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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 […]

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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 […]

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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 […]

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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 […]

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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 […]

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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 […]

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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 […]

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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 […]

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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 […]

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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 […]

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China economic growth slows to 18-month low in first quarter

China’s economy grew at its slowest pace in 18 months in the first quarter of 2014, official data showed on Wednesday, with signs of waning momentum already prompting limited government action to steady the world’s second-largest economy. Authorities have ruled out major stimulus to fight short-term dips in growth, and some analysts think the economy will continue to lose momentum into the middle of the year. The economy grew 7.4 percent in the January-March quarter from a year earlier, slightly stronger than the median forecast of 7.3 percent in a Reuters poll but still slowing from 7.7 percent in the final quarter of 2013. It was China’s slowest annual growth since the third quarter of 2012, when growth was also 7.4 percent. Economists were split on the outlook, with some predicting that growth had stabilized and that the government would stand pat on policy. Others, however, […]

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China’s Growth Slows to Six-Quarter Low

China’s expansion moderated to the weakest pace in six quarters and property construction plunged, testing leaders’ commitment to keep reining in credit as risks mount of a deeper slowdown. Gross domestic product rose 7.4 percent in the January-to-March period from a year earlier, the statistics bureau said today in Beijing, compared with the 7.3 percent median estimate in a Bloomberg News survey of analysts. Industrial production and fixed-asset investment trailed projections. The weakest first-quarter property-investment growth since 2009 signals credit is tight and demand is faltering, adding to economic and default dangers as Premier Li Keqiang grapples with risks from shadow banking and local-government debt. A deeper slowdown would put pressure on leaders to expand stimulus or limit the pace of changes intended to give market forces a bigger role in the world’s second-largest economy. “The property market is probably the biggest risk this year, because this is not […]

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Slowing growth adds to China stimulus pressure

China’s growth slowed sharply in the first quarter of 2014, raising pressure on Beijing to provide a fresh round of government stimulus to prop up faltering growth in the world’s second-largest economy. In the three months to the end of March, China’s gross domestic product expanded 7.4 per cent from the same period a year earlier, a slowdown from 7.7 per cent growth in the fourth quarter of 2013 but faster than the 7.2 per cent pace that some analysts had predicted. The expansion in the first quarter, revealed by China’s National Bureau of Statistics on Wednesday, was the slowest since the third quarter of 2012 when the government loosened monetary policy and accelerated infrastructure investment as growth dropped to 7.4 per cent. China’s slowest quarterly growth in recent years was a trough of 6.2 per cent, in the immediate aftermath of the global financial crisis in 2009. […]

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Beef prices reach highest level since 1987

The highest beef prices in decades have some consumers spending extra time in meat market aisles as they search for cuts that won’t break their budgets. AP Photo/Sue Ogrocki Shrinking cattle supply, water shortage and growing exports have caused prices to soar and diets to change Beef prices have hit their highest level in almost three decades, causing sticker shock for both consumers and restaurant owners — and relief isn’t likely anytime soon. A  dwindling number of cattle  and growing export demand from countries such as China and Japan have caused the average retail cost of fresh beef to climb to $5.28 a pound in February, up almost a quarter from January and the highest price since 1987. Everything that is produced is being consumed, said Kevin Good, […]

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Finance officials confident of global growth

An ambitious goal to boost global growth by $2 trillion in the next five years is within reach, finance officials of the world’s major economies believe, despite a variety of threats, including rising political tensions over Russia’s actions in Ukraine. In a joint statement Friday, finance ministers and central bank governors from rich and developing nations skirted over substantial differences in such areas as central bank interest rate policies and whether to impose tougher sanctions on Russia because of its dealings with Ukraine. Their talks resume Saturday with meetings of the policymaking committees of the International Monetary Fund and its sister institution, the World Bank. The final Group of 20 communique pledged to keep working on concrete economic reforms that could boost global growth by 2 percent over the next five years. But finance officials concede that the economic reforms needed to achieve that goal will […]

