http://www.levy.org/pubs/rpt_19_3.pdf
Levy Recap
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Daily Archives: August 31, 2009 @ 4:13 pm (Monday)
Chicago Purchasing Managers’ Index Increased to 50 in August
Just enough to keep additional fiscal measures off the table while unemployment remains around 10%.
Chicago Purchasing Managers’ Index Increased to 50 in August
By Courtney Schlisserman
Aug. 31 (Bloomberg) — A measure of U.S. business activity rose more than forecast in August, adding to signs that the economy may be entering a recovery.
The Institute for Supply Management-Chicago Inc. said today its businessbarometer increased to 50, the highest level since September, from 43.4 in July. Readings below 50 signal a contraction.
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India’s Growth Accelerates for First Time Since 2007
India the next engine of growth where deficit spending remained high and the recession was largely averted?
All they need to do is let themselves become a large net importer.
India’s Growth Accelerates for First Time Since 2007
By Cherian Thomas
Aug. 31 (Bloomberg) — India’s economic growth accelerated
for the first time since 2007, indicating the global recession’s
impact on Asia’s third-largest economy is waning.
Gross domestic product expanded 6.1 percent last quarter
from a year earlier after a 5.8 percent rise in the previous
quarter, the Central Statistical Organisation said in New Delhi
today. Economists forecast a 6.2 percent gain.
India joins China, Japan and Indonesia in rebounding as
Asian economies benefits from more than $950 billion of stimulus
spending and lower borrowing costs. India’s recovery may stall
as drought threatens to reduce harvests and spur food inflation,
making it harder for the central bank to judge when to raise
interest rates.
“The weak monsoon has complicated the situation for the
central bank,†said Saugata Bhattacharya, an economist at Axis
Bank Ltd. in Mumbai. “Poor rains will hurt growth and stoke
inflationary pressures as well.â€
India’s benchmark Sensitive stock index maintained its
declines today, dropping 1 percent to 15755.33 in Mumbai at
11:12 a.m. local time. The yield on the key 7-year government
bond held at a nine-month high of 7.43 percent, while the rupee
was little changed at 48.86 per dollar.
Before the rains turned scanty, the Reserve Bank of India
on July 28 forecast the economy would grow 6 percent “with an
upward bias†in the year to March 31, the weakest pace since
2003. It also raised its inflation forecast to 5 percent from 4
percent by the end of the financial year. The key wholesale
price inflation index fell 0.95 percent in the week to Aug. 15.
‘Recovery Impulses’
The central bank’s Aug. 27 annual report said withdrawing
the cheap money available in the economy would heighten the risk
of weakening “recovery impulses,†while sustaining inexpensive
credit for too long “can only increase inflation in the
future.â€
As the global recession hit India, the central bank
injected about 5.6 trillion rupees ($115 billion) into the
economy, which together with government fiscal stimulus amounts
to more than 12 percent of GDP.
China’s economic growth accelerated to 7.9 percent last
quarter from 6.1 percent in the previous three months, aided by
a 4 trillion yuan ($585 billion) stimulus package and lower
borrowing costs. China and India are the world’s two fastest
growing major economies.
Interest Rates
The Reserve Bank of India kept its benchmark reverse
repurchase rate unchanged at 3.25 percent in its last monetary
policy statement on July 28 and signaled an end to its deepest
round of interest-rate cuts on concern that inflation will
“creep up†from October. The next policy meeting is scheduled
for Oct. 27.
Manufacturing in India rebounded to 3.4 percent growth in
the quarter ended June 30 after shrinking 1.4 percent in the
previous three months. Mining rose 7.9 percent compared with 1.6
percent while electricity growth almost doubled to 6.2 percent
during the period, today’s statement said.
India’s move to a higher growth trajectory is on course,
Ashok Chawla, the top bureaucrat in the finance ministry, told
reporters in Mumbai.
Drought or drought-like conditions has been declared in 278
districts in India, or 44 percent of the nation’s total, as
rainfall has been 25 percent below average so far in the four-
month monsoon season that started June 1, the farm ministry said
Aug. 27.
