Tuesday, March 1, 2011
King Says Raising Rate to Make a Gesture Is Self-Defeating
Bank of England Governor Mervyn King said increasing the benchmark interest rate to make a gesture in the fight against inflation would be “self-defeating.”
Manufacturing Expands in Europe at Fastest Pace Since 2000 as Exports Grow
European manufacturing growth accelerated to the fastest pace in more than 10 years in February, a further sign the economy is gathering strength.
Bernanke Tempers Republican Criticism With Deficit-Plan Calls
Federal Reserve Chairman Ben S. Bernanke’s calls for an immediate plan to control U.S. debt are winning praise from some of the same Republican lawmakers who rebuked him for the central bank’s record monetary stimulus.
China Manufacturing Grows at Slowest in Six Months After PBOC Tightening
China’s manufacturing expanded at the slowest pace in six months as higher interest rates and lending curbs aimed at containing inflation damped demand.
The Purchasing Managers’ Index fell to 52.2 from 52.9 in January, the China Federation of Logistics and Purchasing said on its website today, the third monthly decline. The gauge of input prices climbed to 70.1, the highest level since November.
Premier Wen Jiabao pledged Feb. 27 to contain gains in consumer prices and tackle surging property prices that could threaten social stability in the world’s most populous nation. Wen may outline additional measures to tame inflation and cool economic growth when he opens the annual session of the National People’s Congress later this week.
“This is a good number, suggesting Beijing’s policy tightening is starting to cool excessive growth and inflation,” said Qu Hongbin, Hong Kong-based economist at HSBC Holdings Plc. The government “still needs to step up measures to combat inflation in the months ahead,” he added, predicting the central bank will raise interest rates and banks’ required reserve ratios further.
The benchmark Shanghai Composite Index rose 0.5 percent to close at 2,919 today, while remaining down about 7 percent from a Nov. 11 high amid concern that monetary tightening will hurt earnings in the world’s fastest-growing major economy. The yuan rose 0.02 percent in Shanghai to 6.5703, according to China Foreign Exchange Trade System in Shanghai.
Oil Prices
“Cost-driven inflation pressure is still large,” the logistics federation said in a statement today accompanying the data release. “Upward pressure on the CPI is still significant,” the federation said, citing a drought in China that’s boosted food prices, the impact of Middle East turmoil on oil and liquidity injections by the U.S. Federal Reserve.
In contrast with China, India’s manufacturing grew at the fastest pace in three months, a survey by HSBC and Markit Economics today showed, adding to pressure on the central bank to increase interest rates for the eighth time in a year.
In the U.S., the Institute for Supply Management’s manufacturing index rose last month to 61, the highest since May 2004, from January’s 60.8, according to the median estimate in a Bloomberg News survey of 77 analysts. A German manufacturing index, also expected today, is forecast to have held at 62.6, according to the average estimate of 19 economists.
Higher Prices
China raised gasoline and diesel prices on Feb. 20 by as much as 4.6 percent after crude oil in London rose above $100 a barrel. The government previously increased costs on Dec. 22.
Consumer-price inflation may have cooled to 4.8 percent in February from 4.9 percent in January, China International Capital Corp. and Shenyin & Wanguo Securities Co. said on Feb. 25.
Still, non-food inflation rose to the highest in at least six years in January and companies including Qingdao Haier Co. and Gree Electric Appliances Inc., the biggest makers of refrigerators and air-conditioners in China, will pass on higher prices to consumers, GF Securities analysts said on Feb. 28.
Chinese steel mills including Baoshan Iron & Steel Co. and Angang Steel Co. said last month they raised prices for March and April delivery. Cement prices may rise by more than 10 percent this year as government projects spur demand, Citigroup Inc. analysts wrote today, benefiting companies including Anhui Conch Cement Co. and China Resources Cement Holdings Ltd.
Input Prices
The People’s Bank of China has already raised its benchmark one-year lending and deposit rates three times since mid-October and imposed eight publicly announced increases in the reserve requirement ratio. It has also used the so-called differentiated reserve requirement on 40 banks, adjusting the level of deposits individual lenders must keep as reserves.
“Today’s PMI shows input prices continued to rise at a very fast pace,” said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong. “Inflation pressures in China have been building even before the latest spike in oil prices and today’s data should further reinforce the case for more policy moves.”
Jackson forecasts two more increases in interest rates and an appreciation in the yuan to 6.20 against the dollar by the end of the year.
February’s PMI reading compares with the median forecast of 52.1 in a Bloomberg News survey of 14 economists. A reading above 50 signals expansion.
Slowest Expansion
A separate manufacturing index released by HSBC and Markit Economics fell to 51.7 in February from 54.5 in January, the slowest pace of expansion in seven months. The gauge was higher than the 51.5 preliminary figure released by HSBC on Feb. 21, the first month the bank has released an advanced reading.
Data in the first two months are typically distorted by the timing of the weeklong lunar new year holiday. The break fell on Feb. 3 this year, almost two weeks earlier than last year.
The output and new-orders sub-indexes in the logistics federation survey indicated the slowest expansions since August, according to today’s data.
“As many manufacturers, especially exporters, do not resume full production for several weeks after the official week-long holiday has ended, February’s reading might be distorted on the downside,” Goldman Sachs Group Inc. economists Yu Song and Helen Qiao wrote in a note today.
The manufacturing survey released by the logistics federation and the National Bureau of Statistics covers more than 820 companies in 20 industries, including energy, metals, textiles, automobiles and electronics. The HSBC study covers more than 400 businesses.
China’s economic growth accelerated to a 9.8 percent annual pace in the fourth quarter, overtaking Japan as the world’s second-biggest economy.
The Purchasing Managers’ Index fell to 52.2 from 52.9 in January, the China Federation of Logistics and Purchasing said on its website today, the third monthly decline. The gauge of input prices climbed to 70.1, the highest level since November.
Premier Wen Jiabao pledged Feb. 27 to contain gains in consumer prices and tackle surging property prices that could threaten social stability in the world’s most populous nation. Wen may outline additional measures to tame inflation and cool economic growth when he opens the annual session of the National People’s Congress later this week.
“This is a good number, suggesting Beijing’s policy tightening is starting to cool excessive growth and inflation,” said Qu Hongbin, Hong Kong-based economist at HSBC Holdings Plc. The government “still needs to step up measures to combat inflation in the months ahead,” he added, predicting the central bank will raise interest rates and banks’ required reserve ratios further.
The benchmark Shanghai Composite Index rose 0.5 percent to close at 2,919 today, while remaining down about 7 percent from a Nov. 11 high amid concern that monetary tightening will hurt earnings in the world’s fastest-growing major economy. The yuan rose 0.02 percent in Shanghai to 6.5703, according to China Foreign Exchange Trade System in Shanghai.
Oil Prices
“Cost-driven inflation pressure is still large,” the logistics federation said in a statement today accompanying the data release. “Upward pressure on the CPI is still significant,” the federation said, citing a drought in China that’s boosted food prices, the impact of Middle East turmoil on oil and liquidity injections by the U.S. Federal Reserve.
In contrast with China, India’s manufacturing grew at the fastest pace in three months, a survey by HSBC and Markit Economics today showed, adding to pressure on the central bank to increase interest rates for the eighth time in a year.
In the U.S., the Institute for Supply Management’s manufacturing index rose last month to 61, the highest since May 2004, from January’s 60.8, according to the median estimate in a Bloomberg News survey of 77 analysts. A German manufacturing index, also expected today, is forecast to have held at 62.6, according to the average estimate of 19 economists.
Higher Prices
China raised gasoline and diesel prices on Feb. 20 by as much as 4.6 percent after crude oil in London rose above $100 a barrel. The government previously increased costs on Dec. 22.
Consumer-price inflation may have cooled to 4.8 percent in February from 4.9 percent in January, China International Capital Corp. and Shenyin & Wanguo Securities Co. said on Feb. 25.
Still, non-food inflation rose to the highest in at least six years in January and companies including Qingdao Haier Co. and Gree Electric Appliances Inc., the biggest makers of refrigerators and air-conditioners in China, will pass on higher prices to consumers, GF Securities analysts said on Feb. 28.
Chinese steel mills including Baoshan Iron & Steel Co. and Angang Steel Co. said last month they raised prices for March and April delivery. Cement prices may rise by more than 10 percent this year as government projects spur demand, Citigroup Inc. analysts wrote today, benefiting companies including Anhui Conch Cement Co. and China Resources Cement Holdings Ltd.
Input Prices
The People’s Bank of China has already raised its benchmark one-year lending and deposit rates three times since mid-October and imposed eight publicly announced increases in the reserve requirement ratio. It has also used the so-called differentiated reserve requirement on 40 banks, adjusting the level of deposits individual lenders must keep as reserves.
“Today’s PMI shows input prices continued to rise at a very fast pace,” said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong. “Inflation pressures in China have been building even before the latest spike in oil prices and today’s data should further reinforce the case for more policy moves.”
Jackson forecasts two more increases in interest rates and an appreciation in the yuan to 6.20 against the dollar by the end of the year.
February’s PMI reading compares with the median forecast of 52.1 in a Bloomberg News survey of 14 economists. A reading above 50 signals expansion.
Slowest Expansion
A separate manufacturing index released by HSBC and Markit Economics fell to 51.7 in February from 54.5 in January, the slowest pace of expansion in seven months. The gauge was higher than the 51.5 preliminary figure released by HSBC on Feb. 21, the first month the bank has released an advanced reading.
Data in the first two months are typically distorted by the timing of the weeklong lunar new year holiday. The break fell on Feb. 3 this year, almost two weeks earlier than last year.
The output and new-orders sub-indexes in the logistics federation survey indicated the slowest expansions since August, according to today’s data.
“As many manufacturers, especially exporters, do not resume full production for several weeks after the official week-long holiday has ended, February’s reading might be distorted on the downside,” Goldman Sachs Group Inc. economists Yu Song and Helen Qiao wrote in a note today.
The manufacturing survey released by the logistics federation and the National Bureau of Statistics covers more than 820 companies in 20 industries, including energy, metals, textiles, automobiles and electronics. The HSBC study covers more than 400 businesses.
China’s economic growth accelerated to a 9.8 percent annual pace in the fourth quarter, overtaking Japan as the world’s second-biggest economy.
Manufacturing in U.S. Probably Grew at Fastest Pace Since 2004
Manufacturing in the U.S. probably grew in February at the fastest pace in almost seven years, indicating factories are providing more momentum for the expansion, economists said before a report today.
The Institute for Supply Management’s factory index rose last month to 61, the highest since May 2004, from January’s 60.8, according to the median estimate in a Bloomberg News survey. Readings greater than 50 signal growth. Other data may show construction spending fell 0.4 percent in January.
Business investment in new equipment is prompting companies like Eaton Corp. and Deere & Co. to raise profit forecasts as the global economy expands. Federal Reserve Chairman Ben S. Bernanke, testifying before Congress today, may reiterate that policy makers are concerned about the pace of recovery and the time it’s taking to reduce unemployment even as manufacturing prospers.
“Manufacturing remains one of the undeniable bright spots in the economy,” said David Semmens, a U.S. economist at Standard Chartered Bank in New York. “We’re looking for hiring to pickup this year and we are looking for it to be investment- led. People don’t buy these machines to leave them idle.”
The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Estimates of the 77 economists in the Bloomberg survey ranged from 58.7 to 63.3.
Also at 10 a.m., the Commerce Department in Washington will release data on construction spending. Projections in the Bloomberg survey of 49 economists ranged from a drop of 2 percent to a gain of 0.8 percent, following a 2.5 percent decline in December.
