Aug. 12 (Bloomberg) -- The U.S. trade deficit in June widened less than forecast, reflecting a second consecutive gain in exports as economies throughout the world picked up. A jump in oil prices also boosted imports.
The gap climbed 4 percent to $27 billion from $26 in May that was the lowest level in almost a decade, the Commerce Department said today in Washington. Overseas demand for American- made goods, such as semiconductors and aircraft engines, pushed exports up 2 percent, almost matching the 2.3 percent increase in imports.
The increase in sales signals the worst global slump in the post-World War II era is coming to an end, helping the U.S. economy pull out of the recession even as consumer spending is slow to recover. Federal Reserve policy makers, wrapping up a two- day meeting today, are expected to commit to keeping rates low to spur growth.
``Growth in the rest of the world is picking up,'' Jay Bryson, global economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. ``Across Asia, we're seeing a pickup and we should see export growth.''
The trade gap was projected to widen to $28.7 billion, according to the median of 70 forecasts in a Bloomberg News survey of economists. Deficit projections ranged from $31 billion to $25.5 billion.
Exports climbed to $125.8 billion from $123.4 billion in May. Sales of chemicals, fuel oil and foods, in addition to capital equipment, climbed.
Oil Prices
Imports increased to $152.8 billion from $149.3 billion the prior month. The price of imported crude oil jumped to $59.17 a barrel, the highest level since November, from $51.21. Americans also bought more foreign-made automobiles and parts and computers. Demand for consumer goods, such as toys, televisions and clothing, slumped.
Demand for auto parts and industrial supplies by companies such as General Motors Co. and Toyota Motor Corp. ahead of the annual retooling of plants for the new model year may have boosted imports in June, according to Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado.
The gain in auto imports was probably even bigger in July when plants reopened and the federal ``cash-for-clunkers'' program got under way, said Englund. Car sales last month climbed to the highest level since September.
After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit shrank to $35.9 billion, the smallest since December 1999.
Help from Trade
The shrinking of the trade shortfall in the first half of the year helped limit the severity of the worst recession since the 1930s. Economists surveyed by Bloomberg this month forecast the economy will grow at a 2.1 percent pace in the second half of 2009.
Exports are likely to keep expanding as the global recession eases. China may grow 7.5 percent this year, the International Monetary Fund said July 8 in its latest forecast. Demand for American-made goods increased in Mexico, the European Union, Canada and China.
The trade gap with China increased to $18.4 billion from $17.5 billion in the prior month.
Some companies are already seeing gains overseas. Caterpillar Inc., the largest producer of earthmoving equipment, posted second-quarter profit that exceeded analysts' highest estimate and raised its full-year forecast, saying China's stimulus program is supporting global demand.
Stimulus Working
``We are seeing signs of stabilization that we hope will set the foundation for an eventual recovery,'' Chief Executive Officer Jim Owens said in a statement July 21. ``Fiscal policy and monetary stimulus have been introduced around the world, an we are seeing signs, particularly in China, that they are beginning to work.''
Fed Chairman Ben S. Bernanke told Congress July 21 that aggressive and concerted policy actions taken by governments last fall helped avert a financial meltdown and since then the U.S. economy and those of its trading partners appeared to be stabilizing.
``Although the recession in the rest of the world led to a steep drop in the demand for U.S. exports, this drag on our economy also appears to be waning, as many of our trading partners are also seeing signs of stabilization.''
Wednesday, August 12, 2009
UK jobless total climbs to 2.4m
The number of people out of work in the UK has risen to its highest level since 1995, official figures have shown.
Unemployment increased by 220,000 to 2,435,000 in the three months to June, taking the jobless rate to 7.8%.
Claims for unemployment benefit grew to its worst level in 12 years, increasing by 24,900 from June to 1.58 million.
Average earnings, excluding bonuses, grew at their slowest rate since records began in 2001, the Office for National Statistics said.
Earnings rose at an annual rate of 2.5% in the three months to June - though those in manufacturing only averaged pay increases of 1.1%, while the public sector saw an average rise of 3.7%.
The figures come as the Bank of England's latest quarterly inflation report warned that the UK economy still had some way to go before it recovered from the effects of the financial crisis.
The British Chambers of Commerce warned that unemployment was likely to continue rising at a rapid pace, even if the economy started growing again, and could exceed three million.
And the Institute of Directors said that almost a million people were working part-time because they could not find a full-time job, meaning the impact of the recession on employment was "even greater than the headline figures suggest".
'Lost to work'
According to BBC calculations based on ONS data, the unemployment rate among 16-24 year olds has risen to 12.6%, with about 928,000 people in that age range classed as unemployed.