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China consumer prices rise, but industry deflation persists

China’s consumer inflation rate increased in March as fresh food prices jumped, but persistent deflation in the industrial sector was another signal of weak demand and slowing growth in the world’s second-largest economy. The consumer price index (CPI) rose 2.4 percent in March from a year earlier, the National Bureau of Statistics said on Friday, more from a 2.0 percent rise in February but just below the median forecast in a Reuters poll. Fresh food prices were a major contributor, with fruit prices up an annual 17.3 percent and vegetables up 12.9 percent, although analysts said food inflation was showing signs of moderating. Pork prices fell 6.7 percent from a year earlier. Producer prices fell in annual terms for the 25th straight month, dropping 2.3 percent, slightly more than expected. "Overall, we expect inflation pressures to remain benign amid tepid domestic demand," Barclays economists said in […]

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China slowdown concerns reinforced by falling prices

Falling prices in China have reinforced fears of the slowdown in the world’s second-largest economy , highlighting sluggish consumer demand and the struggles of over-extended factories. Consumer prices fell 0.5 per cent in March from the previous month, while producer prices remained mired in deflationary territory for a 25th-consecutive month, according to figures published by the national bureau of statistics on Friday. Coming on the heels of weak trade figures , slower credit issuance and big declines in property sales, the price data reinforces the picture of a disappointing first quarter for the world’s second-largest economy. Analysts have rushed to downgrade their forecasts for Chinese growth and now predict that the economy will expand 7.4 per cent this year, its softest in more than two decades. The downturn has fuelled expectations that the government will prop up growth, but Li Keqiang, the premier, on Thursday rebuffed calls for […]

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Growing service sector won't avert China slowdown

A robust services sector will not stop China’s economy from slowing into the middle of the year, analysts said after modest government stimulus was seen as a signal authorities want to steady growth to keep their reform drive on track. Two surveys on Thursday showing growth in the service sector offered some relief after a run of disappointing data this year, but did little to alter the view that the world’s second-largest economy has lost more momentum than expected in 2014. On Wednesday, the government said it would accelerate construction of rail projects and cut taxes for small firms, the first concrete action this year to boost activity. "The scale of the stimulus is modest, likely aimed at smoothing GDP growth at around the 7.5 percent target, rather than another round of massive stimulus," HSBC economists said in a report. The targeted moves showed authorities wanted […]

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Growing service sector won’t avert China slowdown

A robust services sector will not stop China’s economy from slowing into the middle of the year, analysts said after modest government stimulus was seen as a signal authorities want to steady growth to keep their reform drive on track. Two surveys on Thursday showing growth in the service sector offered some relief after a run of disappointing data this year, but did little to alter the view that the world’s second-largest economy has lost more momentum than expected in 2014. On Wednesday, the government said it would accelerate construction of rail projects and cut taxes for small firms, the first concrete action this year to boost activity. "The scale of the stimulus is modest, likely aimed at smoothing GDP growth at around the 7.5 percent target, rather than another round of massive stimulus," HSBC economists said in a report. The targeted moves showed authorities wanted […]

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China’s shadow banks at risk of a property crash

©EPA Delegates from Hong Kong who made the pilgrimage to the mainland to take part in the National People’s Congress in mid-March came away impressed with the capability of Chinese president Xi Jinping, the most powerful leader of China since Deng Xiaoping. “He will never let the economy fall apart,” one delegate said. Their only doubt? The outsized vigour with which Mr Xi is pursuing his anti-corruption campaign . This delegate complained bitterly about being put up at a three star hotel in which even bottled water was not supplied, let alone whisky or fine wine. Meanwhile, across the Pacific, many people have sounded the alarm about Beijing’s ability to rein in credit growth and rebalance the economy more towards domestic demand and services and away from commodity-intensive fixed asset investment. But in Hong Kong and China itself, faith in the ability of the government to correct the excesses […]