Regional Manufacturing
Recent regional factory reports underscore the strength of manufacturing at the start of the year. The Institute for Supply Management-Chicago Inc. said yesterday that its business barometer rose in February to the highest level since July 1988.
The Fed Bank of New York on Feb. 15 reported manufacturing accelerated in that region in February, while the Philadelphia Fed said two days later that factories in its area expanded at the fastest pace since January 2004.
The strength in manufacturing has been reflected in higher share prices. The Standard & Poor’s Supercomposite Industrial Machinery Index, which includes Caterpillar Inc. and Deere, has climbed 47 percent in the past 12 months, compared with a 19 percent increase in the broader S&P 500.
Manufacturing, which accounts for about 11 percent of the world’s largest economy, led the recovery from the recession that ended in June 2009 as businesses rebuilt stockpiles slashed during the slump that began in December 2007. Rising exports have also spurred production.
Last Year
In 2010, U.S. gross domestic product increased 2.8 percent, the most in five years.
“The numbers coming out of the U.S. for GDP and industrial production are pretty solid, but we have an issue with regard to employment,” James Meil, chief economist at Eaton said on a Feb. 25 teleconference. The Cleveland-based maker of pumps used in forklifts, raised its full-year forecast amid higher hydraulics sales.
Employment increased by 190,000 workers last month, the most since May 2010 and rebounding after a 36,000 gain in January, when winter storms depressed the count, according to the median forecast of economists surveyed by Bloomberg ahead of Labor Department data on March 4. The report may also show the jobless rate increased to 9.1 percent from 9 percent.
Bernanke will deliver the central bank’s semiannual report on monetary policy before the Senate Banking Committee today at 10 a.m. Tomorrow, he will testify before the House Financial Services Committee.
Bernanke Testimony
In an appearance before the same committee on Feb. 9, Bernanke told legislators that while the declines in the jobless rate in December and January “do provide some grounds for optimism,” he cautioned that “with output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level.”
Further gains in manufacturing may be constrained in coming months by a slowdown in consumer spending, which accounts for about 70 percent of the economy. Household purchases rose at a 0.2 percent pace in January, half the rate forecast by economists and the slowest pace since June, the Commerce Department reported yesterday.
At the same time, auto dealers are seeing improved demand. Car sales in February probably rose to a 12.6 million unit pace, the highest since the government’s cash-for-clunkers program in August 2009, after a 12.54 million annual rate the previous month, according to the median of analysts surveyed before industry data today.
Factories may receive a boost this year from a government program that accelerates tax depreciation for equipment purchases. The incentive is part of the $858 billion bill signed by President Barack Obama in December that extended tax cuts for two years, continued expanded unemployment insurance benefits through 2011 and trimmed payroll taxes.
Bloomberg Survey
================================================================
Construct ISM ISM
Spending Manu Prices
MOM% Index Index
================================================================
Date of Release 03/01 03/01 03/01
Observation Period Jan. Feb. Feb.
----------------------------------------------------------------
Median -0.4% 61.0 83.0
Average -0.4% 60.8 83.3
High Forecast 0.8% 63.3 88.0
Low Forecast -2.0% 58.7 80.0
Number of Participants 49 77 17
Previous -2.5% 60.8 81.5
----------------------------------------------------------------
4CAST Ltd. -1.0% 61.0 ---
ABN Amro Inc. --- 61.0 ---
Action Economics -0.8% 60.0 81.5
Aletti Gestielle --- 60.0 83.0
Ameriprise Financial 0.0% 62.0 80.0
Banesto -0.5% 60.4 ---
Bank of Tokyo- Mitsubishi -0.3% 63.3 ---
Barclays Capital -0.4% 61.5 ---
Bayerische Landesbank --- 61.0 ---
BBVA -0.8% 60.3 83.0
BMO Capital Markets -0.4% 60.0 ---
BNP Paribas -0.8% 60.0 ---
BofA Merrill Lynch -0.2% 59.5 ---
Briefing.com -1.0% 61.5 ---
Capital Economics -2.0% 60.5 ---
CIBC World Markets --- 59.5 ---
Citi -0.6% 59.0 85.0
Commerzbank AG --- 61.0 ---
Credit Agricole CIB --- 61.0 ---
Credit Suisse --- 61.5 82.0
Daiwa Securities America -0.3% 60.0 ---
Danske Bank --- 60.0 ---
DekaBank -0.3% 61.0 ---
Deutsche Bank Securities 0.5% 60.0 ---
Deutsche Postbank AG --- 61.5 ---
Exane --- 61.0 ---
Fact & Opinion Economics -0.7% 61.5 83.0
First Trust Advisors -0.9% 60.7 ---
Goldman, Sachs & Co. 0.0% 61.0 ---
Helaba --- 60.0 ---
High Frequency Economics -1.0% 62.0 ---
Hugh Johnson Advisors --- 59.0 ---
Ibersecurities --- 60.3 ---
IDEAglobal -0.5% 62.0 83.0
IHS Global Insight -0.9% 62.0 ---
Informa Global Markets -0.2% 60.4 83.0
ING Financial Markets 0.5% 62.0 83.0
Insight Economics -1.0% 62.0 ---
Intesa-SanPaulo -0.3% 60.5 ---
J.P. Morgan Chase -0.9% 62.0 ---
Janney Montgomery Scott -0.1% 59.2 ---
Jefferies & Co. 0.2% 59.0 ---
Landesbank Berlin -0.2% 62.0 ---
Landesbank BW 0.5% 62.0 ---
Maria Fiorini Ramirez --- 60.5 ---
MET Capital Advisors --- 61.5 ---
MF Global 0.5% 61.5 83.0
Mizuho Securities -1.0% 59.8 ---
Moody’s Analytics 0.2% 60.0 ---
Morgan Keegan & Co. -0.4% --- ---
Morgan Stanley & Co. -0.4% 60.0 ---
Natixis --- 61.0 ---
Newedge --- 60.5 ---
Nomura Securities Intl. --- 58.7 ---
Nord/LB --- 60.0 83.0
OSK Group/DMG --- 61.5 ---
Pierpont Securities --- 61.0 ---
PineBridge Investments 0.6% 61.5 ---
PNC Bank -1.0% 62.0 ---
Raiffeisenbank International --- 61.5 85.0
Raymond James -1.2% 60.5 ---
RBC Capital Markets --- 61.0 ---
RBS Securities Inc. --- 60.8 ---
Scotia Capital --- 61.1 ---
Societe Generale -0.9% 61.5 85.0
Standard Chartered --- 61.0 ---
State Street Global Markets -1.2% 61.8 83.9
Stone & McCarthy Research 0.4% 60.2 ---
TD Securities --- 62.0 ---
Thomson Reuters/IFR 0.8% 61.0 ---
UBS -0.4% 61.5 88.0
UniCredit Research --- 60.0 ---
Union Investment --- 60.5 ---
University of Maryland -0.5% 60.0 81.5
Wells Fargo & Co. -0.6% 60.5 ---
WestLB AG -0.5% 60.2 ---
Westpac Banking Co. 0.0% 62.0 ---
Wrightson ICAP -0.8% 61.5 ---
================================================================
The Institute for Supply Management’s factory index rose last month to 61, the highest since May 2004, from January’s 60.8, according to the median estimate in a Bloomberg News survey. Readings greater than 50 signal growth. Other data may show construction spending fell 0.4 percent in January.
Business investment in new equipment is prompting companies like Eaton Corp. and Deere & Co. to raise profit forecasts as the global economy expands. Federal Reserve Chairman Ben S. Bernanke, testifying before Congress today, may reiterate that policy makers are concerned about the pace of recovery and the time it’s taking to reduce unemployment even as manufacturing prospers.
“Manufacturing remains one of the undeniable bright spots in the economy,” said David Semmens, a U.S. economist at Standard Chartered Bank in New York. “We’re looking for hiring to pickup this year and we are looking for it to be investment- led. People don’t buy these machines to leave them idle.”
The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Estimates of the 77 economists in the Bloomberg survey ranged from 58.7 to 63.3.
Also at 10 a.m., the Commerce Department in Washington will release data on construction spending. Projections in the Bloomberg survey of 49 economists ranged from a drop of 2 percent to a gain of 0.8 percent, following a 2.5 percent decline in December.
Regional Manufacturing
Recent regional factory reports underscore the strength of manufacturing at the start of the year. The Institute for Supply Management-Chicago Inc. said yesterday that its business barometer rose in February to the highest level since July 1988.
The Fed Bank of New York on Feb. 15 reported manufacturing accelerated in that region in February, while the Philadelphia Fed said two days later that factories in its area expanded at the fastest pace since January 2004.
The strength in manufacturing has been reflected in higher share prices. The Standard & Poor’s Supercomposite Industrial Machinery Index, which includes Caterpillar Inc. and Deere, has climbed 47 percent in the past 12 months, compared with a 19 percent increase in the broader S&P 500.
Manufacturing, which accounts for about 11 percent of the world’s largest economy, led the recovery from the recession that ended in June 2009 as businesses rebuilt stockpiles slashed during the slump that began in December 2007. Rising exports have also spurred production.
Last Year
In 2010, U.S. gross domestic product increased 2.8 percent, the most in five years.
“The numbers coming out of the U.S. for GDP and industrial production are pretty solid, but we have an issue with regard to employment,” James Meil, chief economist at Eaton said on a Feb. 25 teleconference. The Cleveland-based maker of pumps used in forklifts, raised its full-year forecast amid higher hydraulics sales.
Employment increased by 190,000 workers last month, the most since May 2010 and rebounding after a 36,000 gain in January, when winter storms depressed the count, according to the median forecast of economists surveyed by Bloomberg ahead of Labor Department data on March 4. The report may also show the jobless rate increased to 9.1 percent from 9 percent.
Bernanke will deliver the central bank’s semiannual report on monetary policy before the Senate Banking Committee today at 10 a.m. Tomorrow, he will testify before the House Financial Services Committee.
Bernanke Testimony
In an appearance before the same committee on Feb. 9, Bernanke told legislators that while the declines in the jobless rate in December and January “do provide some grounds for optimism,” he cautioned that “with output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level.”
Further gains in manufacturing may be constrained in coming months by a slowdown in consumer spending, which accounts for about 70 percent of the economy. Household purchases rose at a 0.2 percent pace in January, half the rate forecast by economists and the slowest pace since June, the Commerce Department reported yesterday.
At the same time, auto dealers are seeing improved demand. Car sales in February probably rose to a 12.6 million unit pace, the highest since the government’s cash-for-clunkers program in August 2009, after a 12.54 million annual rate the previous month, according to the median of analysts surveyed before industry data today.
Factories may receive a boost this year from a government program that accelerates tax depreciation for equipment purchases. The incentive is part of the $858 billion bill signed by President Barack Obama in December that extended tax cuts for two years, continued expanded unemployment insurance benefits through 2011 and trimmed payroll taxes.
Bloomberg Survey
================================================================
Construct ISM ISM
Spending Manu Prices
MOM% Index Index
================================================================
Date of Release 03/01 03/01 03/01
Observation Period Jan. Feb. Feb.