There is rising concern about youth unemployment, and Business Secretary Lord Mandelson said the government needed the help of businesses to tackle it.
Work experience, mentoring and internships were needed to avoid a generation "lost to work", Lord Mandelson told the BBC.
"This is something the whole country has got to rally to. We need public and private employers, as well as those in the [charity] sector, to help us mount this national campaign to back young Britain."
A group called the Youth Fight for Jobs Campaign says there is a lack of training and affordable housing for younger people.
Campaigner Manuel Dominguez said: "It's about highlighting that there's a problem, and also saying to the government, and local MPs, and councillors, what are you going to do about it?
"Young people don't get proper training, a lot of working class young people get put off from going to university and being saddled with debt."
A new crop of school leavers and university graduates will join the jobs market this summer.
'Marked weakening'
Earlier this week, the government said it had launched an investigation into the gap between the number of people out of work and those who were claiming unemployment benefit.
While the latest data shows that the jobless rate, under International Labour Organisation (ILO) rules, rose to 7.8% in the three months to June - the highest rate since the final quarter of 1996, the rate of people claiming unemployment benefit in July was just 4.9%.
One possible explanation for this discrepancy could be that some people who have recently lost their jobs are relying on their partner's income, their own savings or redundancy payments rather than drawing on benefits.
"Recently the broader ILO measure of joblessness has indicated a more marked weakening in the labour market, and that trend has continued," said Colin Ellis, European economist at Daiwa Securities.
Meanwhile, an investigation by Radio 4's Face the Facts has found that some frontline staff at Jobcentre Plus, the government agency tasked with getting people back to work, are cutting interview times to cope with the increase in claimants.
However, Employment Minister Angela Eagle dismissed the idea that government cuts to the agency before the recession were proving detrimental to those out of work, saying staff had done "a magnificent job in difficult circumstances".
She added that 9,000 new staff had been recruited and that 80% of people registering after they had lost their jobs were getting an interview with a personal adviser within three days. Benefits payments were also being processed "well within targets", she said.
China economy shows improvement
China's economy has shown signs of improvement, with the annual growth rates of both industrial output and retail sales rising last month.
However, despite the improvement, both sets of data were below analysts' expectations.
July's industrial production rose 10.8% year-on-year, while retail sales grew at an annual pace of 15.2%.
The rise in retail sales suggests that domestic consumption has helped to counter the drop in foreign demand.
China's 4 trillion yuan ($586bn; £355bn) stimulus package aims to boost domestic demand to fuel a recovery.
The plan has helped to boost China's economy, which grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter.
But this is less than the double digit growth seen between 2003 and 2007.
Deflation fears
"The Chinese economy has shown some positive changes," said Li Xiaochao, a spokesman for the National Bureau of Statistics following the data.
But he said that profits at some firms were still "in great decline", adding, "the grave international environment affected our exports".
Separate data also showed Chinese consumer prices continued to fall in July. The consumer price index dropped 1.8% year-on-year, the National Bureau of Statistics said.
The drop was the sixth straight month of decline year-on-year. Wholesale prices were 8.2% lower year-on-year.
Analysts had expected the fall, since the year earlier period had significant inflation but concerns remain about continuing falls in prices.
"Deflation is still deepening," said Mr Peng.
Olympic effect
Trade data showed imports fell 14.9% in July from a year earlier, and exports shed 22.9%.
While exports fell year-on-year they rose from June and beat expectations, adding $17.5bn to reach $105.4bn in July.
"That's a pretty solid improvement, even if the year-over-year comparisons continued to be ugly," said Citigroup economist Ken Peng.
"With improving external conditions, we should see growth pick up in the second half of the year."
Xing Ziqiang, an economist at China International Capital said: "The annual fall in exports is caused by the abnormally high comparison base last July, when factories rushed to deliver their export orders before the Olympic Games."
However, despite the improvement, both sets of data were below analysts' expectations.
July's industrial production rose 10.8% year-on-year, while retail sales grew at an annual pace of 15.2%.
The rise in retail sales suggests that domestic consumption has helped to counter the drop in foreign demand.
China's 4 trillion yuan ($586bn; £355bn) stimulus package aims to boost domestic demand to fuel a recovery.
The plan has helped to boost China's economy, which grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter.
But this is less than the double digit growth seen between 2003 and 2007.
Deflation fears
"The Chinese economy has shown some positive changes," said Li Xiaochao, a spokesman for the National Bureau of Statistics following the data.
But he said that profits at some firms were still "in great decline", adding, "the grave international environment affected our exports".
Separate data also showed Chinese consumer prices continued to fall in July. The consumer price index dropped 1.8% year-on-year, the National Bureau of Statistics said.
