Category Archives: Uncategorized

AFP: Burning up more food for fuel

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The monetary system will burn up the world’s food supply for fuel until the marginal individual about to starve to death has enough political influence to stop the process.

I’m pretty sure that’s not the millionth one to die of starvation. And probably not the ten millionth.

As more and more acreage goes to biofuels, expect the real price of food to continue to rise.

Lula and Indonesian president pledge biofuel cooperation

by Zulhefi

(AFP) Brazilian President Luiz Inacio Lula da Silva and his Indonesian counterpart pledged cooperation on biofuels during talks here Saturday in a bid to take advantage of surging oil prices.

Lula and President Susilo Bambang Yudhoyono signed off on an agreement to share knowledge on biofuel technology after meeting at Jakarta’s presidential palace.

The Brazilian leader called spiralling global commodity prices a “great opportunity” for developing countries such as Indonesia and Brazil, both of which are major producers of biofuel.

“The developing countries that have the characteristics that Indonesia and Brazil have should not analyse this crisis as only a problem. We have to see this moment as a great opportunity,” Lula said.

“We have land, we have sunlight, we have water resources, we have technology and, thanks to God, the poor of the world have started to eat more, three meals a day, so they will demand more food production.”

The two leaders signed memoranda of understanding that would see the countries exchange experts and students to share knowledge on biofuels. Yudhoyono will also make an official visit to Brazil in November.

“In the energy sector, both countries are cooperating in the field of alternative energy. Brazil has succeeded in developing bio-ethanol and Indonesia can learn from Brazil to develop bio-ethanol,” Yudhoyono said.


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Business Weekly: Salary offers move higher

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Overall starting salaries for 2008 graduates post a 7.1% increase, according to a quarterly report, in spite of the slowdown

by Sara Hennessey

Despite the weak state of the economy and the large number of businesses being forced to make cuts and lay off employees, it seems recent hires can expect to maintain competitive starting salaries, according to a recent 2008 undergraduate study.

The latest quarterly report of salary offers to grads, released by the National Association of Colleges & Employers (NACE) on July 2, shows an overall increase of 7.1% in starting salaries in all majors, compared to a year ago. Increases for business students lagged the overall market, however, posting only a 4% increase.

NACE National Employment Manager Andrea Koncz says the results were surprising because the group’s spring report (BusinessWeek.com, 4/17/08) seemed to hint salary increases would be flattening out due to the economic slowdown. “However, the current report shows that salaries are in fact still rising,” Koncz says.

For business grads, the average salary offers varied by specialty. Business administration and management grads fared especially well, posting a 5.1% increase over the previous year. Marketing grads saw an equally strong increase — 4.7% over last year. Economics majors saw a 4.2% increase, according to the survey, and finance grads saw a 2.8% increase. While accounting grads reported a modest 2.9% increase in their average offer, it’s a gain compared with NACE’s spring report, which found no year-over-year salary increase for accounting majors.

Hiring Down?
As for the hiring outlook, college employment experts remained cautious that the economic downturn will reduce the number of job offers for undergrads. NACE’s Koncz says her organization will begin asking companies about their hiring plans in late summer. In the meantime, she says initial indications are that companies may be cutting back on new hires. “Whereas last year (companies) were saying they would be hiring 16% more graduates, this year they’re anticipating hiring only 8% more,” Koncz says.

Linda Scales, director of career services at the University of San Diego, says that while alums have reported declining job offers, she hasn’t noticed the same trend for recent grads. Scales calls herself “cautiously optimistic” and says she hasn’t noticed companies holding back in offering jobs to recent grads.

“So far, there’s been no downturn,” she says, “and we keep wondering if it’s coming.” Scales adds that companies may have learned from the last recession and recognize that “there’s a continued need for new blood and new hires.”

Tammie King, director of the career management center at Texas Tech University’s Rawls College of Business, agrees that companies are going to continue to hire, albeit cautiously. “Companies that would normally hire, say, eight entry-level employees are hiring only four,” she says.

Whatever the hiring levels, Jeannette Frett, assistant dean and director of career management for the MBA program at Georgetown’s McDonough School of Business, says starting salaries are likely to continue to rise. “It’s really about supply and demand,” Frett says. “Companies are looking to do more with less, and those with the right talent and the right skills will be able to maintain a competitive salary.”