----------------------------------------------------------------
Median -0.4% 61.0 83.0
Average -0.4% 60.8 83.3
High Forecast 0.8% 63.3 88.0
Low Forecast -2.0% 58.7 80.0
Number of Participants 49 77 17
Previous -2.5% 60.8 81.5
----------------------------------------------------------------
4CAST Ltd. -1.0% 61.0 ---
ABN Amro Inc. --- 61.0 ---
Action Economics -0.8% 60.0 81.5
Aletti Gestielle --- 60.0 83.0
Ameriprise Financial 0.0% 62.0 80.0
Banesto -0.5% 60.4 ---
Bank of Tokyo- Mitsubishi -0.3% 63.3 ---
Barclays Capital -0.4% 61.5 ---
Bayerische Landesbank --- 61.0 ---
BBVA -0.8% 60.3 83.0
BMO Capital Markets -0.4% 60.0 ---
BNP Paribas -0.8% 60.0 ---
BofA Merrill Lynch -0.2% 59.5 ---
Briefing.com -1.0% 61.5 ---
Capital Economics -2.0% 60.5 ---
CIBC World Markets --- 59.5 ---
Citi -0.6% 59.0 85.0
Commerzbank AG --- 61.0 ---
Credit Agricole CIB --- 61.0 ---
Credit Suisse --- 61.5 82.0
Daiwa Securities America -0.3% 60.0 ---
Danske Bank --- 60.0 ---
DekaBank -0.3% 61.0 ---
Deutsche Bank Securities 0.5% 60.0 ---
Deutsche Postbank AG --- 61.5 ---
Exane --- 61.0 ---
Fact & Opinion Economics -0.7% 61.5 83.0
First Trust Advisors -0.9% 60.7 ---
Goldman, Sachs & Co. 0.0% 61.0 ---
Helaba --- 60.0 ---
High Frequency Economics -1.0% 62.0 ---
Hugh Johnson Advisors --- 59.0 ---
Ibersecurities --- 60.3 ---
IDEAglobal -0.5% 62.0 83.0
IHS Global Insight -0.9% 62.0 ---
Informa Global Markets -0.2% 60.4 83.0
ING Financial Markets 0.5% 62.0 83.0
Insight Economics -1.0% 62.0 ---
Intesa-SanPaulo -0.3% 60.5 ---
J.P. Morgan Chase -0.9% 62.0 ---
Janney Montgomery Scott -0.1% 59.2 ---
Jefferies & Co. 0.2% 59.0 ---
Landesbank Berlin -0.2% 62.0 ---
Landesbank BW 0.5% 62.0 ---
Maria Fiorini Ramirez --- 60.5 ---
MET Capital Advisors --- 61.5 ---
MF Global 0.5% 61.5 83.0
Mizuho Securities -1.0% 59.8 ---
Moody’s Analytics 0.2% 60.0 ---
Morgan Keegan & Co. -0.4% --- ---
Morgan Stanley & Co. -0.4% 60.0 ---
Natixis --- 61.0 ---
Newedge --- 60.5 ---
Nomura Securities Intl. --- 58.7 ---
Nord/LB --- 60.0 83.0
OSK Group/DMG --- 61.5 ---
Pierpont Securities --- 61.0 ---
PineBridge Investments 0.6% 61.5 ---
PNC Bank -1.0% 62.0 ---
Raiffeisenbank International --- 61.5 85.0
Raymond James -1.2% 60.5 ---
RBC Capital Markets --- 61.0 ---
RBS Securities Inc. --- 60.8 ---
Scotia Capital --- 61.1 ---
Societe Generale -0.9% 61.5 85.0
Standard Chartered --- 61.0 ---
State Street Global Markets -1.2% 61.8 83.9
Stone & McCarthy Research 0.4% 60.2 ---
TD Securities --- 62.0 ---
Thomson Reuters/IFR 0.8% 61.0 ---
UBS -0.4% 61.5 88.0
UniCredit Research --- 60.0 ---
Union Investment --- 60.5 ---
University of Maryland -0.5% 60.0 81.5
Wells Fargo & Co. -0.6% 60.5 ---
WestLB AG -0.5% 60.2 ---
Westpac Banking Co. 0.0% 62.0 ---
Wrightson ICAP -0.8% 61.5 ---
================================================================
Canada Economic Growth Rate Accelerates to 3.3% in 4th Quarter on Exports
Canada’s economy accelerated more than forecast from October to December on the biggest jump in exports since 2004 and faster consumer spending.
Gross domestic product in the world’s 10th-largest economy expanded at a 3.3 percent annual pace in the fourth quarter following a 1.8 percent expansion in the previous three months that was higher than initially estimated, Statistics Canada said today in Ottawa. Economists predicted a 3 percent fourth-quarter gain, according to the median of 23 estimates gathered by Bloomberg News.
The country’s dollar reached the highest in more than three years as the report boosted confidence that Bank of Canada Governor Mark Carney will raise interest rates later this year. Economists predict the key rate will remain 1 percent at tomorrow’s announcement and rise in the second quarter according to economists surveyed by Bloomberg News.
“There is pretty nice momentum going into the first quarter,” said Jacqui Douglas, a senior economics and currency strategist at TD Securities in Toronto. “It looks like global growth is starting to help Canada,” said Douglas, who predicts a July rate increase.
Canada’s dollar appreciated 0.6 percent to 97.18 cents per U.S. dollar at 4:43 p.m. in Toronto, from 97.74 on Feb. 25. It touched 97.10 cents, the strongest level since Nov. 19, 2007. One Canadian dollar purchases $1.0291.
Faster Growth
The June bankers’ acceptance contract yield, which is tied to forecasts about the central bank rate, rose to 1.49 percent today from 1.45 percent on Feb. 25. Government 10-year bonds fell for the first time in seven days.
Carney told reporters at a G-20 meeting in Paris Feb. 19 that fourth-quarter growth could be faster than the 2.3 percent rate the bank had forecast in January.
Statistics Canada also reported today that the country’s fourth-quarter current account deficit narrowed to C$11 billion from a revised record C$17 billion shortfall. Economists predicted a C$9.7 billion deficit the measure of trade in goods, investment and services. The trade balance swung to a C$523 million surplus from a record deficit of C$6.42 billion in the third quarter, as exports rose and imports fell.
On a monthly basis, gross domestic product rose 0.5 percent in December, the fastest pace in nine months, as oil and gas companies boosted production. Economists forecast a 0.3 percent gain based on the median of 21 responses to a Bloomberg survey.
Clock Ticking
“The clock is beginning to tick down on the bank’s ability to hold off interest-rate hikes,” said Avery Shenfeld, chief economist at CIBC World Markets in Toronto. “Another strong quarter and the Bank of Canada has to start moving,” said Shenfeld, who said the January-to-March expansion will match the fourth quarter increase.
Companies such as Suncor Energy Inc. and Canadian National Railway Co. are boosting investment as the recovery takes hold. Rio Tinto Group, the world’s third-largest mining company, approved a $277 million expansion at its Iron Ore Co. of Canada unit on Feb. 8, to increase output as prices rise.
Exports, which equaled 32 percent of Canada’s economy in 2009, rose 4 percent in the fourth quarter -- the biggest percentage gain since the second quarter of 2004. Crude oil shipments rose 30 percent to a record.
Imports of goods and services advanced 0.1 percent, slowing from the third-quarter pace of 1.9 percent, today’s report said.
The gains in trade helped Canada exceed the U.S. fourth- quarter growth rate of 2.8 percent that was reported by the Commerce Department in Washington Feb. 25. The increase also comes as the Canadian currency traded close to parity with the U.S. dollar.
Regain Competitiveness
Carney has said companies must boost investment to regain lost competitiveness and predicts Canada’s recovery will be led by exports and business investment over the next two years as government stimulus spending wanes and consumer spending slows.
Business investment in plant and equipment rose 2.5 percent between October and December, the fourth straight increase. Inventories fell by C$5.34 billion in the fourth quarter, versus a C$18.7 billion increase in the third quarter.
Canadian Prime Minister Stephen Harper’s government is scheduled to present a budget next month, and Finance Minister Jim Flaherty said Feb. 25 he will avoid major new spending measures and focus on keeping taxes low as a two-year stimulus package expires. The Conservatives lack a majority of seats in the House of Commons and need support of at least one opposition party to pass the budget and avoid an early election.
Gaining Momentum
The report shows Canada’s recovery is gaining momentum, Industry Minister Tony Clement told reporters in Ottawa today, adding the economy remains fragile given “international factors.”
Consumer spending rose 1.2 percent in the fourth quarter, the fastest in three years and up from the third-quarter pace of 0.7 percent. Purchases of new and used cars rose 3.8 percent and furniture spending rose 0.9 percent after two prior declines.
Housing investment fell 0.2 between October and December, the second straight decline. Government spending rose 0.8 percent.
Gross domestic product in the world’s 10th-largest economy expanded at a 3.3 percent annual pace in the fourth quarter following a 1.8 percent expansion in the previous three months that was higher than initially estimated, Statistics Canada said today in Ottawa. Economists predicted a 3 percent fourth-quarter gain, according to the median of 23 estimates gathered by Bloomberg News.
The country’s dollar reached the highest in more than three years as the report boosted confidence that Bank of Canada Governor Mark Carney will raise interest rates later this year. Economists predict the key rate will remain 1 percent at tomorrow’s announcement and rise in the second quarter according to economists surveyed by Bloomberg News.
“There is pretty nice momentum going into the first quarter,” said Jacqui Douglas, a senior economics and currency strategist at TD Securities in Toronto. “It looks like global growth is starting to help Canada,” said Douglas, who predicts a July rate increase.
Canada’s dollar appreciated 0.6 percent to 97.18 cents per U.S. dollar at 4:43 p.m. in Toronto, from 97.74 on Feb. 25. It touched 97.10 cents, the strongest level since Nov. 19, 2007. One Canadian dollar purchases $1.0291.
Faster Growth
The June bankers’ acceptance contract yield, which is tied to forecasts about the central bank rate, rose to 1.49 percent today from 1.45 percent on Feb. 25. Government 10-year bonds fell for the first time in seven days.
Carney told reporters at a G-20 meeting in Paris Feb. 19 that fourth-quarter growth could be faster than the 2.3 percent rate the bank had forecast in January.
Statistics Canada also reported today that the country’s fourth-quarter current account deficit narrowed to C$11 billion from a revised record C$17 billion shortfall. Economists predicted a C$9.7 billion deficit the measure of trade in goods, investment and services. The trade balance swung to a C$523 million surplus from a record deficit of C$6.42 billion in the third quarter, as exports rose and imports fell.
On a monthly basis, gross domestic product rose 0.5 percent in December, the fastest pace in nine months, as oil and gas companies boosted production. Economists forecast a 0.3 percent gain based on the median of 21 responses to a Bloomberg survey.
Clock Ticking
“The clock is beginning to tick down on the bank’s ability to hold off interest-rate hikes,” said Avery Shenfeld, chief economist at CIBC World Markets in Toronto. “Another strong quarter and the Bank of Canada has to start moving,” said Shenfeld, who said the January-to-March expansion will match the fourth quarter increase.
Companies such as Suncor Energy Inc. and Canadian National Railway Co. are boosting investment as the recovery takes hold. Rio Tinto Group, the world’s third-largest mining company, approved a $277 million expansion at its Iron Ore Co. of Canada unit on Feb. 8, to increase output as prices rise.
Exports, which equaled 32 percent of Canada’s economy in 2009, rose 4 percent in the fourth quarter -- the biggest percentage gain since the second quarter of 2004. Crude oil shipments rose 30 percent to a record.
Imports of goods and services advanced 0.1 percent, slowing from the third-quarter pace of 1.9 percent, today’s report said.
The gains in trade helped Canada exceed the U.S. fourth- quarter growth rate of 2.8 percent that was reported by the Commerce Department in Washington Feb. 25. The increase also comes as the Canadian currency traded close to parity with the U.S. dollar.