The drop was the sixth straight month of decline year-on-year. Wholesale prices were 8.2% lower year-on-year.
Analysts had expected the fall, since the year earlier period had significant inflation but concerns remain about continuing falls in prices.
"Deflation is still deepening," said Mr Peng.
Olympic effect
Trade data showed imports fell 14.9% in July from a year earlier, and exports shed 22.9%.
While exports fell year-on-year they rose from June and beat expectations, adding $17.5bn to reach $105.4bn in July.
"That's a pretty solid improvement, even if the year-over-year comparisons continued to be ugly," said Citigroup economist Ken Peng.
"With improving external conditions, we should see growth pick up in the second half of the year."
Xing Ziqiang, an economist at China International Capital said: "The annual fall in exports is caused by the abnormally high comparison base last July, when factories rushed to deliver their export orders before the Olympic Games."
Japanese prices in record decline
Japanese wholesale prices were down by a record 8.5% in July compared with a year earlier, highlighting the growing deflationary pressure in the economy.
Weak demand during the downturn and the fall in the price of oil have put downward pressure on prices.
On Tuesday, the Bank of Japan kept interest rates at 0.1% to try to boost consumer demand.
Revised figures also showed that industrial output rose 2.3% in June, down from the initial 2.4% estimate.
Recent data showed consumer prices had fallen by a record 1.7% in the year to the end of June.
Downward pressure
Although the impact of last summer's spike in the oil price will lessen towards the end of the year, analysts expect further falls in prices.
"We're going to see increasing downward price pressure from weak demand," said Takesh Minami at the Norinchukin Research Institute.
"The Bank of Japan has said that the country is not entering the deflationary spiral, so it won't ease monetary policy further. The bank will keep interest rates on hold at least until March 2011," he added.
Japan, the world's second largest economy, experienced a prolonged period of deflation in the 1990s, commonly referred to as "the lost decade".
But the central bank is confident that low interest rates and the stimulus packages it has already implemented will prevent deflation taking hold again.
However, in keeping interest rates on hold on Tuesday, the bank underlined its cautious outlook for the economy.
It said conditions in the world's second-largest economy had stopped worsening, but that unemployment would stay high and consumer spending low.
Last month, the bank forecast that Japan's economy would shrink by 3.4% in the 12 months to 31 March 2010.
Weak demand during the downturn and the fall in the price of oil have put downward pressure on prices.
On Tuesday, the Bank of Japan kept interest rates at 0.1% to try to boost consumer demand.
Revised figures also showed that industrial output rose 2.3% in June, down from the initial 2.4% estimate.
Recent data showed consumer prices had fallen by a record 1.7% in the year to the end of June.
Downward pressure
Although the impact of last summer's spike in the oil price will lessen towards the end of the year, analysts expect further falls in prices.
"We're going to see increasing downward price pressure from weak demand," said Takesh Minami at the Norinchukin Research Institute.
"The Bank of Japan has said that the country is not entering the deflationary spiral, so it won't ease monetary policy further. The bank will keep interest rates on hold at least until March 2011," he added.
Japan, the world's second largest economy, experienced a prolonged period of deflation in the 1990s, commonly referred to as "the lost decade".
But the central bank is confident that low interest rates and the stimulus packages it has already implemented will prevent deflation taking hold again.
However, in keeping interest rates on hold on Tuesday, the bank underlined its cautious outlook for the economy.
It said conditions in the world's second-largest economy had stopped worsening, but that unemployment would stay high and consumer spending low.
Last month, the bank forecast that Japan's economy would shrink by 3.4% in the 12 months to 31 March 2010.
Industrial output shows big jump, up 7.8% in June
The industrial production rose at its fastest pace in a year as stimulus packages and easy monetary policy take their effect. The index of industrial production rose 7.8 per cent in June from a year earlier, after growing a revised 2.2 per cent in May.
The big rise in June output was powered by a 15 per cent jump in mining growth as compared to just 0.1 per cent a year earlier. June manufacturing growth came in at 7.3 per cent vs 6.1 per cent a year earlier. Electricity production also grew at 8 per cent while consumer goods production was up 4 per cent.
The big jump in the output has however raised questions whether it can be sustained. Mridul Saggar, chief economist, Kotak Securities, said, “It is definitely a very positive number. But we need to watch out if growth of this order can be sustained. The number on the manufacturing front is a big surprise.”
The big rise in June output was powered by a 15 per cent jump in mining growth as compared to just 0.1 per cent a year earlier. June manufacturing growth came in at 7.3 per cent vs 6.1 per cent a year earlier. Electricity production also grew at 8 per cent while consumer goods production was up 4 per cent.