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Bloomberg: Poole jumps in

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The Fed’s mission is to not let a relative value story turn into an inflation story.

When food/fuel prices rise, consumers have less to spend on other things; so, they should moderate to keep it all a relative value story.

But even though core CPI hasn’t gone up as fast as headline (YET), it has gone up to 2.3%. Rather than stay the same or go down; so, the relative value story is slowing turning into an inflation story.

And my guess is that most of Congress isn’t going to like the idea that the Fed’s job is to keep wages ‘behaving’ (suppressed) when food/fuel goes up, as Poole states below:

Poole Says Fed Needs to Help Prevent Wage Increase

by Kathleen Hays and Timothy R. Homan

(Bloomberg) The Federal Reserve needs to prevent the public’s expectation that inflation will accelerate from spurring demands for higher wages, William Poole, former St. Louis Fed President, said today.

“You want to keep wages behaving,” Poole said in an interview on Bloomberg Television. Once the public’s anticipation of rising prices begins to stoke demands for higher wages, “the jig is up” and inflation becomes harder to eradicate.

The public’s outlook for annual inflation over five years stood at 3.4 percent in June, up from 2.9 percent the same month last year, according to the Reuters/University of Michigan Survey.

Comments by Fed Chairman Ben S. Bernanke and other policy makers this month have compelled traders to increase bets the central bank will start to lift the main lending rate later this year to keep rising food and energy costs from influencing labor agreements and other prices.

“We should be moving sooner rather than later,” Poole said, referring to an interest-rate increase.


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DXY and exports

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2008-06-03 Dollar Index vs US Exports

Dollar Index vs US Exports

Right – seems to me the dollar will fall until it’s at a level where the trade gap goes to about zero. So even though exports are way up and the trade gap down, there could be a lot more to go.

A nation can only run a trade deficit to the extent non-residents (governments and private sector agents) desire to net accumulate its financial assets (or buy its domestic assets such as real estate).

Seems to me Paulson, Bush, and Bernanke have successfully kept the world’s CBs, monetary authorities, and portfolio managers from actively accumulating USD financial assets.

Doesn’t seem like jawboning is going to alter foreign ‘savings desires’ apart from short term trading responses.


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Reuters: Redbook sales

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TABLE-US chain store sales rose 1.4 pct last wk-Redbook

Muddling through at modestly positive numbers.

(Reuters) Redbook Research on Tuesday released the following seasonally adjusted weekly data on U.S. chain store sales:

Year-over-year: Week (w/e 5/3/08 vs year ago)         1.4 pct
Year-over-year:Month (April 2008 vs April 2007)       1.6 pct
Month-over-month: (April 2008 vs March 2008)         -1.6 pct

The Johnson Redbook Retail Sales Index is a sales-weighted index of year-over-year same-store sales growth in a sample of large U.S. general merchandise retailers representing about 9,000 stores.

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2008-04-18 JN Highlights

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doesn’t look too bad?

Highlights:

Consumer Sentiment Improves For 1st Time In 6 Months
Industrial Production Index Rose To Record 110.2 In February
March Department Store Sales Fall 1.2% On Year
Supply Of Tokyo Office Space To Drop 40%: Survey
BOJ Cuts Assessment On 8 Of 9 Regional Economies
Shirakawa Keeps Weak Economic Outlook, No Hint On Rate Action
Govt Holds Economic Assessment, Says Japan’s Recovery ‘Pausing’
BOJ Rate Cut Speculation Losing Momentum In Money Market
Labor Shortage Pushed Workers 65 Or Older Above 2mn In ’07
Japan On 11% Economic Growth Pace For ’08 In Dollar Terms
Forex: Dollar Firm At Mid-102 Yen Level On Eased U.S. Financial Turmoil
Stocks: Weaker Yen Lifts Nikkei For 4th Straight Day
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AP: Budget deficit up due to spending increases

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While revenue growth is slowing, it is still positive.

Might be the suspected 2007 spending that was moved forward to 2008 that is helping spending increase so much and support GDP into the election. And the new fiscal package kicks in soon as well.