Regain Competitiveness
Carney has said companies must boost investment to regain lost competitiveness and predicts Canada’s recovery will be led by exports and business investment over the next two years as government stimulus spending wanes and consumer spending slows.
Business investment in plant and equipment rose 2.5 percent between October and December, the fourth straight increase. Inventories fell by C$5.34 billion in the fourth quarter, versus a C$18.7 billion increase in the third quarter.
Canadian Prime Minister Stephen Harper’s government is scheduled to present a budget next month, and Finance Minister Jim Flaherty said Feb. 25 he will avoid major new spending measures and focus on keeping taxes low as a two-year stimulus package expires. The Conservatives lack a majority of seats in the House of Commons and need support of at least one opposition party to pass the budget and avoid an early election.
Gaining Momentum
The report shows Canada’s recovery is gaining momentum, Industry Minister Tony Clement told reporters in Ottawa today, adding the economy remains fragile given “international factors.”
Consumer spending rose 1.2 percent in the fourth quarter, the fastest in three years and up from the third-quarter pace of 0.7 percent. Purchases of new and used cars rose 3.8 percent and furniture spending rose 0.9 percent after two prior declines.
Housing investment fell 0.2 between October and December, the second straight decline. Government spending rose 0.8 percent.
Singh Puts Burden on RBI to Tame Prices as India Plans Spending, Tax Cuts
India’s plans to lower income taxes, increase wages and boost spending risk fueling price gains that will force the central bank to raise interest rates further.
Finance Minister Pranab Mukherjee yesterday unveiled plans to increase spending by 13.4 percent to 12.6 trillion rupees ($278.3 billion) for the financial year starting April 1. The government is boosting incomes through wider exemptions from individual tax payments, reduced costs for some housing loans and the allocation of 1.44 trillion rupees in subsidies.
“The budget hasn’t done enough to curb price pressures and the central bank may have to continue to do the heavy lifting to slow inflation,” said Sonal Varma, an economist at Nomura Holdings Inc. in Mumbai. “More rate actions are in the offing starting this month.”
Prime Minister Manmohan Singh’s government faces five state elections this year and said last week that its “foremost” priority is to curb inflation, which reduces purchasing power in a nation where the World Bank estimates more than three-quarters of the people live on less than $2 a day. The central bank has raised its benchmark rate seven times in the past year and signaled more increases at its last meeting in January.
Stocks Gain
The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 3.5 percent at the 3:30 p.m. close in Mumbai. The Sensex has lost 10 percent this year, the world’s fourth-worst performing benchmark index, on concern government measures to quell inflation will hurt economic growth.
The yield on the 8.13 percent bond due in September 2022 was little changed at 8.09 percent as of 4 p.m. in Mumbai after dropping five basis points yesterday, according to the central bank’s trading system.
“India’s government is likely to face a challenging year, trying to maintain economic growth, control inflation, and achieve fiscal consolidation,” Takahira Ogawa, a credit analyst at Standard & Poor’s Ratings Services, said in an e-mail today. “The government may struggle to meet its fiscal deficit target for 2011-2012 as pressure to step up spending mounts.”
India’s $1.3 trillion economy expanded 8.2 percent last quarter, making it the fastest-growing major economy after China, government figures showed yesterday. The benchmark wholesale- price inflation rate averaged 9.4 percent in the nine months through December, the most in the past decade, the finance ministry said in a report on Feb. 25.
Corruption Allegations
Singh’s budget must be approved by India’s parliament, where the ruling coalition has been battling opposition protests over corruption allegations for months. The final parliament session of 2010 was the least productive in 25 years.
Even as he reduced the income-tax burden, Mukherjee moved to boost levies in other areas that might contribute to price pressures. The finance chief included more services under the tax net to lift revenue. Taxes would now be collected from air- conditioned restaurants, hotels, airlines and hospitals.
He also imposed an excise duty of 10 percent on branded garments and raised the levy on drugs, textiles and medical equipment to 5 percent from 4 percent. Cipla Ltd., an Indian drugmaker, plans to pass on the increase in excise duty on medicines to customers, its Chief Financial Officer S. Radhakrishnan said yesterday.
“I doubt the budget has anything very concrete to dent inflation,” said Samiran Chakraborty, a Mumbai-based chief economist at Standard Chartered Plc. “The burden of controlling inflation will be more on the monetary policy in the near term.”
Tax Relief
From the next financial year, incomes below 180,000 rupees won’t be taxed, higher than the previous threshold of 160,000 rupees. Mukherjee also announced a 1 percent interest-rate subsidy for housing loans up to 1.5 million rupees and said the government will give cash to the poor to buy kerosene.
India’s state-controlled railway operator last week said it will leave passenger and freight charges unchanged to help tackle inflation that accelerated to the fastest in a decade.
“The central bank is getting some help from the budget but not very much,” said Leif Eskesen, an economist at HSBC Holdings Plc in Singapore. “It has to carry the burden on really addressing the near-term inflation pressures.”
India’s manufacturing grew in February at the fastest pace in three months, according to the purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics, adding pressure on the central bank to increase rates further.
Growth Forecast
The finance ministry predicts GDP may grow as much as 9.25 percent in the year starting April 1. The government estimates growth in revenue will outpace outlays, forecasting the budget deficit will narrow to 4.6 percent of gross domestic product in the financial year starting April 1 from 5.1 percent of GDP in the previous year.
“The budget may be difficult to deliver in practice as growth assumptions are quite optimistic and they are relying on a significant compression of non-planned spending including a decline in the subsidy bill,” HSBC’s Eskensen said. “If delivered as planned, it will be contractionary. There may be more subsidy outlays later in the year.”
Mukherjee cut taxes and stepped up government spending in 2008 and 2009 to provide stimulus worth more than 4 percent of GDP to cushion the Indian economy from the impact of the global financial crisis.
‘Massive Withdrawal’
If the 4.6 percent fiscal deficit target “is met, then it will be a massive withdrawal of stimulus,” said Jahangir Aziz, an economist at JPMorgan Chase & Co. in Mumbai. “It will be largest fiscal consolidation, if it is done, in the history of India.”
The government plans debt sales of 4.17 trillion rupees in the next financial year, less than the estimated 4.47 trillion rupees this year.
The Reserve Bank is next expected to release its monetary policy decision on March 17. Governor Duvvuri Subbarao on Feb. 26 declined to comment on whether the central bank would take interest-rate action between scheduled monetary policy announcement days.
“Growth will slow down next year as the Reserve Bank of India tightening takes effect,” said Dharmakirti Joshi, a Mumbai-based economist at Crisil Ltd., the local unit of a Standard & Poor’s Ratings Services. “The government is taking steps to ease inflation in the budget and the RBI, on its part, will raise interest rates further.”
Finance Minister Pranab Mukherjee yesterday unveiled plans to increase spending by 13.4 percent to 12.6 trillion rupees ($278.3 billion) for the financial year starting April 1. The government is boosting incomes through wider exemptions from individual tax payments, reduced costs for some housing loans and the allocation of 1.44 trillion rupees in subsidies.
“The budget hasn’t done enough to curb price pressures and the central bank may have to continue to do the heavy lifting to slow inflation,” said Sonal Varma, an economist at Nomura Holdings Inc. in Mumbai. “More rate actions are in the offing starting this month.”
Prime Minister Manmohan Singh’s government faces five state elections this year and said last week that its “foremost” priority is to curb inflation, which reduces purchasing power in a nation where the World Bank estimates more than three-quarters of the people live on less than $2 a day. The central bank has raised its benchmark rate seven times in the past year and signaled more increases at its last meeting in January.
Stocks Gain
The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 3.5 percent at the 3:30 p.m. close in Mumbai. The Sensex has lost 10 percent this year, the world’s fourth-worst performing benchmark index, on concern government measures to quell inflation will hurt economic growth.
The yield on the 8.13 percent bond due in September 2022 was little changed at 8.09 percent as of 4 p.m. in Mumbai after dropping five basis points yesterday, according to the central bank’s trading system.
“India’s government is likely to face a challenging year, trying to maintain economic growth, control inflation, and achieve fiscal consolidation,” Takahira Ogawa, a credit analyst at Standard & Poor’s Ratings Services, said in an e-mail today. “The government may struggle to meet its fiscal deficit target for 2011-2012 as pressure to step up spending mounts.”
India’s $1.3 trillion economy expanded 8.2 percent last quarter, making it the fastest-growing major economy after China, government figures showed yesterday. The benchmark wholesale- price inflation rate averaged 9.4 percent in the nine months through December, the most in the past decade, the finance ministry said in a report on Feb. 25.
Corruption Allegations
Singh’s budget must be approved by India’s parliament, where the ruling coalition has been battling opposition protests over corruption allegations for months. The final parliament session of 2010 was the least productive in 25 years.
Even as he reduced the income-tax burden, Mukherjee moved to boost levies in other areas that might contribute to price pressures. The finance chief included more services under the tax net to lift revenue. Taxes would now be collected from air- conditioned restaurants, hotels, airlines and hospitals.
He also imposed an excise duty of 10 percent on branded garments and raised the levy on drugs, textiles and medical equipment to 5 percent from 4 percent. Cipla Ltd., an Indian drugmaker, plans to pass on the increase in excise duty on medicines to customers, its Chief Financial Officer S. Radhakrishnan said yesterday.
“I doubt the budget has anything very concrete to dent inflation,” said Samiran Chakraborty, a Mumbai-based chief economist at Standard Chartered Plc. “The burden of controlling inflation will be more on the monetary policy in the near term.”
Tax Relief
From the next financial year, incomes below 180,000 rupees won’t be taxed, higher than the previous threshold of 160,000 rupees. Mukherjee also announced a 1 percent interest-rate subsidy for housing loans up to 1.5 million rupees and said the government will give cash to the poor to buy kerosene.
India’s state-controlled railway operator last week said it will leave passenger and freight charges unchanged to help tackle inflation that accelerated to the fastest in a decade.
“The central bank is getting some help from the budget but not very much,” said Leif Eskesen, an economist at HSBC Holdings Plc in Singapore. “It has to carry the burden on really addressing the near-term inflation pressures.”
India’s manufacturing grew in February at the fastest pace in three months, according to the purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics, adding pressure on the central bank to increase rates further.
Growth Forecast
The finance ministry predicts GDP may grow as much as 9.25 percent in the year starting April 1. The government estimates growth in revenue will outpace outlays, forecasting the budget deficit will narrow to 4.6 percent of gross domestic product in the financial year starting April 1 from 5.1 percent of GDP in the previous year.
“The budget may be difficult to deliver in practice as growth assumptions are quite optimistic and they are relying on a significant compression of non-planned spending including a decline in the subsidy bill,” HSBC’s Eskensen said. “If delivered as planned, it will be contractionary. There may be more subsidy outlays later in the year.”
Mukherjee cut taxes and stepped up government spending in 2008 and 2009 to provide stimulus worth more than 4 percent of GDP to cushion the Indian economy from the impact of the global financial crisis.
‘Massive Withdrawal’
If the 4.6 percent fiscal deficit target “is met, then it will be a massive withdrawal of stimulus,” said Jahangir Aziz, an economist at JPMorgan Chase & Co. in Mumbai. “It will be largest fiscal consolidation, if it is done, in the history of India.”
The government plans debt sales of 4.17 trillion rupees in the next financial year, less than the estimated 4.47 trillion rupees this year.
The Reserve Bank is next expected to release its monetary policy decision on March 17. Governor Duvvuri Subbarao on Feb. 26 declined to comment on whether the central bank would take interest-rate action between scheduled monetary policy announcement days.