The big jump in the output has however raised questions whether it can be sustained. Mridul Saggar, chief economist, Kotak Securities, said, “It is definitely a very positive number. But we need to watch out if growth of this order can be sustained. The number on the manufacturing front is a big surprise.”
India’s 7% Growth Target Threatened as Rain Gods ‘Play Hooky’
Aug. 12 (Bloomberg) -- India’s 7 percent economic growth target may be jeopardized as the weakest monsoon rains in five years threaten harvests, according to economists.
The India Meteorological Department on Aug. 10 lowered its monsoon forecast for a second time this season, saying showers in the June-September season will be 13 percent below average, compared with a 7 percent shortfall estimated in June.
Deficient rains may reduce crops as India, where more than half the arable land isn’t irrigated, relies on the monsoon to produce food for its 1.2 billion people. Lower farm output may erode the purchasing power of 742 million Indians who live in the countryside, hurting Prime Minster Manmohan Singh’s efforts to revive growth in order to create jobs and cut poverty.
“The rain gods continue to play hooky,” said Rajeev Malik, a regional economist at Macquarie Group Ltd. in Singapore. A poor monsoon that results in a sizeable shortfall in farm production would “definitely reduce economic growth,” he added.
As many as 161 of India’s 626 districts have been declared drought prone, the government said yesterday. Areas under rice cultivation have declined 20 percent to 22.82 million hectares, the farm ministry said.
A below-average monsoon may shave as much as one percentage point off India’s growth in the year to March 2010, Raghuram Rajan, a former chief economist at the International Monetary Fund said on Aug. 10. India’s economy, the third-largest in Asia, may expand 6 percent in the current fiscal year, Rajan said.
2002 Drought
A drought in 2002 pared economic growth to 3.8 percent, the lowest in 11 years. The following year, the pace of expansion accelerated to 8.5 percent, the fastest since 1989, as sufficient rains returned.
A 20 percent rain shortfall may chop 2 percentage points off India’s economic growth, according to Philip Wyatt, a senior economist at UBS AG in Hong Kong. A 2 percent drop in farm output may lower gross domestic product by 1 percentage point, said economist Robert Prior-Wandesforde of HSBC Group Plc.
“We think rural demand will be negatively impacted and this is a significant negative shock,” said Tushar Poddar, an economist at Goldman Sachs Group Inc. in Mumbai. Industries catering to rural consumers will be the hardest hit, he said. Poddar estimates GDP growth would be reduced by 0.3 percentage point in the case of a 2 percent decline in farm production.
Insufficient rain has caused acreage of all major crops to lag behind year-ago levels, denting prospects for bigger harvests of rice, oilseeds and sugar cane. India, the world’s second-biggest rice producer, planted monsoon paddy crops on 5.8 million hectares less area this year because of scant rain in the main growing regions, according to the farm ministry.
Food Prices
Reduced harvests this year may also have an inflationary impact on food prices in the coming months, Prime Minister Singh said Aug. 8.
Consumer prices paid by farm workers jumped 11.52 percent in June from a year earlier after gaining 10.21 percent in May. Prices paid by industrial workers rose 9.26 percent in June from a year earlier, according to the latest government data.
The showers in June-September period are critical as abundant rains boosts farm output, putting more money in the hands of rural consumers to spend on goods such as tractors made by Mahindra & Mahindra Ltd. and soaps and personal-care products from Hindustan Unilever Ltd.
“As food prices go up, this will have a significant negative impact on rural demand,” Poddar from Goldman Sachs said. “Additionally, the summer rains prepare the ground for the winter crop, which may also be affected due to the shortfall.”
Cars, Tractors
Indian stocks fell by 1 percent on Aug. 10 on concern shortfalls in agricultural production may slow the country’s economic growth. Mahindra & Mahindra, the nation’s largest maker of sport-utility vehicles and tractors, sank 9 percent and Hindustan Unilever Ltd. declined 3.3 percent.
Still, economists such as Macquarie’s Malik said accelerating industrial output and higher government spending on rural jobs and infrastructure may help offset the impact of lower farm output on the economy.
“The share of agriculture in India’s GDP has declined to 17.5 percent from 34 percent in 1980,” Malik said. “Hence minor variations in farm output increasingly matter less for overall GDP growth.”
Malik has kept his economic growth estimate unchanged at 7 percent, saying he’ll make a final call on the forecast after a more complete report of the sowing season through August.
Finance Minister Pranab Mukherjee in his July 6 budget speech raised spending on a guaranteed-rural jobs program by 144 percent to 391 billion rupees ($8.15 billion) in the year to March 2010 and promised to provide rice and wheat to the poor at 3 rupees a kilogram.