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In case you thought business economists understand the monetary system
Not to mention these CNBC headlines today:
No Need for 2nd US Fiscal Stimulus Package: Survey
August 31 (CNBC) — The U.S. economy does not need a second fiscal stimulus package, instead the government should cut spending over the next two years, according to a survey of business economists released on Monday.
Fed’s Profit from Crisis Loans is $14 Bn
Economists Are Split on Inflation
By Sara Murray
August 31 (WSJ) — Business economists are split on whether the Federal Reserve’s massive infusion of credit into the economy will lead to inflation in the next couple of years.
Half of 266 members of the National Association for Business Economics surveyed in August said the Fed’s decisions to increase the money supply won’t lead to inflation in the next few years, the NABE said Monday. Some 41% disagreed, though, citing “lagged effects of policies now in effect,” “monetization of the debt” and “ineffective exit strategy” as their primary concerns.
Recent debate over the Fed’s strategy for reducing its large holdings of government bonds and mortgage-backed securities has centered on timing. If the Fed waits too long to bring the programs to a close, the economy runs the risk of inflation. But if it attempts to wind them down too soon, while the economy is still weak, it could hinder the recovery.
As for U.S. fiscal policy, 35% said it was “about right,” the highest percentage to say so since March 2008. But 50% of the economists surveyed said fiscal policy was too stimulative.
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NYC 2006 acquisition of Stuyvesant Town
Thanks, looks like we could use a full payroll tax holiday and a lot of per capita revenue sharing ASAP.
Pretty much as expected, GDP muddling through around flat or modestly positive, supported by the automatic stabilizers and a bit of proactive fiscal support dribbling in, but not enough to keep unemployment from rising as GDP gains lag productivity gains.
This can be ok for financial markets and equities, which are now well off the bottom, but depressing for most of the voters.
NYC is dynamic and seems to adjust relatively quickly. Finances are getting reorganized, and prices are adjusting to current market conditions, as life there moves on and doesn’t look back.
Tishman Speyer’s 2006 acquisition of Stuyvesant Town for $5.4 billion apparently is about to turn terminally sour. The “biggest deal for a single American property in modern times” which never managed to be profitable from day one, is on the verge of completely exhausting reserve accounts tied to $3 billion of securitized accounts.The premise – take the 11,227 rent-stabilized u,nits apartment complex and convert them to market-rate. Alas, the timing could not have been worse due to an implosion in the NY rent market, coupled with legal difficulties – to date only 4,350 of the units have been converted to market rate, while the remaining rent-controlled units will likely increase in number due to a recent court ruling.
According to RealPoint the original reserve fund which had a balance of $650 million in 2007 when Stuy Town’s debt was first securitized is down to a meager $49.7 million. The origianal reserve fund set consisted of a $190 million general reserve as well as a $60 million replacement reserve, both of which have been depleted, as well as a $400 debt-shortfall service fund, which has now declined to just over 10% of its initial balance.
The reserve fund was drawn down by $7 million month to date, versus $13.3 million in July and $19.6 million in June, with an average decline in the reserve fund of $11.3 million per month. At this rate Stuy Town’s reserves will be completely wiped out in four months, sometime in December.
To demonstrate what a colossal failure Tishman and Blackrock’s assumptions have been from the very beginning, the property has a $23.8 million monthly debt service, while on the revenue side, according to first quarter data, the property generates $136.5 million in annual cash flow, or $11.4 million monthly, a $12.4 million monthly shortfall (a cap rate of about + infinity).
And to demonstrate just how bad (and getting progressively worse) real estate in New York is, midtown’s Dream Hotel, owners Hampshire Group have notified special servicer LNR Group, that it wold not make any more payments on the $100 million loan against the property. According to CREDirect, in 2008 the property’s cash flow dropped 11 percent to $7.8 million as occupancy fell 3% to 84%, with a DSCR drop from 1.41x in 2007 to 1.26x. Things have since deteriorated, not just for the now defaulted Dream, but for a vast majority of all other New York hotels who have been struggling with declining bookings and room rates.
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Japan
Nothing hopeful here:
The DPJ won power for the first time yesterday on a pledge to support households battered by two decades of economic stagnation. Hatoyama has also committed to avoid increasing government bond issuance, leaving his main initiative as a redistribution of the former Liberal Democratic Party government’s stimulus efforts, which focused on public works.
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