“Growth will slow down next year as the Reserve Bank of India tightening takes effect,” said Dharmakirti Joshi, a Mumbai-based economist at Crisil Ltd., the local unit of a Standard & Poor’s Ratings Services. “The government is taking steps to ease inflation in the budget and the RBI, on its part, will raise interest rates further.”
Indonesia Inflation Slows, Easing Pressure to Raise Rate at March Meeting
Indonesia’s inflation slowed for the first time in four months in February, prompting Bank of America Merrill Lynch to delay its forecast for an interest-rate increase to April from this week.
Consumer prices in Southeast Asia’s biggest economy rose 6.84 percent last month from a year earlier, after gaining 7.02 percent in the previous month, the Central Bureau of Statistics said in Jakarta today. That’s less than the 7.13 percent median forecast in a Bloomberg News survey of 15 economists.
Bank Indonesia, due to decide on monetary policy March 4, raised its reference rate by a quarter point to 6.75 percent in February. Deputy Governor Hartadi Sarwono said last week the central bank may refrain from adding to the increase for now as efforts to tame inflation are sufficient and the government’s suggestion to delay phasing out subsidized fuel sales may cap price gains.
“We have changed our call, given the lower headline inflation reading and delay in the fuel-subsidy rationing scheme to July,” said Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch. “The Deputy Governor’s dovish remarks last week also increased the likelihood of a hold decision.”
Bank Indonesia may keep the key rate unchanged this week before monetary tightening continues in April as rising oil prices increase the risks to inflation, Chua said.
Rupiah Performance
The rupiah was little changed at 8,819 per dollar as of 3:01 p.m. in Jakarta, according to data compiled by Bloomberg.
Half of the 16 economists surveyed by Bloomberg News expect Bank Indonesia to keep the reference rate unchanged this week, while the other eight expect an increase to 7 percent, according to a Bloomberg News survey.
Food prices fell for the first time in four years in February, Rusman Heriawan, chairman of the Central Bureau of Statistics, said in Jakarta today. Inflation in March may be “low” due to deflation in food prices, he said.
“We aren’t surprised at February’s numbers because Bank Indonesia has allowed the rupiah to strengthen, so pressure on imported inflation is reduced,” said David E. Sumual, an economist at PT Bank Central Asia. “The government’s removal of import duties on some food items also reduced pressure.”
Core Inflation
Still, Indonesia should be wary of accelerating core inflation, he said. “It would be strange if Bank Indonesia held interest rates because it has said it will focus on core inflation.”
Consumer prices in Indonesia, Southeast Asia’s largest economy, climbed 0.13 percent in February from the previous month. Year-on-year core inflation was 4.36 percent, gaining from 4.18 percent the previous month.
From today, commercial banks will be required to boost their foreign currency reserves to 5 percent from 1 percent as part of efforts to absorb excess cash. That will increase to 8 percent in June. The move will absorb $3 billion to $4 billion, Sarwono said last week.
President Susilo Bambang Yudhoyono seeks to expand the economy at an annual average rate of 6.6 percent and create 10.7 million jobs by the end of his second term in 2014, including through attempts to boost investment in infrastructure.
Indonesia’s economy grew at the fastest pace in six years last quarter to 6.9 percent. Fitch Ratings on Feb. 24 raised its outlook on the country’s debt rating to positive from stable, affirming its BB+ rating, one level below investment grade.
Indonesia’s exports rose 24.7 percent in January from a year earlier, the statistics office said. Imports surged 32.2 percent.
Consumer prices in Southeast Asia’s biggest economy rose 6.84 percent last month from a year earlier, after gaining 7.02 percent in the previous month, the Central Bureau of Statistics said in Jakarta today. That’s less than the 7.13 percent median forecast in a Bloomberg News survey of 15 economists.
Bank Indonesia, due to decide on monetary policy March 4, raised its reference rate by a quarter point to 6.75 percent in February. Deputy Governor Hartadi Sarwono said last week the central bank may refrain from adding to the increase for now as efforts to tame inflation are sufficient and the government’s suggestion to delay phasing out subsidized fuel sales may cap price gains.
“We have changed our call, given the lower headline inflation reading and delay in the fuel-subsidy rationing scheme to July,” said Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch. “The Deputy Governor’s dovish remarks last week also increased the likelihood of a hold decision.”
Bank Indonesia may keep the key rate unchanged this week before monetary tightening continues in April as rising oil prices increase the risks to inflation, Chua said.
Rupiah Performance
The rupiah was little changed at 8,819 per dollar as of 3:01 p.m. in Jakarta, according to data compiled by Bloomberg.
Half of the 16 economists surveyed by Bloomberg News expect Bank Indonesia to keep the reference rate unchanged this week, while the other eight expect an increase to 7 percent, according to a Bloomberg News survey.
Food prices fell for the first time in four years in February, Rusman Heriawan, chairman of the Central Bureau of Statistics, said in Jakarta today. Inflation in March may be “low” due to deflation in food prices, he said.
“We aren’t surprised at February’s numbers because Bank Indonesia has allowed the rupiah to strengthen, so pressure on imported inflation is reduced,” said David E. Sumual, an economist at PT Bank Central Asia. “The government’s removal of import duties on some food items also reduced pressure.”
Core Inflation
Still, Indonesia should be wary of accelerating core inflation, he said. “It would be strange if Bank Indonesia held interest rates because it has said it will focus on core inflation.”
Consumer prices in Indonesia, Southeast Asia’s largest economy, climbed 0.13 percent in February from the previous month. Year-on-year core inflation was 4.36 percent, gaining from 4.18 percent the previous month.
From today, commercial banks will be required to boost their foreign currency reserves to 5 percent from 1 percent as part of efforts to absorb excess cash. That will increase to 8 percent in June. The move will absorb $3 billion to $4 billion, Sarwono said last week.
President Susilo Bambang Yudhoyono seeks to expand the economy at an annual average rate of 6.6 percent and create 10.7 million jobs by the end of his second term in 2014, including through attempts to boost investment in infrastructure.
Indonesia’s economy grew at the fastest pace in six years last quarter to 6.9 percent. Fitch Ratings on Feb. 24 raised its outlook on the country’s debt rating to positive from stable, affirming its BB+ rating, one level below investment grade.
Indonesia’s exports rose 24.7 percent in January from a year earlier, the statistics office said. Imports surged 32.2 percent.
Carney May Keep 1% Canada Lending Rate, `Carefully Consider' Future Moves
The Bank of Canada will probably keep its benchmark interest rate at 1 percent for a fourth consecutive meeting today, and reiterate that any future increases will be “carefully considered.”
The target rate for overnight loans between commercial banks has been unchanged since September, and all 29 economists surveyed by Bloomberg News predict no change today.
The recovery in the world’s 10th-largest economy was bolstered by the biggest jump in exports since 2004 during the fourth quarter and job creation in January that quadrupled forecasts. Central bank Governor Mark Carney has said the inflation will stay under control because the economy will have “slack” until the end of 2012, suggesting no interest-rate increase until May, said Royal Bank of Canada chief economist Craig Wright.
“I don’t think they will overplay the recovery story,” said Wright, who works at the country’s biggest bank by assets, adding that the Bank of Canada would not likely want to increase rates much sooner or much more aggressively than the U.S. Federal Reserve.
Canada’s rate decision will be followed in the next two weeks by all other central banks from the Group of Seven nations, including the European Central Bank March 3 and the Fed and Bank of Japan on March 15. Canada will raise rates in the second quarter while the Fed will stay on hold until the fourth quarter, according to Bloomberg surveys of economists.
Exports Lead Growth
Canada’s gross domestic product grew at a 3.3 percent annualized pace in the fourth quarter, led by exports and consumer spending. The trade gains came as the country’s dollar traded close to parity with the U.S. dollar. The central bank said in January that persistent currency strength and weak productivity growth were a threat to the recovery, along with Europe’s fiscal crisis.
The bank increased its key policy rate three times last year to 1 percent from a record 0.25 percent on signs Canada was exiting a recession. Further interest-rate increases could boost the Canadian dollar and curb shipments abroad from companies such as auto-parts maker Magna International Inc.
The Canadian dollar rose to a three-year high after yesterday’s gross domestic product report from Statistics Canada, which followed the agency’s Feb. 4 estimate that 69,200 jobs were created in January.
“They have to acknowledge that Canadian growth is running ahead of their last projection,” said Avery Shenfeld, chief economist at CIBC World Markets in Toronto. Today’s statement will also likely mention political turmoil in the Middle East that has driven up oil prices, said Shenfeld, who also predicts a May rate increase.
Higher Oil Prices
Demonstrations in nations from Libya to Bahrain have led to higher oil prices that threaten to slow economic growth. Crude oil rose 14 percent last week, the most in two years.
“What I see is a lot of uncertainty” in the economy, said Merrell Moorhead, a business planning consultant in Halifax, Nova Scotia. “Most businesses would say don’t do anything sudden” on interest rates, he said.
Prime Minister Stephen Harper’s plan to support the recovery through corporate tax cuts as government stimulus measures expire could lead to an election. Finance Minister Jim Flaherty is scheduled to present a budget this month and needs the support of one opposition party for it to pass, while Liberal Party Leader Michael Ignatieff said he favors spending on education and worker training over tax cuts passed in previous budgets.
The Bank of Canada in January predicted the economy grew at a 2.3 percent pace in the fourth quarter and will expand 2.4 percent this year.
The target rate for overnight loans between commercial banks has been unchanged since September, and all 29 economists surveyed by Bloomberg News predict no change today.
The recovery in the world’s 10th-largest economy was bolstered by the biggest jump in exports since 2004 during the fourth quarter and job creation in January that quadrupled forecasts. Central bank Governor Mark Carney has said the inflation will stay under control because the economy will have “slack” until the end of 2012, suggesting no interest-rate increase until May, said Royal Bank of Canada chief economist Craig Wright.
“I don’t think they will overplay the recovery story,” said Wright, who works at the country’s biggest bank by assets, adding that the Bank of Canada would not likely want to increase rates much sooner or much more aggressively than the U.S. Federal Reserve.
Canada’s rate decision will be followed in the next two weeks by all other central banks from the Group of Seven nations, including the European Central Bank March 3 and the Fed and Bank of Japan on March 15. Canada will raise rates in the second quarter while the Fed will stay on hold until the fourth quarter, according to Bloomberg surveys of economists.
Exports Lead Growth
Canada’s gross domestic product grew at a 3.3 percent annualized pace in the fourth quarter, led by exports and consumer spending. The trade gains came as the country’s dollar traded close to parity with the U.S. dollar. The central bank said in January that persistent currency strength and weak productivity growth were a threat to the recovery, along with Europe’s fiscal crisis.
The bank increased its key policy rate three times last year to 1 percent from a record 0.25 percent on signs Canada was exiting a recession. Further interest-rate increases could boost the Canadian dollar and curb shipments abroad from companies such as auto-parts maker Magna International Inc.
The Canadian dollar rose to a three-year high after yesterday’s gross domestic product report from Statistics Canada, which followed the agency’s Feb. 4 estimate that 69,200 jobs were created in January.
“They have to acknowledge that Canadian growth is running ahead of their last projection,” said Avery Shenfeld, chief economist at CIBC World Markets in Toronto. Today’s statement will also likely mention political turmoil in the Middle East that has driven up oil prices, said Shenfeld, who also predicts a May rate increase.
Higher Oil Prices
Demonstrations in nations from Libya to Bahrain have led to higher oil prices that threaten to slow economic growth. Crude oil rose 14 percent last week, the most in two years.