Government spending, this year, should top $3 trillion – still a modest percent of GDP by world standards.

Federal budget deficit at all-time high for first half

by Martin Crutsinger

The federal deficit through the first half of this budget year is at an all-time high, underscoring the pressure the budget is coming under as the overall economy slumps.

The Treasury Department reported Thursday that the deficit through the first six months of the budget year totaled $311.4 billion (euro196.2 billion), up 20.5 percent from the same period a year ago. That was the largest deficit for the first half of a budget year on record, surpassing the old six-month mark of $302 billion set in 2006.

The Bush administration, when it sent its budget proposal to Congress in February, estimated that the deficit for the whole year will total $410 billion (euro258.3 billion), putting it very close to the all-time high in dollar terms of $413 billion (euro260.2 billion).

However, private economists are forecasting a much bigger deficit, reflecting the U.S.’s current economic problems and a $168 billion (euro105.83 billion) stimulus package that Congress has passed in an effort to jump-start growth. Rebate checks will be mailed to 130 million households starting next month in an effort to boost consumer spending and make sure that any downturn is short-lived and mild.

The Treasury’s monthly budget report showed that revenues for the first six months of the budget year, which began on Oct. 1, totaled $1.146 trillion (euro720 billion), up 2.2 percent from last year. However, government spending was up by a much faster 5.7 percent, rising to $1.457 trillion (euro920 billion). Both the spending and the revenues were records for the first six months of a budget year.

The difference between revenues and spending left a deficit of $311.4 billion (euro196 billion), compared to a deficit for the same period in the 2007 budget year of $258.4 billion.

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Bloomberg: Exports booming

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(Yes, I know, just anecdotal.)

Honeywell Wins $23 Billion Jet Award, Its Biggest, From Embraer

by Courtney Dentch

(Bloomberg) Honeywell International Inc. won its biggest business jet engine order, beating two rivals for a $23 billion contract from Empresa Brasileira de Aeronautica SA.

Honeywell will build engines for two new Embraer planes over the next decade, the companies said after the close of U.S. stock markets yesterday. The contract is the Brazilian company’s first engine order with Morris Township, New Jersey-based Honeywell and includes repair parts and services.

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Bloomberg: Egypt’s Soaring Food Prices Bring Bread Lines, Deficit Pressure

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This is destabilizing and escalating.

Egypt’s Soaring Food Prices Bring Bread Lines, Deficit Pressure

By Abeer Allam and Daniel Williams

 

(Bloomberg) Atyat Musa Bakri, a Cairo mother of nine children, was waiting in line to buy subsidized bread for the third time in one day.

“The more cheap bread I can get, the better,” she said as a crowd of about 30 women jostled at a bakery in the Boulaq district. “The price of everything is going up and up, so I save on this. I spend all morning buying cheap bread.”

Bread is just about the only affordable food these days in Egypt, where rising commodity and energy prices have sent unsubsidized food prices up 20 percent or more in the past year. The rising cost of subsidies is damaging the government’s efforts to reduce its budget deficit.

About 500 political activists and textile workers at the Mahallah El-Kobra factory in northern Egypt were arrested and dozens were wounded in clashes with police on April 6 as the government clamped down on a one-day national strike to protest food inflation. In Mahallah itself, demonstrators threw stones at police phalanxes and set fire to trash.

The government-owned Egyptian Gazette newspaper said April 1 that seven people have died since the beginning of the year in brawls in bread lines.

Egyptian inflation accelerated to 12.1 percent in February, the fastest pace in 11 months, the Cairo-based Central Agency for Public Mobilization and Statistics reported March 19. Food and beverage prices increased 16.8 percent, while non-subsidized bread and grain prices jumped 27 percent. Dairy products and eggs rose 20.1 percent.

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2008-03-31 JN Highlights

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Japan data volatile as usual, but a few interesting bits that are worth a quick look:

Industrial Output Falls 1.2% In Feb

(Dow Jones) Japanese industrial output declined in February, partly due to weaker overseas demand for electronic parts and devices, increasing worries that a downturn exports will slow the economy.