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Eurozone inflation slows to lowest level in five years

Inflation in the eurozone slowed again in March, dipping to 0.5 per cent ahead of the European Central Bank’s policy vote on Thursday. The latest flash estimate from Eurostat , the commission’s statistics bureau, showed inflation slowing from 0.7 per cent in February to its lowest level since 2009. Though economists believe last year’s early Easter – a time when businesses tend to raise their prices – weighed on cost pressures, the low number puts pressure on the ECB to do more to stave off the threat of a prolonged period of falling prices. The March figure was below economists’ expectations of 0.6 per cent. The ECB targets inflation of just below 2 per cent, but expects inflation to remain below this level at least until the end of 2016. Copyright The Financial Times Limited 2014. You may share using our article tools. Please don’t cut articles from FT.com […]

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Data deepen eurozone deflation fears

The cost of borrowing for crisis hit countries in the eurozone is tumbling amid expectations that the European Central Bank will be forced to start buying government bonds to fend off the spectre of a damaging period of deflation. Yields on 10-year Portuguese government bonds, which move inversely with prices, dropped below 4 per cent for the first time since early 2010 on Friday while Spanish 10-year yields tumbled to a near decade-low. Fears that the eurozone is drifting towards a Japanese-style bout of deflation were stoked further on Friday after prices fell in Spain this month and inflation edged down in Germany. The unexpected dip in Spanish prices capped a week that saw yields on peripheral countries’ debt tumble and the euro edge lower after Germany’s powerful central bank radically scaled back its opposition to the possibility of the ECB embarking on a government bond buying programme. […]

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China may opt for ‘two children’ policy in future, says senior official

After decades of enforcing a one-child policy, China may in the future allow every couple to have two children, a senior family planning official has said. China’s national health and family planning commission will study the impact of a universal two-child rule, its head of research, Ma Xu, told state news agency Xinhua, adding that there was no specific timetable for the decision. Experts said it was inevitable that China would make the shift, but probably not for several years. While most couples face large fines if they have more than one child, there are several exemptions, notably for ethnic minorities and rural residents. China recently relaxed its tight birth control rules slightly , allowing couples to qualify for a second birth if one of the partners was an only child; previously, both had to be without siblings. The move affects a relatively small proportion of families, but experts […]

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China may opt for 'two children' policy in future, says senior official

After decades of enforcing a one-child policy, China may in the future allow every couple to have two children, a senior family planning official has said. China’s national health and family planning commission will study the impact of a universal two-child rule, its head of research, Ma Xu, told state news agency Xinhua, adding that there was no specific timetable for the decision. Experts said it was inevitable that China would make the shift, but probably not for several years. While most couples face large fines if they have more than one child, there are several exemptions, notably for ethnic minorities and rural residents. China recently relaxed its tight birth control rules slightly , allowing couples to qualify for a second birth if one of the partners was an only child; previously, both had to be without siblings. The move affects a relatively small proportion of families, but experts […]

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Funds cut Russian holdings after sanctions

Days after Washington imposed sanctions against an additional 20 Russian individuals and a top-20 Russian bank , investors are still reeling from the news and beginning to wonder what the long-term consequences of the heightened geopolitical conflict will be for Russia Inc. Unlike the US’s first group of sanction targets, who were Russian officials with little to no business holdings, the second group includes businessmen who own shares in some of the biggest Russian stocks, many of which are traded in London and New York and sold to US and UK institutional investors. While the sanctions are only meant to target assets which the individuals have control over, many funds are now pondering whether they can justify holding on to stocks, which count such individuals as their minority shareholders. A portfolio manager at a UK asset management group says his fund is “staying clear of any company involved with […]

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New worries on China growth as flash PMI shows contraction

