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Global Growth Worries Climb

A spate of worrying economic data Thursday shook stock and bond markets. Economic activity in the 18-country euro zone expanded at a weak annual rate of 0.8% during the first quarter, data released Thursday showed. Excluding Germany, which grew at a robust 3.3% pace, the rest of the euro-area economy contracted slightly during the quarter. European Central Bank officials are now moving toward enacting additional low interest-rate policies to prevent the region from sliding into a lengthy period of economic stagnation, while the U.S. Federal Reserve guardedly tries to wind down a bond-buying program meant to revitalize economic growth. Meantime, Chinese authorities are trying to prod banks to lend more to first-time home buyers shut out of their real-estate market. U.S. officials privately say they expect Chinese officials to act to boost their economy and support banks if growth slows severely, though Chinese officials say they will avoid major […]

Posted On : Published By : Tom Whipple
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De-Dollarization: Russia Is On The Verge Of Dealing A Massive Blow To The Petrodollar

Is the petrodollar monopoly about to be shattered?  When U.S. politicians started slapping economic sanctions on Russia, they probably never even imagined that there might be serious consequences for the United States. But now the Russian media is reporting that the Russian Ministry of Finance is getting ready to pull the trigger on a “de-dollarization” plan.  For decades, virtually all oil and natural gas around the world has been bought and sold for U.S. dollars.  As I will explain below, this has been a massive advantage for the U.S. economy.  In recent years, there have been rumblings by nations such as Russia and China about the need to change to a new system, but nobody has really had a big reason to upset the status quo.  However, that has now changed.  The struggle over Ukraine has caused Russia to completely reevaluate the financial relationship that it has with the […]

Posted On : Published By : Tom Whipple
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China tried to undermine economic report showing its ascendancy

China fought for a year to undermine new data showing it is poised to usurp the US as the world’s biggest economy in 2014 based on purchasing power, according to people who helped compile the report. The report, released this week by the International Comparison Programme under the auspices of the World Bank, included a line stating that the “National Bureau of Statistics of China has expressed reservations about some aspects of the methodology”. Beijing has declined to publish the headline number for China and the report said that the NBS “does not endorse the results as official statistics”. But, according to those involved in compiling the data, China’s distaste for the findings went further. “A year ago, there was a huge debate. China wanted to throw this out. They don’t want to be seen as number one. They’re worried about the political implications with the US,” said one […]

Posted On : Published By : Tom Whipple
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China PMI steadies, but doesn’t dispel growth worries

Activity in China’s factories increased marginally in April but export orders fell sharply, a government survey showed on Thursday, adding to questions about whether the world’s second-largest economy is stabilizing after its first-quarter slowdown. The data came a day after Premier Li Keqiang pledged to step up support for the trade sector, adding to measures taken over the past month on concerns that the economy may be losing momentum more quickly than expected. The Purchasing Managers’ Index rose to 50.4 in April from March’s 50.3, the National Bureau of Statistics said, one of the first indicators of how the economy started the second quarter. At just above the 50 level that separates growth from contraction, it indicated a slight pick-up in activity for the month, although it was a notch below economists’ expectations. Zhang Liqun, an economist at the Development Research Centre, which helps compile the […]

Posted On : Published By : Tom Whipple
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China PMI steadies, but doesn't dispel growth worries

Activity in China’s factories increased marginally in April but export orders fell sharply, a government survey showed on Thursday, adding to questions about whether the world’s second-largest economy is stabilizing after its first-quarter slowdown. The data came a day after Premier Li Keqiang pledged to step up support for the trade sector, adding to measures taken over the past month on concerns that the economy may be losing momentum more quickly than expected. The Purchasing Managers’ Index rose to 50.4 in April from March’s 50.3, the National Bureau of Statistics said, one of the first indicators of how the economy started the second quarter. At just above the 50 level that separates growth from contraction, it indicated a slight pick-up in activity for the month, although it was a notch below economists’ expectations. Zhang Liqun, an economist at the Development Research Centre, which helps compile the […]

Posted On : Published By : Tom Whipple
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China poised to pass US as world’s leading economic power this year