Separate data, meanwhile, showed that Japanese workers’ salaries rose for the second consecutive month. But the rise was mostly canceled out by higher consumer prices, so the higher wages are unlikely to give the broader economy much support.

Higher nominal wages probably represents elevated ‘inflation expectations’ to their mainstream economists.

Industrial output fell 1.2% from the previous month after adjustment for seasonal factors, according to data released Monday by the Ministry of Economy, Trade and Industry.

But better than expected:

The result was better than the 2.2% decline expected by economists surveyed by Dow Jones and Nikkei. The ministry said manufacturers expect their output to rise 2.0% in March, and to decline 1.0% in April.

Lower domestic production for pulp, paper and paper products, which was off 2.7% on month, also pushed overall output down.

Production issues?

Wages up for 2nd straight month
Meanwhile, Japanese workers’ average cash earnings rose for the second straight month in February, growing 1.3% on year to Y274,521, preliminary data from the Labor Ministry showed Monday.

Behind the rise was a 2.4% on-year increase in the number of full-time employees, the government said.

The rise in salaries and full-time employees “reflects businesses’ increasing efforts to secure against mid- to long-term labor shortages” and this could continue for a while, Yamamoto said.

Labor shortages and rising wages? That’s a change from the last fifteen years.

In January, wages climbed a revised 1.6% on year, following a 1.7% fall in December.

Still, “amid current price rises, it may take some time until salary rises help push up private consumption,” Yamamoto said.

Last Friday the government released data showing that the nationwide core consumer price index rose 1.0% on year, the biggest increase in almost a decade.

Average monthly wages excluding special allowances rose 0.9% on year to Y250,347, and average overtime pay also increased 2.6% to Y20,095. Special allowances jumped 28.1% to Y4,079.

Feb Construction Orders Up 18.4% On Year

Maybe they got the permit thing sort of straightened out? If so, most likely a large backlog to start working off.

(Dow Jones) Total construction orders received by Japan’s 50 leading domestic contractors rose 18.4% on year to Y1.221 trillion in February, the Ministry of Land, Infrastructure and Transport said Monday.

Orders fell 5.7% in January and rose 4.7% in December.

Orders from the public sector rose 45.9% to Y337.1 billion. Meanwhile, private sector orders gained 8.9% to Y776.8 billion.

Overseas construction orders rose 51.1% to Y59.1 billion, the ministry said.

Feb Housing Starts Fall 5.0% On Year

(Dow Jones) Japan’s housing starts fell 5.0% in February from a year earlier to 82,962 units, the Ministry of Land, Infrastructure and Transport said Monday.

The decline was larger than the 1.0% drop forecast by a Dow Jones/Nikkei poll of economists.

That was the eighth consecutive month of falls after orders dropped 5.7% in January and 19.2% in December.

Annualized housing starts stood at 1.15 million units.

That’s more than the US with maybe half the population.

Housing starts for individual homes in January fell 2.1% on year to 22,494 units, while rental housing fell 3.1% to 33,063 units.

Multiunit dwellings, meanwhile, declined 9.7% to 26,757 units, including condominiums.

And the drop is part of the permit problem?

The results suggest the fallout from a legal change that created bottlenecks for housing permits is gradually easing. Economists said, however, that a sudden recovery remains unlikely with corporate and household sentiment at multiyear lows.

Oil Imports Rise 8.2% In Feb, Up For 5th Straight Month

Demand remains high at current prices?

(Kyodo) Japan’s crude oil imports in February rose 8.2 percent from a year before to 127.18 million barrels, marking the fifth straight month of expansion, the Natural Resources and Energy Agency said Monday.

Imports from the Middle East accounted for 86.7 percent of the total, down 1.4 percentage points from a year before, the agency, under the Ministry of Economy, Trade and Industry, said in a preliminary report.

By country, Saudi Arabia remained the biggest supplier to Japan, exporting 35.98 million barrels, up 4.2 percent.

The United Arab Emirates stayed second with shipments rising 3.9 percent to 32.65 million barrels.

Iran was in third, exporting 16.48 million barrels, up 28.6 percent, followed by Qatar’s 9.56 million barrels, up 5.3 percent, and Kuwait’s 9.44 million barrels, up 5.7 percent.