China’s manufacturing engine contracted in the first quarter of 2014, a preliminary private survey showed on Monday, raising market expectations of government stimulus to arrest a loss of momentum in the world’s second-largest economy this year. The weaker-than-expected survey knocked the country’s main share index and other Asian markets off early highs, and lopped around a quarter of a U.S. cent from the Australian dollar, which is often used as a proxy for Chinese risk. The flash Markit/HSBC Purchasing Managers’ Index (PMI) fell to an eight-month low of 48.1 in March from February’s final reading of 48.5. The index has been below the 50 level since January, indicating a contraction in the sector this year. Output and new orders both weakened but new export orders grew for the first time in four months, the survey showed, suggesting the slowdown has been driven primarily by weak domestic […]

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Oil Limits and the Economy: One Story, Not Two

The two big stories of our day are (1) Our economic problems: The inability of economies to grow as rapidly as they would like, add as many jobs as they would like, and raise the standards of living of citizens as much as they would like. Associated with this slow economic growth is a continued need for ultra-low interest rates to keep economies of the developed world from slipping back into recession. (2) Our oil related-problems: One part of the story relates to too little, so-called “peak oil,” and the need for substitutes for oil. Another part of the story relates to too much carbon released by burning fossil fuels, including oil, leading to climate change. While the press treats these issues as separate stories, they are in fact very closely connected, related to the fact that we are reaching limits in many different directions simultaneously. The economy is […]

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In Iran, Hopes Fade for Surge in the Economy

Suffering in an economy dragged down by years of mismanagement and the effects of international sanctions, Iran’s increasingly impoverished middle class voted in huge numbers last summer for President Hassan Rouhani , who promised to reignite growth by restoring ties with the rest of the world. But more than six months after Mr. Rouhani took office, hopes of a quick economic recovery are fading among ordinary Iranians, business owners and investors, while economists say the government is running out of cash . Although Mr. Rouhani has managed to stabilize the national currency, halt inflation and forge a temporary nuclear deal that provides some relief from sanctions, delivering on his promises of economic growth has proved far more difficult. On taking office, he discovered that the government’s finances were in far worse condition than his predecessor, Mahmoud Ahmadinejad, had ever let on. Now, with a lack of petrodollars […]

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U.S. current account gap hits 14-year low in fourth quarter

WASHINGTON (Reuters) – The U.S. current account deficit tumbled to a 14-year low in the fourth quarter as exports touched a record high, a government report showed on Wednesday. The Commerce Department said the current account gap, which measures the flow of goods, services and investments into and out of the country, narrowed to $81.1 billion. That was the smallest since the third quarter of 1999 and followed a revised $96.4 billion gap in the third quarter. It represented 1.9 percent of gross domestic product, the smallest share since the third quarter of 1997. That was down from 2.3 percent in the July-September period. Economists polled by Reuters had forecast the current account deficit narrowing to $88 billion in the final three months of 2013 from a previously reported $94.84 billion in the prior period. For all of 2013, the current account deficit averaged 2.3 percent of GDP, the […]

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Report: Climate change stunting fish

Climate change may be stunting fish growth, a new study  said. Fish sizes in the North Sea have shrunk dramatically, and scientists believe warmer ocean temperatures and less oxygenated water could be the causes.  The body sizes of several North Sea species have decreased by as much as 29 percent over a period of four decades, according to the report published in the April issue of Global Change Biology. The report presents evidence gathered as researchers followed six commercial fish species in the North Sea over 40 years. Their evidence showed that as water temperatures increased by 1 to 2 degrees Celsius, an accompanying reduction in fish size was observed. It is generally accepted among scientists that decreased body size is a universal response to increasing temperatures, known as the ‘temperature size rule,’ the report said. But before this report, led by scientists at Scotland’s University of Aberdeen, there […]

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China FDI data indicates sharp slowdown in February

