multi-family occupancies. Separately, a report showed prices edging up in October. The consumer price index rose 0.3%, pushed up by higher energy prices.
‘A weak number’
The housing figures are a blow to recent signs of recovery in the market. David Resler from Nomura Securities in New York said they were “really disappointing.” “I had convinced myself that we had turned the corner on housing,” he added. “I am no longer convinced. This is really a quite weak number.” Congress has voted to extend a tax credit of up to $8,000 for first-time buyers. It had been due to expire at the end of November. Some analysts said that the uncertainty over whether it would be renewed could have held back construction. Continue reading
Goldman Sachs Apologizes, Gives Back
ABC NEWS Business Unit | Nov. 18, 2009
The Wall Street firm that has arguably taken the most heat for its multibillion-dollar employee compensation will donate $500 million for a new program to help small businesses. Goldman Sachs, widely viewed as the biggest bank to suffer the least damage from the world’s financial crisis, said Tuesday it will join forces with billionaire investor and Goldman stakeholder Warren Buffett on “10,000 Small Businesses.” The program will provide capital to small businesses in underserved areas and education aid to small business owners. “Small businesses play a vital role in creating jobs and growth in America’s economy,” Goldman CEO Lloyd C. Blankfein said in a statement released Tuesday. “We are pleased to work with our partners in this initiative to support small business owners, particularly those in underserved communities.”
Goldman Sachs, which received and later paid back $10 billion in federal Troubled Asset Relief Program funds during the financial crisis, has set aside $16.7 billion for employee compensation so far this year and is on track to pay out an average $700,000 per employee. The $500 million program amounts to less than 3 percent of Goldman’s employee compensation pool. There’s been rampant speculation that the bank Continue reading
World Out of Balance –Paul Krugman
PAUL KRUGMAN | NYT | November 16, 2009
International travel by world leaders is mainly about making symbolic gestures. Nobody expects President Obama to come back from China with major new agreements, on economic policy or anything else. But let’s hope that when the cameras aren’t rolling Mr. Obama and his hosts engage in some frank talk about currency policy. For the problem of international trade imbalances is about to get substantially worse. And there’s a potentially ugly confrontation looming unless China mends its ways. Some background: Most of the world’s major currencies “float” against one another. That is, their relative values move up or down depending on market forces. That doesn’t necessarily mean that governments pursue pure hands-off policies: countries sometimes limit capital outflows when there’s a run on their currency (as Iceland did last year) or take steps to discourage hot-money inflows when they fear that speculators love their economies not wisely but too well (which is what Brazil is doing right now). But these days most nations try to keep the value of their currency in line with long-term economic fundamentals.
China is the great exception. Despite huge trade surpluses and the desire of many investors to buy into this fast-growing economy — forces that should have strengthened the renminbi, China’s currency — Chinese authorities have kept that currency persistently weak. They’ve done this mainly by trading renminbi for dollars, which they have accumulated in vast quantities. And in recent months, China has carried out what amounts to a beggar-thy-neighbor devaluation, keeping the yuan-dollar exchange rate fixed even as the dollar has fallen sharply against other major currencies. This has given Chinese exporters a growing competitive advantage over their rivals, especially producers in other Continue reading
Stronger Yuan Needed for Global Rebalancing – IMF Chief
Reuters | 15 Nov 2009 | 9:48 PM ET
A stronger Chinese Yuan is part of the reforms that Beijing needs to implement to increase domestic consumption and help ease global imbalances, the head of the International Monetary Fund said on Monday. IMF Managing Director Dominique Strauss-Kahn said the countries at the heart of global imbalances needed to take various measures to ease them. In the case of China, that means an increasing emphasis on domestic demand, especially private consumption, Strauss-Kahn said in remarks prepared for a financial conference in Beijing. “A stronger currency is part of the package of necessary reforms,” he said. “Allowing the renminbi (Yuan) and other Asian currencies to rise would help increase the purchasing power of households, raise the labour share of income and provide the right incentives to reorient investment.” His remarks come as U.S. President Barack Obama is in Shanghai on the first leg of a four-day visit that will grapple with economic imbalances and the future of the Yuan. Strauss-Kahn noted that Chinese authorities were already taking steps to boost household consumption, including health care reforms. “But more can be done to secure a lasting, structural shift towards consumption, by expanding the scope of social policies, moving ahead on financial sector reform, and undertaking corporate governance reforms,” he said. Continue reading
Japan’s economy continues growing
BBC NEWS |2009/11/16 | 06:48:02 GMT
Figures released by the Japanese government show that the country’s economy has grown for a second successive quarter. The world’s second biggest economy grew by 1.2% in the three months from July to September – faster than economists had predicted. However, analysts say overall growth is likely to be sluggish for years. The global downturn had plunged Japan into its worst recession since World War II. Japan’s Trade Minister, Masayuki Naoshima, apologised for disclosing the market sensitive third-quarter GDP figures to oil industry executives ahead of its official release. It was the first GDP data released after Prime Minister Yukio Hatoyama’s new government took power in mid-September.