The US is on the brink of losing its status as the world’s largest economy, and is likely to slip behind China this year, sooner than widely anticipated, according to the world’s leading statistical agencies. The US has been the global leader since overtaking the UK in 1872. Most economists previously thought China would pull ahead in 2019. The figures, compiled by the International Comparison Program hosted by the World Bank, are the most authoritative estimates of what money can buy in different countries and are used by most public and private sector organisations, such as the International Monetary Fund. This is the first time they have been updated since 2005. After extensive research on the prices of goods and services, the ICP concluded that money goes further in poorer countries than it previously thought, prompting it to increase the relative size of emerging market economies. The estimates of […]

Posted On : Published By : Tom Whipple
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The Gross Society

Seeing only its title, a prospective reader might guess this essay is about our nation’s epidemic of obesity. Or could it be a sarcastic observation on the evolution of Lyndon Johnson’s Great Society? Might it be a jeremiad about the gross (i.e., offensive and disgusting) ways we waste and over-consume natural resources, or a comment on current television trends? There’s plenty to be said on all those scores. No, the definition of gross I have in mind is “exclusive of deductions,” as in gross profits versus net profits. The profits we’ll be considering come in the forms not just of money but, more crucially, of energy. Sound boring? Well, you may be surprised. Here’s my thesis: As a society, we are entering the early stages of energy impoverishment. It’s hard to overstate just how serious a threat this is to every aspect of our current way of life. But […]

Posted On : Published By : Tom Whipple
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China factory activity shrinks for fourth month

China’s factory activity shrank for the fourth straight month in April, signaling economic weakness into the second quarter, a preliminary survey showed on Wednesday, although the pace of decline eased helped by policy steps to arrest the slowdown. Analysts see initial signs of stabilization in the economy due to the government’s targeted measures to underpin growth, but believe more policy support may be needed as structural reforms put additional pressure on activity. The HSBC/Markit flash Purchasing Managers Index (PMI) for April rose to 48.3 from March’s final reading of 48.0, but was still below the 50 line separating expansion from contraction. "It’s generally in line (with expectations), reflecting that growth momentum is stabilizing," said Zhou Hao, China economist at ANZ in Shanghai. Hao expected economic growth to pick up slightly to 7.5 percent in the second quarter. Annual growth slowed to 7.4 percent in the first […]

Posted On : Published By : Tom Whipple
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China factories face new challenge as growth slows

As China’s growth inexorably slows, manufacturers such as Linan Meite Cable are discovering that being an efficient low cost producer is no longer enough to prosper. Factories that had thrived by using cheap migrant labor to churn out inexpensive clothing, electronics and toys for export now face changing government priorities as a growth engine based on investment and trade loses its momentum after more than a decade of double-digit expansion. At the same time, China’s labor costs are rising and global demand is still weak, putting pressure on manufacturers to move into more advanced production, consolidate into bigger entities or shift to cheaper inland regions to survive. Growth in the world’s second-largest economy eased to 7.4 percent last quarter, the lowest since a mini-downturn in late 2012, government figures showed Wednesday. Last year’s expansion of 7.7 percent tied 2012 for the weakest since 1999. Leaders […]

Posted On : Published By : Tom Whipple
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Russia Economy Worsens Even Before Sanctions Hit

Margarita R. Zobnina, a professor of marketing here, has been watching the Russian economy’s gathering woes with mounting alarm: friends who have moved abroad with no plans to return; others who put off new business ventures because of rising uncertainty. Meanwhile, Ms. Zobnina and her husband, Alexander, also a professor, have rented a safe deposit box to hold foreign cash as a hedge against the declining ruble. Most shocking, she says, is that her local grocery is now selling anchovies packed in sunflower oil rather than olive oil, an obvious response to the soaring cost of imports. “That really freaks me out,” she said. While the annexation of Crimea has rocketed President Vladimir V. Putin’s approval rating to more than 80 percent, it has also contributed to a sobering downturn in Russia’s economy, which was in trouble even before the West imposed sanctions. With inflation rising, growth […]

Posted On : Published By : Tom Whipple