BEIJING (Reuters) – China drew $19.3 billion in foreign direct investment (FDI) in the first two months of 2014, up 10.4 percent from a year earlier, the Commerce Ministry said on Tuesday, indicating a sharp slowdown in February due to the Lunar New Year holidays. Ministry spokesman Shen Danyang told a media briefing that the ministry did not release data for February alone due to seasonal distortions caused by the Lunar New Year holidays, when factories, offices and shops often close for long periods. Based on the published data, FDI in February alone was $8.6 billion, up 4.1 percent from a year earlier, slowing sharply from a 16.1 percent increase in January. FDI from the top 10 Asian economies rose 11.6 percent in the first two months to $16.9 billion, while investment from the United States jumped 43.3 percent to $711 million and investment from the European Union fell […]

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China Crude Processing Falls to Four-Month Low on Weak Demand

China refined the least crude in four months as fuel demand in the world’s second-largest oil consumer slowed amid a cooling economy. Processing in the January-to-February period fell 1 percent from a year earlier to 78.78 million metric tons, the National Bureau of Statistics said in a statement on its website today. That’s equivalent to an average of 9.79 million barrels a day, the lowest rate since October. The bureau in Beijing combines data for the two months, citing distortions from the week-long Lunar New Year holiday, whose timing differs each year. Refiners are cutting oil processing as the pace of China’s economic expansion slows. Benchmark U.S. crude futures dropped the past three days, the longest losing streak in more than two months, after data on March 8 showed an 18.1 percent slump in exports. Industrial output rose 8.6 percent in January-February from a year earlier, the weakest for […]

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China output and retail data adds to slowdown fears

China’s industrial output rose 8.6% in January and February, according to the National Bureau of Statistics. Retail sales – a key measure of consumer spending – also increased 11.8% from the year before, government figures show. The figures were less than analysts had been expecting, adding to fears of a slowdown. Markets in Asia fell on the news, with both Hong Kong’s Hang Seng and the Shanghai composite dropping. Fixed-asset investment, a measure of government spending on infrastructure, expanded 17.9%. The reporting period includes the Chinese Lunar New Year, which fell during both months. Threat continues The data comes as China’s leaders wrap up their parliamentary session, known as the National People’s Congress (NPC). During the session, the government unveiled plans to push ahead with a pilot programme of privately-owned banks, in order to help open up the financial sector. At the start of the NPC earlier this month, […]

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China Slowdown Is Rocking Raw Materials

On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $99.41 a barrel at 0455 GMT, down $0.62 in the Globex electronic session. April Brent crude on London’s ICE Futures exchange fell $0.31 to $108.24 a barrel. Nymex WTI crude extended losses and traded below $100 a barrel while Brent crude gave up overnight gains and moved into negative territory as concerns over a slowdown in China dominated market sentiment. "Global risk sentiment remained somewhat fragile on the back of lingering concerns over Chinese GDP growth," Singapore-based OCBC Bank said in a report. The slide in oil prices wasn’t as pronounced as prices of industrial metals like copper. Markets expect China’s industrial production data due on Thursday to provide more cues. China’s fuel consumption has been increasingly driven by the transport sector and industrial fuels like diesel has seen limited growth with oil […]

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New Cold War Would Differ From Old

RUSSIA had some real economic problems even before the Ukrainian crisis led the United States and European countries to threaten sanctions on the country after the Russian flag was raised in Crimea, a part of Ukraine, and troops who spoke Russian appeared to take over a significant part of the region. Russia’s growth had slowed to almost nothing: Its real gross national product in the third quarter of 2013 was just 0.6 percent larger than it had been a year earlier. The ruble was weak. Its manufacturers appeared to be doing much worse than competitors in other countries. Its stock market has trailed markets in most other countries over the last year. If this is a new incarnation of the Cold War, it will be very different from the old one. Back then, the Soviet Union and the members of its empire were in some ways in their own […]

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Weather restrains U.S. private hiring, services sector growth