Domestic output of petroleum products such as gasoline, naphtha and jet fuel in February rose 5.8 percent to 18.32 million kiloliters for the fifth straight month of increase. One kl equals 6.29 barrels.

Sales of such products in Japan increased 4.2 percent to 20.12 million kl, the second straight month of growth, the agency said.

Number Of Full-Time Workers Posts Highest Rise In 16 Years

(Kyodo) The number of full-time workers at firms with at least five employees in Japan rose 2.4 percent in February from a year earlier to 33.02 million, marking the highest pace of expansion in almost 16 years, the government said Monday.

The number of such workers, including permanent and nonpermanent jobholders, increased by more than 700,000 from a year before, the Ministry of Health, Labor and Welfare said in a preliminary report.

”Many companies are increasingly converting part-time workers to full-time workers, which may be behind” the highest pace of increase since June 1992, a ministry official said.

In contrast, the number of part-time workers at such firms increased by a mere 0.9 percent in February, with the pace of increase being smaller than that of full-time workers for the first time in 16 months, the report said.

The increase in full-time workers is attributable partly to the revised part-time labor law to be implemented Tuesday, which requires firms to take measures to promote shifting of part-timers into full-time employees on the regular payroll, analysts said.

Many companies have already been taking such steps ahead of the implementation of the law, they said.

Also, some big firms have been accelerating efforts to convert part-time and temporary workers into full-time workers amid the continuing expansion of the Japanese economy.

Such development is in contrast with the employment policy of large companies after the bursting of the nation’s asset-inflated economy in the early 1990s, in which they had to trim the number of full-time regular workers and increase the number of part-time workers in order to cut personnel costs.

Large companies including Takashimaya Co., Toyota Motor Corp. and Sumitomo Mitsui Banking Corp. have been increasing the number of full-time workers in a shift from past policy.

The ministry also said in the same report that average winter bonuses at the end of 2007 per regular employee at firms with at least five employees fell 2.8 percent from a year earlier to 417,507 yen for the first decline in four years.

The decline was partly attributable to lingering uncertainty over the Japanese economic outlook, the ministry official said.

Temporary Fall In Road Tax Not Seen Harming Economy

(Nikkei) If the rates on the gasoline and other road-related taxes are lowered from April, Japan’s economic growth may suffer, but the impact would be limited if lower rates are in place for only a few months, according to an estimate by Nikkei Digital Media Inc.

However, reduced taxes for a full year could cause economic growth to decline by up to 0.3 percentage point due to a cutback in road construction.

The firm’s Nikkei Economic Electronic Databank System (NEEDS) service projects that if road-related taxes become lighter, tax revenues for the central and local governments would shrink by a total of 2.6 trillion yen, while disposable income at households would increase by 1.6 trillion yen and corporate revenue would jump by 1 trillion yen. Other factors expected to affect actual economic growth include a reduction in public spending on road construction.

The tax rates are set to fall as a result of political deadlock over a bill to extend the provisional surcharge imposed on gasoline and other items.

The government and ruling parties aim to bring the lowered rates back to the current levels when the ruling coalition-controlled lower house gains the right to vote for the move in late April. If the higher rates are reimposed from the July-September quarter, and a 2.6 trillion yen reduction in public works spending is averted, fiscal 2008 economic growth would expand by 0.1 point. Under such a scenario, the impact from the tax rate change would be limited, with consumer spending estimated to grow by 0.1 point thanks to lowered gasoline prices, among other factors, and corporate capital investment is seen increasing by 0.2 point.

If the road-related taxes remain lower throughout fiscal 2008 and public works spending remains intact, financed by increased issuance of government bonds, economic growth would be boosted by 0.2 point, with consumption and corporate capital spending estimated to grow by 0.3 point and 0.4 point, respectively.

On the other hand, if the tax rates stay lower for the entire year and public spending is reduced, that would likely have a negative impact on economic growth. A 2.6 trillion yen reduction in public investment would hamper GDP growth by 0.3 point, and a 1.3 trillion yen cutback would push growth down by 0.1 point, with the positive effects of increases in consumer spending and corporate capital investment expected to be more than offset by a decrease in public works spending.

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