Deficient rainfall may pose a problem to India’s economic recovery but there is no need to “press the panic button,” Mukherjee said. The government has contingency plans to deal with the situation, he added.
The India Meteorological Department on Aug. 10 lowered its monsoon forecast for a second time this season, saying showers in the June-September season will be 13 percent below average, compared with a 7 percent shortfall estimated in June.
Deficient rains may reduce crops as India, where more than half the arable land isn’t irrigated, relies on the monsoon to produce food for its 1.2 billion people. Lower farm output may erode the purchasing power of 742 million Indians who live in the countryside, hurting Prime Minster Manmohan Singh’s efforts to revive growth in order to create jobs and cut poverty.
“The rain gods continue to play hooky,” said Rajeev Malik, a regional economist at Macquarie Group Ltd. in Singapore. A poor monsoon that results in a sizeable shortfall in farm production would “definitely reduce economic growth,” he added.
As many as 161 of India’s 626 districts have been declared drought prone, the government said yesterday. Areas under rice cultivation have declined 20 percent to 22.82 million hectares, the farm ministry said.
A below-average monsoon may shave as much as one percentage point off India’s growth in the year to March 2010, Raghuram Rajan, a former chief economist at the International Monetary Fund said on Aug. 10. India’s economy, the third-largest in Asia, may expand 6 percent in the current fiscal year, Rajan said.
2002 Drought
A drought in 2002 pared economic growth to 3.8 percent, the lowest in 11 years. The following year, the pace of expansion accelerated to 8.5 percent, the fastest since 1989, as sufficient rains returned.
A 20 percent rain shortfall may chop 2 percentage points off India’s economic growth, according to Philip Wyatt, a senior economist at UBS AG in Hong Kong. A 2 percent drop in farm output may lower gross domestic product by 1 percentage point, said economist Robert Prior-Wandesforde of HSBC Group Plc.
“We think rural demand will be negatively impacted and this is a significant negative shock,” said Tushar Poddar, an economist at Goldman Sachs Group Inc. in Mumbai. Industries catering to rural consumers will be the hardest hit, he said. Poddar estimates GDP growth would be reduced by 0.3 percentage point in the case of a 2 percent decline in farm production.
Insufficient rain has caused acreage of all major crops to lag behind year-ago levels, denting prospects for bigger harvests of rice, oilseeds and sugar cane. India, the world’s second-biggest rice producer, planted monsoon paddy crops on 5.8 million hectares less area this year because of scant rain in the main growing regions, according to the farm ministry.
Food Prices
Reduced harvests this year may also have an inflationary impact on food prices in the coming months, Prime Minister Singh said Aug. 8.
Consumer prices paid by farm workers jumped 11.52 percent in June from a year earlier after gaining 10.21 percent in May. Prices paid by industrial workers rose 9.26 percent in June from a year earlier, according to the latest government data.
The showers in June-September period are critical as abundant rains boosts farm output, putting more money in the hands of rural consumers to spend on goods such as tractors made by Mahindra & Mahindra Ltd. and soaps and personal-care products from Hindustan Unilever Ltd.
“As food prices go up, this will have a significant negative impact on rural demand,” Poddar from Goldman Sachs said. “Additionally, the summer rains prepare the ground for the winter crop, which may also be affected due to the shortfall.”
Cars, Tractors
Indian stocks fell by 1 percent on Aug. 10 on concern shortfalls in agricultural production may slow the country’s economic growth. Mahindra & Mahindra, the nation’s largest maker of sport-utility vehicles and tractors, sank 9 percent and Hindustan Unilever Ltd. declined 3.3 percent.
Still, economists such as Macquarie’s Malik said accelerating industrial output and higher government spending on rural jobs and infrastructure may help offset the impact of lower farm output on the economy.
“The share of agriculture in India’s GDP has declined to 17.5 percent from 34 percent in 1980,” Malik said. “Hence minor variations in farm output increasingly matter less for overall GDP growth.”
Malik has kept his economic growth estimate unchanged at 7 percent, saying he’ll make a final call on the forecast after a more complete report of the sowing season through August.
Finance Minister Pranab Mukherjee in his July 6 budget speech raised spending on a guaranteed-rural jobs program by 144 percent to 391 billion rupees ($8.15 billion) in the year to March 2010 and promised to provide rice and wheat to the poor at 3 rupees a kilogram.
Deficient rainfall may pose a problem to India’s economic recovery but there is no need to “press the panic button,” Mukherjee said. The government has contingency plans to deal with the situation, he added.
Subscribe to:
Posts (Atom)