U.S. private employers added fewer workers than expected in February and services sector growth slowed, the latest signs that severe weather continues to be a drag on the economy. The ADP National Employment Report showed on Wednesday that private payrolls increased by 139,000 jobs last month. January’s job count was revised sharply down to 127,000 from the previously reported 175,000. Last month’s increase was below economists’ expectations for a gain of 160,000 jobs. "Bad winter weather, especially in mid-month, weighed on payrolls. Job growth is expected to improve with warmer temperatures," said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. Moody’s Analytics jointly develops the report with payrolls processor ADP. The report was released ahead of the government’s comprehensive employment report on Friday. With unusually cold weather blamed for the weak private sector hiring, the report raised the prospect of a third straight […]

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China Retains 7.5% Growth Target for 2014

ages China retained a target for economic growth of about 7.5 percent in 2014, signaling limits on the leadership’s efforts to curb pollution and credit expansion in the world’s second-largest economy. The goal was given in a work report that Premier Li Keqiang delivered to the annual meeting of the legislature today in Beijing. Li said the nation needs stable growth to ensure jobs. Inflation and money-supply targets also matched those of 2013. Maintaining a pace of expansion close to last year’s 7.7 percent would help sustain demand for oil and iron ore and support a global economy that’s forecast by the International Monetary Fund to accelerate. At the same time, analysts from UBS AG to Societe Generale SA say a lower goal would’ve been more in keeping with the government’s pledge to move away from growth at all costs. “It is going to be very […]

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China's manufacturing, services sectors diverge in February

China’s services sector regained some momentum in February but its manufacturing sector struggled, separate surveys showed on Monday, with the divergence adding to the difficulty in assessing the strength of the economy at the start of 2014. Data for the world’s second-largest economy has been mixed, and the Lunar New Year holidays have made it harder to assess momentum. Weak investment and declining manufacturing PMI readings have been countered by surprisingly buoyant exports and bank lending. The official non-manufacturing Purchasing Managers’ Index (PMI) rose to a three-month high of 55.0 in February, while the final Markit/HSBC manufacturing Purchasing Managers’ Index fell to 48.5, its third straight decline. That followed an official manufacturing PMI on Saturday which fell to an eight-month low of 50.2, just above the 50 level that separates contraction from expansion. "It’s a domestic investment-led slowdown. You see exports strong, so external demand is […]

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China’s manufacturing, services sectors diverge in February

China’s services sector regained some momentum in February but its manufacturing sector struggled, separate surveys showed on Monday, with the divergence adding to the difficulty in assessing the strength of the economy at the start of 2014. Data for the world’s second-largest economy has been mixed, and the Lunar New Year holidays have made it harder to assess momentum. Weak investment and declining manufacturing PMI readings have been countered by surprisingly buoyant exports and bank lending. The official non-manufacturing Purchasing Managers’ Index (PMI) rose to a three-month high of 55.0 in February, while the final Markit/HSBC manufacturing Purchasing Managers’ Index fell to 48.5, its third straight decline. That followed an official manufacturing PMI on Saturday which fell to an eight-month low of 50.2, just above the 50 level that separates contraction from expansion. "It’s a domestic investment-led slowdown. You see exports strong, so external demand is […]

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Fourth-quarter growth cut to 2.4 percent

The U.S. government slashed its estimate for fourth-quarter growth as consumer spending and exports were less robust than initially thought, leaving the economy on a more sustainable path of modest expansion. Gross domestic product expanded at a 2.4 percent annual rate, the Commerce Department said on Friday. That was down sharply from the 3.2 percent pace reported last month and the 4.1 percent logged in the third quarter. Economists polled by Reuters had expected growth would be cut to a 2.5 percent pace. It is not unusual for the government to make sharp revisions to GDP numbers, as it does not have complete data when it makes its initial estimates. In fact, the latest figures will be subject to revisions next month as more information is received. The revision left GDP just above the economy’s potential growth trend, which analysts put somewhere between a 2 percent […]

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Harsh weather likely to skew economic data again