“What I see is a lot of uncertainty” in the economy, said Merrell Moorhead, a business planning consultant in Halifax, Nova Scotia. “Most businesses would say don’t do anything sudden” on interest rates, he said.
Prime Minister Stephen Harper’s plan to support the recovery through corporate tax cuts as government stimulus measures expire could lead to an election. Finance Minister Jim Flaherty is scheduled to present a budget this month and needs the support of one opposition party for it to pass, while Liberal Party Leader Michael Ignatieff said he favors spending on education and worker training over tax cuts passed in previous budgets.
The Bank of Canada in January predicted the economy grew at a 2.3 percent pace in the fourth quarter and will expand 2.4 percent this year.
Japan's Jobless Rate Stays at 4.9% as Payrolls Climb, Signaling Recovery
Japan’s unemployment rate held steady while payrolls rose in January, adding to signs the nation’s recovery is gaining pace after a temporary slowdown.
The jobless rate remained unchanged from the previous month at 4.9 percent, the statistics bureau said today in Tokyo. That figure matched the median estimate of 29 economists surveyed by Bloomberg News.
Honda Motor Co. is among companies saying they will boost hiring as Japan’s export-driven recovery gains steam. Improving sentiment among consumers about their job prospects helped household confidence rebound from a 10-month low in January, when retail sales unexpectedly increased.
“The job market has been recovering on the whole, even if the improvements have been slow,” Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo, said before the report. “With corporate profits recovering, we should continue to see stable demand for labor.”
While the world’s third-largest economy contracted last quarter, gross domestic product will probably expand 1.47 percent in the year starting April, according to the average forecast of 43 economists in a survey by the government- affiliated Economic Planning Association released on Feb. 10.
Payrolls Increase
The number of people with work increased by 170,000 in January from a month earlier while those outside the workforce decreased 0.4 percent, seasonally adjusted figures show.
A separate report today showed that the job-to-applicant ratio rose, indicating that more jobs are becoming available. There were 61 positions for every 100 candidates in January, compared with a revised 58 positions in December, the Labor Ministry said.
Honda said last week it will hire 600 college and high school graduates in the year starting April 2012, an increase from the 588 the company’s planning to take on in fiscal year 2011. Japan’s third-largest automaker increased its profit forecast for the year ending this month by 6 percent in January, helped by rising U.S. auto sales and Asian motorcycle demand.
The jobless rate remained unchanged from the previous month at 4.9 percent, the statistics bureau said today in Tokyo. That figure matched the median estimate of 29 economists surveyed by Bloomberg News.
Honda Motor Co. is among companies saying they will boost hiring as Japan’s export-driven recovery gains steam. Improving sentiment among consumers about their job prospects helped household confidence rebound from a 10-month low in January, when retail sales unexpectedly increased.
“The job market has been recovering on the whole, even if the improvements have been slow,” Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo, said before the report. “With corporate profits recovering, we should continue to see stable demand for labor.”
While the world’s third-largest economy contracted last quarter, gross domestic product will probably expand 1.47 percent in the year starting April, according to the average forecast of 43 economists in a survey by the government- affiliated Economic Planning Association released on Feb. 10.
Payrolls Increase
The number of people with work increased by 170,000 in January from a month earlier while those outside the workforce decreased 0.4 percent, seasonally adjusted figures show.
A separate report today showed that the job-to-applicant ratio rose, indicating that more jobs are becoming available. There were 61 positions for every 100 candidates in January, compared with a revised 58 positions in December, the Labor Ministry said.
Honda said last week it will hire 600 college and high school graduates in the year starting April 2012, an increase from the 588 the company’s planning to take on in fiscal year 2011. Japan’s third-largest automaker increased its profit forecast for the year ending this month by 6 percent in January, helped by rising U.S. auto sales and Asian motorcycle demand.
Dudley Says `Considerably Brighter' Outlook No Reason to Withdraw Stimulus
Federal Reserve Bank of New York President William Dudley said the “considerably brighter” economic outlook isn’t yet reason for the central bank to withdraw its record monetary stimulus.
“We provided additional monetary policy stimulus via the asset purchase program in order to help ensure the recovery did regain momentum,” Dudley said today in a speech in New York. “A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course.”
Dudley, who is also the vice chairman of the policy-setting Federal Open Market Committee, said the economy is “finally showing more signs of life” because household and financial- company balance sheets are improving, monetary and fiscal policy have “provided support” and growth overseas has led to increased demand for U.S. goods and services.
The Fed in November announced a plan to buy $600 billion of Treasuries through June in a second round of so-called quantitative easing aimed at combating too-low inflation, stimulating economic growth and creating jobs. Chairman Ben S. Bernanke plans to deliver a semiannual report on monetary policy to the Senate Banking Committee tomorrow and intends to testify before the House Financial Services Committee on March 2.
While there are “signs that core inflation is now stabilizing,” the U.S. economy needs “sustained strong employment growth in order to be certain that this virtuous circle has become firmly established,” Dudley said.
Unemployment Declines
The unemployment rate fell to 9 percent in January, its biggest two-month drop since 1958. Joblessness rose above 9 percent in May 2009, beginning the longest period of unemployment at that level or higher since monthly records began in 1948.
“We also have to be careful not to be overly optimistic about the growth outlook,” Dudley said. “The coast is not completely clear -- the healing process in the aftermath of the crisis takes time and there are still several areas of vulnerability and weakness.”
The housing industry is still “unusually weak,” state and local governments are “under stress,” and the U.S. may face “further shocks from abroad,” such as from sovereign debt markets or political events in the Middle East, Dudley said.
Boston Fed President Eric Rosengren also addressed threats to steady growth, saying today that regular “stress tests” may help financial institutions prepare for unexpected risks, such as fallout from a sovereign debt crisis or a disruption to the economy from state and local governments.
‘Better Job’
“We need to do a much better job of using so-called stress tests to challenge commonly held views, so that boards of directors and regulators of firms better understand the fundamental drivers of risks in organizations and in the financial system,” Rosengren said in a speech in Boston.
The Fed has ordered the 19 largest U.S. banks to test their capital levels against a scenario of renewed recession. Such stress-testing is mandated by the Dodd-Frank Act, signed into law by President Barack Obama in July, overhauling regulation of the financial system with the goal of reducing the risks of future financial crises.
Dudley affirmed in his speech a stance on borrowing costs that the FOMC has held since March 2009.
“Barring a sustained period of economic growth so strong that the economy’s substantial excess slack is quickly exhausted or a noteworthy rise in inflation expectations, the outlook implies that short-term interest rates are likely to remain unusually low for ‘an extended period,’” he said.
Near Zero
The FOMC has kept its benchmark interest rate near zero since December 2008.
U.S. stocks rose on improving economic data, and the benchmark 10-year Treasury note reached the highest level in almost a month as unrest in Libya drove investors to the safety of U.S. debt. The Standard & Poor’s 500 Index of stocks climbed 0.6 percent to 1,328.38 at 11:04 a.m. in New York.
“The economy can be allowed to grow rapidly for quite some time before there is a real risk that shrinking slack will result in a rise in underlying inflation,” Dudley said.
The core inflation gauge watched by the Fed, which excludes food and energy prices, increased 0.8 percent in the 12 months through December, the smallest advance since records began in 1959.
Still, oil exceeded $100 a barrel last week amid unrest in the Middle East. Regular fuel, which in January was higher than the December average, jumped to $3.29 a gallon last week, the costliest since 2008, according to AAA, the nation’s biggest motoring organization.
Political Unrest
It’s important not to “over-react” to Middle East political unrest and its impact on commodity prices, Dudley said in response to audience questions.
The extent and duration of the surge in oil prices are unclear, and if they don’t “feed through” to inflation expectations and wages, then policy makers can be “more relaxed” about their impact on the economy, he said.
Dudley said that 9 percent unemployment and industrial capacity use that’s lower than the long-term average point to “considerable” economic “slack.”
The main risk to inflation is that expectations climb, which could happen if there was a “loss of confidence” in the U.S. central bank’s ability to withdraw its record stimulus in time to ward off a surge in prices, he said.
Will to Exit
In order to address this risk, the Fed needs to “communicate effectively about its objectives” and its ability and will to exit, Dudley said.
“If inflation expectations were to become unanchored because Federal Reserve policy makers failed to communicate clearly, this would be a self-inflicted wound that would make our pursuit of the dual mandate of full employment and price stability more difficult,” Dudley said.
When the slack in the economy diminishes, the U.S. central bank will take action to “keep the economy from overheating,” Dudley said in response to audience questions.
“Once we get to the point where we can see that as likely happening,” we “will raise the interest on excess reserve rate,” he said. “This new tool is a viable tool for keeping the economy from overheating.”
“We provided additional monetary policy stimulus via the asset purchase program in order to help ensure the recovery did regain momentum,” Dudley said today in a speech in New York. “A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course.”
Dudley, who is also the vice chairman of the policy-setting Federal Open Market Committee, said the economy is “finally showing more signs of life” because household and financial- company balance sheets are improving, monetary and fiscal policy have “provided support” and growth overseas has led to increased demand for U.S. goods and services.
The Fed in November announced a plan to buy $600 billion of Treasuries through June in a second round of so-called quantitative easing aimed at combating too-low inflation, stimulating economic growth and creating jobs. Chairman Ben S. Bernanke plans to deliver a semiannual report on monetary policy to the Senate Banking Committee tomorrow and intends to testify before the House Financial Services Committee on March 2.
While there are “signs that core inflation is now stabilizing,” the U.S. economy needs “sustained strong employment growth in order to be certain that this virtuous circle has become firmly established,” Dudley said.
Unemployment Declines
The unemployment rate fell to 9 percent in January, its biggest two-month drop since 1958. Joblessness rose above 9 percent in May 2009, beginning the longest period of unemployment at that level or higher since monthly records began in 1948.
“We also have to be careful not to be overly optimistic about the growth outlook,” Dudley said. “The coast is not completely clear -- the healing process in the aftermath of the crisis takes time and there are still several areas of vulnerability and weakness.”
The housing industry is still “unusually weak,” state and local governments are “under stress,” and the U.S. may face “further shocks from abroad,” such as from sovereign debt markets or political events in the Middle East, Dudley said.
Boston Fed President Eric Rosengren also addressed threats to steady growth, saying today that regular “stress tests” may help financial institutions prepare for unexpected risks, such as fallout from a sovereign debt crisis or a disruption to the economy from state and local governments.
‘Better Job’
“We need to do a much better job of using so-called stress tests to challenge commonly held views, so that boards of directors and regulators of firms better understand the fundamental drivers of risks in organizations and in the financial system,” Rosengren said in a speech in Boston.
The Fed has ordered the 19 largest U.S. banks to test their capital levels against a scenario of renewed recession. Such stress-testing is mandated by the Dodd-Frank Act, signed into law by President Barack Obama in July, overhauling regulation of the financial system with the goal of reducing the risks of future financial crises.
Dudley affirmed in his speech a stance on borrowing costs that the FOMC has held since March 2009.
“Barring a sustained period of economic growth so strong that the economy’s substantial excess slack is quickly exhausted or a noteworthy rise in inflation expectations, the outlook implies that short-term interest rates are likely to remain unusually low for ‘an extended period,’” he said.
Near Zero
The FOMC has kept its benchmark interest rate near zero since December 2008.
U.S. stocks rose on improving economic data, and the benchmark 10-year Treasury note reached the highest level in almost a month as unrest in Libya drove investors to the safety of U.S. debt. The Standard & Poor’s 500 Index of stocks climbed 0.6 percent to 1,328.38 at 11:04 a.m. in New York.
