Daily Archives: August 14, 2009 @ 3:44 pm (Friday)

Brazil Lula Vetoes Spending Limits for 2010 Budget, Estado Says

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Brazil seems to be catching on?

Brazil Lula Vetoes Spending Limits for 2010 Budget, Estado Says

August 14 (Bloomberg) — Brazil’s President Luiz Inacio Lula da Silva vetoed 20 items in the guidelines for next year’s budget that sought to curtail government spending on public
works, O Estado de S. Paulo said.

Lula also vetoed a measure that would have limited the government’s ability to increase investment under its so-called Growth Acceleration Program, which is comprised of infrastructure spending on ports, roads and energy projects, the Sao Paulo-based newspaper reported, citing the official gazette.


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CPI/IP/Michigan

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Yes, there’s clearly an ‘unidentified demand leakage’ to have all this deficit spending with demand only holding at very low levels.

I keep coming back to the depressing effects of low interest rates and a large Fed portfolio shifting interest income from savers to govt., banks, and corporate borrowers with consumers who borrow getting very little benefit as incomes at best stagnate.

As Bernanke stated in his 2004 paper, the fiscal drag from lower interest rates can be offset by a tax cut or fed spending increase.


Karim writes:

Biggest news this morning was surprising drop in Michigan survey. Despite equity rally, lower gas prices and labor market becoming ‘less bad’, Michigan survey drops 2.8pts to lowest level since March. Consumer still nowhere to be found in current ‘recovery’.

  • Michigan Survey falls from 66 to 63.2
  • 1y Fwd Inflation expex drop from 3.0 to 2.9; 5-10yr fwd from 2.9 to 2.8
  • IP for July up 0.5%; aided by auto production; ex-autos -0.1%
  • CPI unchanged m/m for both headline and core; headline -2.1% y/y and core +1.5%
  • OER (Unch) and lodging away from home (-2.1%) offset apparel (0.6%), vehicles (0.3%) and tobacco (2.2%).
  • Look for quirks in vehicle pricing to resolve in coming months and help drive core below 1% by yr-end.


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Hong Kong recovery ‘made in China’

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Yes, this further supports the notion that some of the world economic improvement was due indirectly to ‘one time’ inventory building and additions to capacity in China, including the eurozone, where exports nudged France and Germany to positive GDP reports.

Hong Kong Climbs Out of Recession as Trade Improves

August 14 (Bloomberg) — Hong Kong climbed out of a yearlong recession as trade improved, adding to signs that the global economy is recovering.

Gross domestic product rose a seasonally adjusted 3.3 percent in the second quarter from the previous three months, after dropping 4.3 percent in the first quarter, the government
said today. The median estimate in a Bloomberg News survey of seven economists was for a 1.2 percent gain.

The Hang Seng Index has gained 84 percent from this year’s low in March as China’s record lending and 4 trillion yuan ($585 billion) stimulus package help the city, which is a hub for
trade and finance. Hong Kong’s government raised its forecast for this year’s GDP to a contraction of between 3.5 percent and 4.5 percent today from a previous estimate of a 5.5 percent to
6.5 percent decline.

“This rebound has largely been ‘Made in China,’” said Brian Jackson, a senior strategist at Royal Bank of Canada in Hong Kong. “Exports to the mainland have picked up, while easy
liquidity conditions there have contributed to recent gains in Hong Kong’s asset prices, providing a strong boost to Hong Kong consumers.”

The economy shrank 3.8 percent in the second quarter from a year earlier, after a 7.8 percent drop in the previous three months. The first-quarter contraction from the previous three
months was the worst since data began in 1990.

Singapore Retail Sales Post Smaller Drop as Recession Recedes

By Stephanie Phang

August 14 (Bloomberg) — Singapore’s retail sales fell the least in three months in June as the nation emerged from its worst recession since independence 44 years ago and an annual island-wide sale supported spending.

The retail sales index dropped 8.2 percent from a year earlier after sliding a revised 10.4 percent in May, the Statistics Department said today. The median estimate of 11 economists surveyed by Bloomberg News was for a 9.2 percent decline. Adjusted for seasonal factors, sales rose 2.3 percent from May.

Singapore’s economy expanded for the first time in a year last quarter as manufacturing and services improved. The government raised its 2009 export forecast this week as policy makers around the world predict the worst of the global recession is past after pledging about $2 trillion in stimulus measures and cutting interest rates.