After months of subpar economic data that has been blamed at least partially on the brutal winter weather, investors may still struggle to discern the real picture of the economy next week. The closely watched monthly jobs report due on Friday is expected show that employers stepped up hiring a bit in February, but there is a greater-than-unusual amount of uncertainty around forecasts given that the weather remained unseasonable. In addition, questions over whether Russia could be drawn into the conflict in Ukraine will likely weigh on investor sentiment. March futures on the CBOE Volatility index, Wall Street’s so-called fear gauge, shot up nearly a percent even as the S&P 500 closed at another record high on Friday. "It will be interesting to see the action on S&P futures on Sunday night based on the kind of developments we see in Ukraine. There are definitely […]

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Euro Zone Inflation Stays Low; Joblessness Remains High

PARIS — Inflation in the euro zone remained stuck at a very low level in February, while the jobless rate was unchanged in January, official reports showed Friday, providing the European Central Bank with crucial data before its monetary policy meeting next week. Consumer prices in the 18-nation euro zone rose 0.8 percent in February, unchanged from the revised figure for January, Eurostat, the statistical agency of the European Union reported from Luxembourg. The “core” inflation rate, which excludes energy and food prices, ticked up to 1.0 percent from 0.8 percent in January. The January jobless rate for the euro zone remained at 12 percent, Eurostat reported. For the full European Union, made up of 28 nations, the jobless rate stood at 10.8 percent, also unchanged. The numbers were largely in line with market expectations, and financial markets reacted calmly. The Euro Stoxx 50 index slipped about 0.1 percent […]

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Can the World Feed China?

Overnight, China has become a leading world grain importer, set to buy a staggering 22 million tons in the 2013–14 trade year, according to the latest U.S. Department of Agriculture projections. As recently as 2006—just eight years ago—China had a grain surplus and was exporting 10 million tons. What caused this dramatic shift? It wasn’t until 20 years ago, after I wrote an article entitled “Who Will Feed China?”, that I began to fully appreciate what a sensitive political issue food security was to the Chinese. The country’s leaders were all survivors of the Great Famine of 1959–61, when some 36 million people starved to death. Yet while the Chinese government was publicly critical of my questioning the country’s ability to feed itself, it began quietly reforming its agriculture. Among other things, Beijing adopted a policy of grain self-sufficiency, an initiative that is now faltering. Since 2006, China’s grain […]

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China gives big state firms more influence in strategic sectors of economy.

Beijing When China’s leaders wanted to give a boost to the domestic semiconductor industry last year, a big state-owned electronics company scooped up smaller privately owned chip-design and chip-making firms. Beijing followed the same script to get control of the sprawling, polluting rare-earths industry: A big state-owned company purchased nine firms in December that mine the minerals used in such strategic industries as defense and telecommunications. Expect China’s leaders to insist on a big state role in sectors they deem strategic when the officials lay out their economic plans for the coming year at a session of the country’s largely toothless legislature. On the one hand, China has pledged to dismantle some state-owned monopolies so they operate by market principles and pay more dividends to fund social spending. But on the other, China specialists say the state may actually end up with more influence over the economy in coming […]

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With Stable Gas Prices, Who Still Cares About Fuel Economy?

As the WSJ reports today, President Obama has announced the next phase in his administration’s push to improve fuel efficiency on U.S. roads: stricter economy rules for the nation’s fleet of medium- and heavy-duty trucks. That’s a big deal for overall U.S. fuel consumption, because while big trucks make up fewer than 5% of the vehicles on the road, they account for about a quarter of all greenhouse-gas emissions from the transport sector.  The move comes after the government introduced ambitious fuel-economy standards for passenger vehicles  back in 2012, which aim to cut U.S. oil consumption by two million barrels a day by 2025. But there’s one big challenge in promoting fuel-efficient vehicles: without rising gas prices, it’s getting harder to convince consumers to buy small, economic cars.   There’s precedent for what happens to fuel economy when pump prices aren’t part of the […]

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15 Reasons Why Your Food Prices Are About To Start Soaring