“The economy can be allowed to grow rapidly for quite some time before there is a real risk that shrinking slack will result in a rise in underlying inflation,” Dudley said.
The core inflation gauge watched by the Fed, which excludes food and energy prices, increased 0.8 percent in the 12 months through December, the smallest advance since records began in 1959.
Still, oil exceeded $100 a barrel last week amid unrest in the Middle East. Regular fuel, which in January was higher than the December average, jumped to $3.29 a gallon last week, the costliest since 2008, according to AAA, the nation’s biggest motoring organization.
Political Unrest
It’s important not to “over-react” to Middle East political unrest and its impact on commodity prices, Dudley said in response to audience questions.
The extent and duration of the surge in oil prices are unclear, and if they don’t “feed through” to inflation expectations and wages, then policy makers can be “more relaxed” about their impact on the economy, he said.
Dudley said that 9 percent unemployment and industrial capacity use that’s lower than the long-term average point to “considerable” economic “slack.”
The main risk to inflation is that expectations climb, which could happen if there was a “loss of confidence” in the U.S. central bank’s ability to withdraw its record stimulus in time to ward off a surge in prices, he said.
Will to Exit
In order to address this risk, the Fed needs to “communicate effectively about its objectives” and its ability and will to exit, Dudley said.
“If inflation expectations were to become unanchored because Federal Reserve policy makers failed to communicate clearly, this would be a self-inflicted wound that would make our pursuit of the dual mandate of full employment and price stability more difficult,” Dudley said.
When the slack in the economy diminishes, the U.S. central bank will take action to “keep the economy from overheating,” Dudley said in response to audience questions.
“Once we get to the point where we can see that as likely happening,” we “will raise the interest on excess reserve rate,” he said. “This new tool is a viable tool for keeping the economy from overheating.”
Germany's Unemployment Shrinks Three Times as Fast as Economists Estimated
German unemployment plunged in February three times as fast as economists forecast, underlining the gulf between Europe’s biggest economy and the region’s peripheral countries.
The number of people out of work fell a seasonally adjusted 52,000 to 3.07 million, the lowest since September 1992, the Nuremberg-based Federal Labor Agency said today. Economists forecast a drop of 18,000, according to the median of 30 estimates in a Bloomberg News survey.
“The labour market recovery, which started around the middle of 2009, is continuing at an unabated pace as the German economy is powering ahead,” said Aline Schuiling, an economist at ABN Amro Bank NV in Amsterdam. Germany “remains the star performer of the eurozone.”
Germany’s shrinking joblessness is helping Chancellor Angela Merkel’s government meet a constitutionally imposed deficit ceiling in 2015, a year earlier than planned. Merkel plans to tout Germany’s belt-tightening at two European Union summits this month that aim to staunch the financial crisis that has forced Ireland and Greece to seek bailouts.
All European countries must take budget cutting “just as seriously as we do in Germany,” bolstering competitiveness to “maintain the confidence of financial markets” in the euro, Finance Minister Wolfgang Schaeuble said yesterday in a speech.
The euro climbed 0.19 percent after the jobless report to $1.3832 at 10:10 a.m. Frankfurt time, bringing the gain in the single currency to 3.3 percent so far this year.
Ireland, Spain
As governments in countries such as Portugal, Ireland, Greece and Spain cut spending to rein in budget deficits, German exports to Asia and stronger household spending are helping buoy the economic outlook. Business confidence rose in February to the highest since records for a reunified Germany began in 1991. Consumer confidence will increase to the highest level in three and a half years in March as growth fuels income expectations, Nuremberg-based market research company GfK said on Feb. 22.
Stuttgart-based Daimler AG said on Feb. 24 it will add 10,000 jobs, while Volkswagen AG, Europe’s biggest carmaker, plans to add 6,000. Robert Bosch GmbH, the world’s biggest automotive supplier, said Jan. 24 that it plans to add 16,500 jobs this year to satisfy a “boom in emerging markets.”
“Economic growth has broadened, sparking company spending in investment goods as well as solid growth in private consumption,” Rainer Sartoris, an economist at HSBC Trinkaus & Burkhardt in Dusseldorf, said in an interview.
Early Winter Onslaught
German joblessness has now declined for each of the last 19 months with the exception of December, when it rose by 1,000 amid the coldest winter in more than 40 years. The early onslaught of winter led to a rise in unemployment sooner than would normally be expected, helping the numbers in February, the Labor Agency said. An ageing workforce also lowered the number of those seeking work.
The adjusted jobless rate fell to 7.3 percent, the lowest since December 1991, down from a post-World War II high of 12.1 percent in March 2005.
Ireland’s unemployment more than tripled over the same period, to 13.4 percent in January from 4.1 percent in 2005, according to Eurostat data. The jobless rate in Spain was 20.3 percent in December, up from 8 percent in 2007; in Greece, it was 13.9 percent in November after 6.6 percent in 2008. Italy’s jobless rate held at 8.6 percent in January for a third month, close to a seven-year high.
‘Good-News Show’
In Germany, “a further drop in unemployment to below 7 percent in the course of this year looks very likely,” said Carsten Brzeski, an economist at ING Groep NV in Brussels. “Even if the German economy is still a far cry from full employment, the good-news show will continue.”
Using the latest data from the Paris-based Organization for Economic Cooperation and Development, Germany’s unemployment rate of 6.6 percent in December compared with an average in the- then 16-state euro region of 10 percent and 9.6 percent in the 27-nation EU. In France, Germany’s main EU trading partner, the rate was 9.7 percent, in the U.S. 9.4 percent, while the Group of Seven average was 8 percent.
Companies in Germany plan to hire as many as 300,000 workers this year, according to a survey of 28,000 firms by the DIHK industry and trade chambers group this month. Machine and electrical companies may add 80,000 jobs, the DIHK said.
Expansion by companies in Germany’s southern regions may already be crimped by a shortage of skilled labor. A January IHK industry and trade chamber poll of 3,800 companies in Bavaria showed that some 41 percent of local companies were failing to recruit skilled staff.
In January, the Labor Agency announced a 10-point plan through to 2025 to reduce shortages of skilled labor as regional offices reported 374,000 vacancies in technology as well as health and service sectors such as hotels and catering.
The number of people out of work fell a seasonally adjusted 52,000 to 3.07 million, the lowest since September 1992, the Nuremberg-based Federal Labor Agency said today. Economists forecast a drop of 18,000, according to the median of 30 estimates in a Bloomberg News survey.
“The labour market recovery, which started around the middle of 2009, is continuing at an unabated pace as the German economy is powering ahead,” said Aline Schuiling, an economist at ABN Amro Bank NV in Amsterdam. Germany “remains the star performer of the eurozone.”
Germany’s shrinking joblessness is helping Chancellor Angela Merkel’s government meet a constitutionally imposed deficit ceiling in 2015, a year earlier than planned. Merkel plans to tout Germany’s belt-tightening at two European Union summits this month that aim to staunch the financial crisis that has forced Ireland and Greece to seek bailouts.
All European countries must take budget cutting “just as seriously as we do in Germany,” bolstering competitiveness to “maintain the confidence of financial markets” in the euro, Finance Minister Wolfgang Schaeuble said yesterday in a speech.
The euro climbed 0.19 percent after the jobless report to $1.3832 at 10:10 a.m. Frankfurt time, bringing the gain in the single currency to 3.3 percent so far this year.
Ireland, Spain
As governments in countries such as Portugal, Ireland, Greece and Spain cut spending to rein in budget deficits, German exports to Asia and stronger household spending are helping buoy the economic outlook. Business confidence rose in February to the highest since records for a reunified Germany began in 1991. Consumer confidence will increase to the highest level in three and a half years in March as growth fuels income expectations, Nuremberg-based market research company GfK said on Feb. 22.
Stuttgart-based Daimler AG said on Feb. 24 it will add 10,000 jobs, while Volkswagen AG, Europe’s biggest carmaker, plans to add 6,000. Robert Bosch GmbH, the world’s biggest automotive supplier, said Jan. 24 that it plans to add 16,500 jobs this year to satisfy a “boom in emerging markets.”
“Economic growth has broadened, sparking company spending in investment goods as well as solid growth in private consumption,” Rainer Sartoris, an economist at HSBC Trinkaus & Burkhardt in Dusseldorf, said in an interview.
Early Winter Onslaught
German joblessness has now declined for each of the last 19 months with the exception of December, when it rose by 1,000 amid the coldest winter in more than 40 years. The early onslaught of winter led to a rise in unemployment sooner than would normally be expected, helping the numbers in February, the Labor Agency said. An ageing workforce also lowered the number of those seeking work.
The adjusted jobless rate fell to 7.3 percent, the lowest since December 1991, down from a post-World War II high of 12.1 percent in March 2005.
Ireland’s unemployment more than tripled over the same period, to 13.4 percent in January from 4.1 percent in 2005, according to Eurostat data. The jobless rate in Spain was 20.3 percent in December, up from 8 percent in 2007; in Greece, it was 13.9 percent in November after 6.6 percent in 2008. Italy’s jobless rate held at 8.6 percent in January for a third month, close to a seven-year high.
‘Good-News Show’
In Germany, “a further drop in unemployment to below 7 percent in the course of this year looks very likely,” said Carsten Brzeski, an economist at ING Groep NV in Brussels. “Even if the German economy is still a far cry from full employment, the good-news show will continue.”
Using the latest data from the Paris-based Organization for Economic Cooperation and Development, Germany’s unemployment rate of 6.6 percent in December compared with an average in the- then 16-state euro region of 10 percent and 9.6 percent in the 27-nation EU. In France, Germany’s main EU trading partner, the rate was 9.7 percent, in the U.S. 9.4 percent, while the Group of Seven average was 8 percent.
Companies in Germany plan to hire as many as 300,000 workers this year, according to a survey of 28,000 firms by the DIHK industry and trade chambers group this month. Machine and electrical companies may add 80,000 jobs, the DIHK said.
Expansion by companies in Germany’s southern regions may already be crimped by a shortage of skilled labor. A January IHK industry and trade chamber poll of 3,800 companies in Bavaria showed that some 41 percent of local companies were failing to recruit skilled staff.
In January, the Labor Agency announced a 10-point plan through to 2025 to reduce shortages of skilled labor as regional offices reported 374,000 vacancies in technology as well as health and service sectors such as hotels and catering.
RBA Keeps Key Interest Rate Unchanged, Extending Pause as Inflation Eases
The Reserve Bank of Australia left its benchmark interest rate at the highest level in the developed world, saying a stronger currency and an earlier decline in wage growth are helping to contain inflation.
Governor Glenn Stevens held the overnight cash rate target at 4.75 percent today, as forecast by all 25 economists surveyed by Bloomberg News. The central bank expects inflation to stay within its target range of 2 percent to 3 percent over the next year, he said in a statement in Sydney.
“Inflation is consistent with the medium-term objective of monetary policy,” Stevens said. “These moderate outcomes are being assisted by the high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices.”
The RBA, which raised rates seven times from October 2009 to November last year, is favoring growth over containing prices as the country recovers from flooding and cyclones in the northeast. Australia’s economic growth probably accelerated to 0.6 percent last quarter, according to the median estimate in a Bloomberg News survey of 25 economists before a report tomorrow.
The Australian dollar, the world’s fifth-most traded currency, touched a record $1.0256 on Dec. 31 and is about 13 percent stronger than a year ago. The currency weakened after the announcement, trading at $1.0170 as of 2:46 p.m. in Sydney from $1.0185 before the release.
Flood Damage
Treasurer Wayne Swan said Feb. 8 that damage from floods and cyclones may cause first-quarter gross domestic product to contract. Economists’ forecasts ahead of tomorrow’s GDP report on the fourth quarter of 2010 range from a 0.3 percent expansion to a 1 percent increase.