“We should generally expect gradual improvement in retail sales from hereon,” said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. He cited “firmer signs of a turnaround in labor markets, and perhaps some positive spillovers on confidence from the buoyant property and equity markets.”

Singapore’s benchmark stock index has climbed 49 percent this year and home sales by developers including Frasers Centrepoint Ltd. rose 9.1 percent in June from May, according to the Urban Redevelopment Authority.

Singapore employers fired fewer workers last quarter, cutting 5,500 jobs compared with 12,760 in the first three months of the year, the Ministry of Manpower said July 31. The seasonally adjusted unemployment rate held at 3.3 percent.


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China steel expansion halted

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Yes, this further supports the notion that some of the world economic improvement was due indirectly to ‘one time’ inventory building and additions to capacity in China, including the eurozone, where exports nudged France and Germany to positive GDP reports.

China stops expansion projects in steel industry for three years

August 13 (China Daily) — China’s Ministry of Industry and Information Technology (MIIT) Thursday announced a three-year moratorium on approvals of new expansion-related proposals in the iron and steel industry, as the government pledges to eliminate outdated capacity.

MIIT Minister Li Yizhong said overcapacity in the steel industry was “the most evident” of all the industrial sectors, with this year’s estimated total output capacity at 660 million tons, compared with estimated demand at 470 million tons.

He called for steel mills to stop expansions for the next three years. Projects with total capacity of about 58 million tons already under construction would continue, he said.

“If the trend goes down like this, the steel industry will come to a dead end,” he said.

Another move to step up elimination of outdated capacity was consolidation of the industry, he said. Steel mills in Hebei province would reduce their overall capacity from 120 million tons to 80 million tons annually over the next two to three years.

He said the ministry was drafting steel industry consolidation guidelines aimed at reforming the world’s largest market. He gave no time for their publication.

The Shanghai Securities News reported in late July that China would release the guidelines in September.

The ministry will issue another guideline on energy conservation and emissions reductions in key sectors, including the chemical and steel sectors in the second half of this year.

The country’s steel mills produced 50.68 million tons of steel in July, up 12.69 percent year on year.


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French Non-Farm Payrolls Fall Less Than Expected

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Proactive fiscal measures, exports, and very ugly automatic stabilizers seem to have slowed the decline in employment, coupled with productivity increases that are supporting output with lower levels of employment.

French Non-Farm Payrolls Fall Less Than Expected as Slump Eases

August 14 (Bloomberg) — French companies cut fewer jobs than expected in the second quarter as the euro area’s second-largest economy exited its worst recession since World War II.

Payrolls, excluding government employees, farm workers and the self-employed, dropped by 74,100, or 0.5 percent, to 15.65 million, the Paris-based Labor Ministry said today. That was less than the 0.8 percent drop forecast by three economists in a Bloomberg News survey, and compared with a loss of 168,300 jobs in the first quarter.

“The current weakness of domestic demand and excess production capacity account for both the weakness in companies’

pricing power and the continued deterioration of the labor market,” said Caroline Newhouse-Cohen, an economist at BNP Paribas, in a report yesterday. “A lot of uncertainties are still weighing on the French economy.”

The French economy returned to growth in the second quarter as exports rose and 30 billion euros ($42.8 billion) in government spending and tax cuts introduced by President Nicolas Sarkozy helped consumer spending. Companies cut investment at a slower pace than in the two previous quarters.

Rising joblessness in France is curbing government revenue and boosting welfare spending, pushing up the budget deficit.

The budget shortfall will soar to 8.3 percent of gross domestic product next year, more than the 7 percent to 7.5 percent the government expects, according to the Organization for Economic Cooperation and Development.

France’s jobless rate hit a three-year high of 9.4 percent in June, the European Union statistics office said on July 31.

On Aug. 11, Adecco SA, the world’s largest supplier of temporary workers, reported a surprise second-quarter loss and said it will deepen cost cuts as sales decline because fewer companies are hiring. The company, based in Zurich, cut about 2,000 jobs in the quarter and told workers in France that an additional 350 jobs will be cut and 100 branches merged in 2009.

The number of temporary workers in France fell 3.7 percent in the second quarter from the first and 32.1 percent from a year earlier to 419,600, the Labor Ministry said. French monthly wages rose 0.4 percent in the second quarter from the first, when they climbed 0.8 percent, the Labor Ministry also said today. From a year ago, wages rose 2.2 percent.


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