Stimulating
Most economists say there is little chance of Japan’s economy returning to recession, given the latest figures. Stimulus measures were credited with lifting consumer spending and capital spending rose, but analysts say growth will slow as wages stay low. Even though subsidies and tax breaks enacted by the previous government will remain in place until next year, an expected fall in year-end bonuses and a scarcity of jobs mean households will have less to spend. “With weakness ahead in private consumption or public spending, a slowdown is unavoidable in the January-March and April-June quarters,” Kyohei Morita, chief economist at Barclays Capital in Tokyo, told Reuters. “The one bright spot is that capital spending turned positive. However, while this signals that capital spending is starting to rise from the bottom, the size is still not enough to promise the kind of speed that would be required to prevent a slowdown in the first half of 2010,” the economist added. Continue reading
Rising Unemployment is a threat to ‘World Free Trade’
12/11/2009 | 13:19 GMT+5:30 | nvs
WTO Director General Pascal Lamy, who is attending a meeting of ‘Asia-Pacific trade and finance ministers in Singapore, told CNBC that the rising unemployment is the biggest threat to free trade and could spark greater protectionist policies around the globe. He said that he didn’t expect any improvement in job situation in the next one or two years, as reported by Reuters on Thursday. Rising unemployment inevitably leads to resorting to protectionist measures by the countries so that domestic market may be protected to generate jobs for the local unemployed. Entire industrial world is wary of long jobless queues since the eruption of global financial crisis and which has been the prime reason for various bigger countries resisting to begin to withdraw from stimulus measures. Economic analysts are expecting the unemployment rate in the US to reach 10.5% by the middle of the next year 2010.
But Japan is somewhat showing optimistic results in employment sector. Japan’s unemployment rate has come down to 5.3% for October from 5.5% in September and from 5.7% in July. Still Industrial and other job creating sectors are not able to generate employment. It was reported by the Reuters that Lamy expressed some satisfaction that so fat protectionist measures are contained and under control. But his claim cannot be taken as granted as it is evident that the US & China, and EU & China have lodged their complaints on each other WTO for ruling which are still pending. Temporary arrangements are in place with the help of bilateral discussions so that regular trade between the respective countries may not get interrupted. But trade disputes are like unknown time bomb, which may explode at any time.
China production and retail rise
BBC News | Shanghai | 06:33 GMT, Wednesday, 11 November 2009
The latest economic data from China suggests that industrial production grew year on year at a level faster than expected. Retail sales also rose by more than analysts had predicted, while consumer prices continued to fall. China’s National Bureau of Statistics says the country’s latest economic data shows it is well on track to meet its target of 8% growth this year. The government’s huge economic stimulus package is likely to have helped a lot. The data indicates that activity in factories and workshops increased by 16.1% in October compared to a year ago.
Increase in Optimism
That is the highest level of growth since March last year. China’s statisticians are starting to sound more optimistic than they have done in a while. Importantly, they see evidence in this latest data that Chinese consumers are starting to make more of a contribution to economic growth here. Retail sales were higher in October than September. China needs consumers to spend more to spur domestic demand for the goods its factories produce, as it is unlikely to be able to rely on US consumers in the years ahead in the same way that it could before the financial crisis. The growth in activity in the country’s factories and workshops beat analysts’ forecasts too. There was better news in October’s trade figures though – the rate of decline in exports last month as the smallest in 10 months, supporting anecdotal evidence from producers that orders from customers abroad have been picking up for several weeks now. China has been trying to boost domestic demand for the goods its factories make, as exports have been declining for 12 months now. The supply of new loans was markedly lower than many analysts had expected suggesting that banks had listened to concerns that the easy access to credit here was creating the risk of asset bubbles and put in place more stringent conditions for those trying to borrow money.
The 2009 Jobless Recovery
CalculatedRisk | 11/09/2009 | 11:11:00 AM
The following graph shows the maximum number of net jobs lost after the end of several official recessions (both in numbers and as a percent of peak employment prior to the start of the recession). Even if the economy started adding jobs in November (very unlikely), the 2009 recovery would already be one of weakest for job creation.
Joblosses After Recession ends Officially
The recovery following the 2001 recession was the worst for job creation, with the bottom for employment happening in August 2003, twenty one months after the official end of the recession.
This graph shows the job losses from the start of the employment recession, in percentage terms.
Job losses from the start of 'Employment Recession'
Look at the brown line for the 2001 recession. According to NBER, the 2001 recession lasted 8 months, but the job losses continued for another 21 months (the brown line bottoms in month 29) – and employment didn’t reach the pre-recession level for 46 months. In terms of jobs lost, the 2009 “recovery” might be even worse than the 2001 recovery.
Maybe we should call this a “job loss” recovery?
Please click the pictures above to view them in original size in a new window
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