“Production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year,” Stevens said. He also said reports of skill shortages “remain confined, at this point, to the resources and related sectors.”
Most leading indicators suggest “further growth in employment, though most likely at a slower pace,” Stevens said. “After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.”
Wages Growth
Data in recent days have shown Australian wages grew at the fastest annual pace in almost two years and business investment reached a record as Chinese and Indian demand for commodities capped a year of unprecedented job growth.
“Consumer austerity and the drag from January’s floods have kept the RBA sidelined since November, but the looming wall of income and investment suggests to us that consumer austerity won’t last,” said Stephen Walters, chief economist for Australia at JPMorgan Chase & Co. in Sydney. “We suspect RBA officials will want to stay in front of the boom and, therefore, will hike before midyear, most likely in May.”
Stevens is relying on lower household spending and higher savings to slow price gains and give him scope to delay rate increases. Investors bet there is a 52 percent chance he will raise borrowing costs in August, bank bill futures indicate.
Australian consumer prices advanced 0.4 percent in the fourth quarter from three months earlier, the slowest pace in almost two years, as a stronger currency lowered costs for household appliances, clothing and cars from abroad.
Currency’s Ascent
The currency’s surge has been propelled by demand for iron ore and coal from Australia’s biggest trading partner, China, which has raised rates three times since mid-October. A Feb. 15 report showed China’s inflation exceeded the government’s 2011 target for a fourth month.
Stevens has kept Australia’s overnight cash rate target unchanged in the three meetings since a quarter percentage-point increase in November. In testimony to a parliamentary panel last month, he signaled the RBA was comfortable with borrowing costs.
“We’re ahead of the game, which is where you want to be, and that’s the thing that affords you periods of sitting, waiting and watching,” the governor told lawmakers in Canberra on Feb. 11. “Sometimes, they can be reasonably lengthy periods.”
Driven up by mining jobs, wages grew 3.9 percent in the three months through December from a year earlier, the fastest pace since the first quarter of 2009, a Feb. 23 government report showed. The gap between the RBA’s weighted median measure of inflation and the annual wage price index is the widest in six years.
Resources Boom
BG Group Plc, based in Reading, U.K., said Oct. 31 it will begin work on a $15 billion liquefied natural gas venture in Queensland, generating 5,000 jobs. BG, Chevron Corp., Royal Dutch Shell Plc and ConocoPhillips are among companies investing about A$200 billion ($203.7 billion) in proposed LNG projects in Australia.
Australia is getting caught up in a bubble in international commodity prices and property markets in Asia that could hit much harder than the global financial crisis, Warwick McKibbin, a member of the RBA’s board, told the Australian newspaper in an article published yesterday.
“This is shaping to be much bigger than 2004 to 2007,” the newspaper cited McKibbin, a professor at Australian National University, as saying. He warned the bursting of the bubble would reverse the surge in Australia’s terms of trade, push down the currency and leave the RBA struggling to fight rising global inflation pressures.
Governor Glenn Stevens held the overnight cash rate target at 4.75 percent today, as forecast by all 25 economists surveyed by Bloomberg News. The central bank expects inflation to stay within its target range of 2 percent to 3 percent over the next year, he said in a statement in Sydney.
“Inflation is consistent with the medium-term objective of monetary policy,” Stevens said. “These moderate outcomes are being assisted by the high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices.”
The RBA, which raised rates seven times from October 2009 to November last year, is favoring growth over containing prices as the country recovers from flooding and cyclones in the northeast. Australia’s economic growth probably accelerated to 0.6 percent last quarter, according to the median estimate in a Bloomberg News survey of 25 economists before a report tomorrow.
The Australian dollar, the world’s fifth-most traded currency, touched a record $1.0256 on Dec. 31 and is about 13 percent stronger than a year ago. The currency weakened after the announcement, trading at $1.0170 as of 2:46 p.m. in Sydney from $1.0185 before the release.
Flood Damage
Treasurer Wayne Swan said Feb. 8 that damage from floods and cyclones may cause first-quarter gross domestic product to contract. Economists’ forecasts ahead of tomorrow’s GDP report on the fourth quarter of 2010 range from a 0.3 percent expansion to a 1 percent increase.
“Production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year,” Stevens said. He also said reports of skill shortages “remain confined, at this point, to the resources and related sectors.”
Most leading indicators suggest “further growth in employment, though most likely at a slower pace,” Stevens said. “After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.”
Wages Growth
Data in recent days have shown Australian wages grew at the fastest annual pace in almost two years and business investment reached a record as Chinese and Indian demand for commodities capped a year of unprecedented job growth.
“Consumer austerity and the drag from January’s floods have kept the RBA sidelined since November, but the looming wall of income and investment suggests to us that consumer austerity won’t last,” said Stephen Walters, chief economist for Australia at JPMorgan Chase & Co. in Sydney. “We suspect RBA officials will want to stay in front of the boom and, therefore, will hike before midyear, most likely in May.”
Stevens is relying on lower household spending and higher savings to slow price gains and give him scope to delay rate increases. Investors bet there is a 52 percent chance he will raise borrowing costs in August, bank bill futures indicate.
Australian consumer prices advanced 0.4 percent in the fourth quarter from three months earlier, the slowest pace in almost two years, as a stronger currency lowered costs for household appliances, clothing and cars from abroad.
Currency’s Ascent
The currency’s surge has been propelled by demand for iron ore and coal from Australia’s biggest trading partner, China, which has raised rates three times since mid-October. A Feb. 15 report showed China’s inflation exceeded the government’s 2011 target for a fourth month.
Stevens has kept Australia’s overnight cash rate target unchanged in the three meetings since a quarter percentage-point increase in November. In testimony to a parliamentary panel last month, he signaled the RBA was comfortable with borrowing costs.
“We’re ahead of the game, which is where you want to be, and that’s the thing that affords you periods of sitting, waiting and watching,” the governor told lawmakers in Canberra on Feb. 11. “Sometimes, they can be reasonably lengthy periods.”
Driven up by mining jobs, wages grew 3.9 percent in the three months through December from a year earlier, the fastest pace since the first quarter of 2009, a Feb. 23 government report showed. The gap between the RBA’s weighted median measure of inflation and the annual wage price index is the widest in six years.
Resources Boom
BG Group Plc, based in Reading, U.K., said Oct. 31 it will begin work on a $15 billion liquefied natural gas venture in Queensland, generating 5,000 jobs. BG, Chevron Corp., Royal Dutch Shell Plc and ConocoPhillips are among companies investing about A$200 billion ($203.7 billion) in proposed LNG projects in Australia.
Australia is getting caught up in a bubble in international commodity prices and property markets in Asia that could hit much harder than the global financial crisis, Warwick McKibbin, a member of the RBA’s board, told the Australian newspaper in an article published yesterday.
“This is shaping to be much bigger than 2004 to 2007,” the newspaper cited McKibbin, a professor at Australian National University, as saying. He warned the bursting of the bubble would reverse the surge in Australia’s terms of trade, push down the currency and leave the RBA struggling to fight rising global inflation pressures.
South Korea's Exports Rise at Slowest Pace in Five Months as Demand Cools
South Korea’s exports rose at the slowest pace in five months, raising concern that the economy is losing momentum and giving the central bank less room to raise interest rates.
Overseas shipments increased 17.9 percent from a year earlier, after gaining a revised 45.4 percent in January, the Ministry of Knowledge Economy said in an e-mailed statement today. That compared with the median estimate for a 17.4 percent gain in a Bloomberg News survey of nine economists. Imports climbed 16.3 percent, leaving a trade surplus of $2.8 billion.
Slower growth and higher inflation may pose a bigger dilemma for the Bank of Korea, which pledged to keep raising borrowing costs at its own pace after leaving them at 2.75 percent last month. The government is stepping up efforts to stabilize prices after President Lee Myung Bak called for a “war” against inflation in January.
The outlook for “the economy depends on how it can cope with bad weather and the Middle East crisis,” Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul, said before the release. “The BOK will have to delay the next rate hike if oil prices keep rising and hurt the global economy.”
Central Bank Governor Kim Choong Soo unexpectedly left interest rates unchanged at 2.75 percent last month even after inflation breached the central bank’s 4 percent ceiling in January. Kim signaled that the pause may be only temporary, saying that the central bank will move at its own pace in “normalizing” rates.
Difficult Situation
“It’s a very difficult situation,” Finance Minister Yoon Jeung Hyun said in parliament yesterday, referring to the country’s rising prices. “This difficulty will likely remain for a significant period of time.”
Consumer prices rose 4.1 percent in January from a year earlier, breaching the central bank’s target range of 2 percent to 4 percent. Producer prices jumped 6.2 percent, the most in more than two years.
Overseas shipments are equivalent to about half the economy and boosted earnings last year at companies including Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones.
The central bank forecasts a 4.5 percent economic expansion in 2011, slowing from the 6.1 percent pace last year, and predicts inflation will accelerate to 3.5 percent from 2.9 percent.
Its policy board raised the benchmark interest rate by a quarter of a percentage point in July, November and January from a record-low 2 percent, joining counterparts from China and India in tightening monetary policy to fight inflation as Asia leads the global recovery.
Asia’s fourth-largest economy expanded 0.5 percent in the three months through December from the previous quarter, when it grew 0.7 percent. It grew 6.1 percent in 2010 from a year earlier, the fastest pace since 2002.
Overseas shipments increased 17.9 percent from a year earlier, after gaining a revised 45.4 percent in January, the Ministry of Knowledge Economy said in an e-mailed statement today. That compared with the median estimate for a 17.4 percent gain in a Bloomberg News survey of nine economists. Imports climbed 16.3 percent, leaving a trade surplus of $2.8 billion.
Slower growth and higher inflation may pose a bigger dilemma for the Bank of Korea, which pledged to keep raising borrowing costs at its own pace after leaving them at 2.75 percent last month. The government is stepping up efforts to stabilize prices after President Lee Myung Bak called for a “war” against inflation in January.
The outlook for “the economy depends on how it can cope with bad weather and the Middle East crisis,” Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul, said before the release. “The BOK will have to delay the next rate hike if oil prices keep rising and hurt the global economy.”
Central Bank Governor Kim Choong Soo unexpectedly left interest rates unchanged at 2.75 percent last month even after inflation breached the central bank’s 4 percent ceiling in January. Kim signaled that the pause may be only temporary, saying that the central bank will move at its own pace in “normalizing” rates.
Difficult Situation
“It’s a very difficult situation,” Finance Minister Yoon Jeung Hyun said in parliament yesterday, referring to the country’s rising prices. “This difficulty will likely remain for a significant period of time.”
Consumer prices rose 4.1 percent in January from a year earlier, breaching the central bank’s target range of 2 percent to 4 percent. Producer prices jumped 6.2 percent, the most in more than two years.
Overseas shipments are equivalent to about half the economy and boosted earnings last year at companies including Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones.
The central bank forecasts a 4.5 percent economic expansion in 2011, slowing from the 6.1 percent pace last year, and predicts inflation will accelerate to 3.5 percent from 2.9 percent.
Its policy board raised the benchmark interest rate by a quarter of a percentage point in July, November and January from a record-low 2 percent, joining counterparts from China and India in tightening monetary policy to fight inflation as Asia leads the global recovery.
Asia’s fourth-largest economy expanded 0.5 percent in the three months through December from the previous quarter, when it grew 0.7 percent. It grew 6.1 percent in 2010 from a year earlier, the fastest pace since 2002.
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