Did you know that the U.S. state that produces the most vegetables is going through the worst drought it has ever experienced and that the size of the total U.S. cattle herd is now the smallest that it has been since 1951?  Just the other day, a CBS News article boldly declared that “ food prices soar as incomes stand still “, but the truth is that this is only just the beginning.  If the drought that has been devastating farmers and ranchers out west continues, we are going to see prices for meat, fruits and vegetables soar into the stratosphere.  Already, the federal government has declared  portions of 11 states to be “disaster areas”, and California farmers are going to leave half a million acres sitting idle this year because of the extremely dry conditions. Sadly, experts are telling us that things […]

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North America Should Look to Nafta on Oil Boom, Pemex CEO says

North America will become the world’s cheapest source of energy if Canada, Mexico and the U.S. pool their resources to reduce costs and generate industrial growth across the continent, the chief executive of Mexico’s state-owned oil producer said in an interview. The call for greater collaboration to leverage North American’s oil and natural gas boom comes as leaders of the three nations prepare to gather in Toluca, Mexico, for a summit on Feb. 19. Mexico, the U.S. and Canada should work together on matters such as regulation and infrastructure to make the most efficient use of the continent’s growing energy production that’s reshaping global markets, said Emilio Lozoya, the CEO of Petroleos Mexicanos , or Pemex. “More than a counterbalance” to the market influence of the Organization of Petroleum Exporting Countries, or OPEC, “I see it as our own strength,” Lozoya said in a telephone interview with Bloomberg News […]

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China Hard Landing War-Gamed for World Economy

A hard landing in China would hobble global growth and buoy the dollar, says Societe Generale SA in a study that war-games the international implications of a steep decline in China’s expansion. A plunge to 2 percent from more than 10 percent in 2010 would be enough to slash 1.5 percentage points from worldwide economic growth in the first year as China’s troubles are transmitted through trade, banking and financial market channels, the French bank said in a Feb. 11 report. Among the reasons to expect such reverberations from what the authors called the “worst reasonable case:” China’s imports are equivalent to 30 percent of its gross domestic product. Asian and commodity-producing nations would be the hardest hit, according to Michala Marcussen, global head of economics research in London . The impact could be aggravated by China’s bias toward investment, which accounts for half of its GDP. Less worrisome […]

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Eurozone economic recovery gains traction on back of improved GDP

The eurozone’s recovery gained a little traction in the final quarter of 2013, with the currency bloc’s economy expanding by 0.3 per cent on the back of stronger-than-expected growth in the region’s two largest economies. Eurostat, the commission’s statistics bureau, on Friday published figures showing growth had edged up from 0.1 per cent in the third quarter by slightly more than the 0.2 per cent expected by economists. The figures will boost hopes that economic conditions in the bloc are steadily improving after the region became engulfed by a sovereign debt and banking crisis. The Eurostat figures were published hours after it emerged that Germany, the bloc’s economic powerhouse, had expanded 0.4 per cent, beating forecasts of 0.3 per cent growth. The German data, published by the Federal Statistics Office, were up from 0.3 per cent in the previous quarter and ahead of its preliminary estimate published last month […]

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Japan seen posting record trade deficit in January as import bill soars

Japan is expected to post a record trade deficit in January as a weak yen pushes up the cost of imports and as export demand slows in a cautionary note about the economic outlook, a Reuters poll showed. The trade deficit, which is forecast to swell to 2.5 trillion yen ($24.5 billion), would provide further evidence that a weak yen alone cannot boost exports as many Japanese manufacturers have shifted factories overseas. A record trade deficit would also suggest that overseas demand may not be strong enough to offset the negative impact of a scheduled sales tax increase in April, meaning policy makers may have to consider other ways to stimulate the economy. "The trade deficit may not expand further, but Japan’s terms of trade are likely to continue to deteriorate, so you can’t say things will start to get better," economists at Mitsubishi UFJ Morgan […]

Posted On : Published By : Tom Whipple