Friday, April 1, 2011
U.S. Payrolls Grew 216,000 in March; Unemployment at 8.8%
The U.S. economy added more jobs than forecast in March and the unemployment rate unexpectedly declined to a two-year low of 8.8 percent, a sign the labor- market recovery is gathering speed.
European Factory Growth Slows as Global Economy's Momentum Relies on China
Factory growth from Germany and Switzerland to the U.K. slowed in March as the region’s recovery struggled to keep momentum, leaving the global economy reliant on emerging markets to drive expansion.
Gross Says U.S. Employment Gains Show QE2 Is Working
Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., said the larger-than-forecast gain in March employment suggests the Federal Reserve’s policy of quantitative easing is working.
Fed Let Brokers Turn Junk to Cash at Height of Financial Crisis
At the height of the financial crisis, the Federal Reserve allowed the world’s largest banks to turn more than $118 billion in junk bonds, defaulted debt, securities of unknown ratings and stocks into cash.
Collateral of those asset types made up 72 percent of the total $164.3 billion in market-rate securities pledged to the Fed on Sept. 29, 2008, two weeks after the bankruptcy of Lehman Brothers Holdings Inc., according to documents released yesterday. The collateral backed $155.7 billion in loans on the largest day of borrowing from the Primary Dealer Credit Facility, which was created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.
“The fact that the Fed was willing to accept that collateral was indicative that collateral was very hard to come by at the time,” said Craig Pirrong, a finance professor at the University of Houston. It also highlights “the seriousness with which the Fed viewed the situation,” he said.
Fed spokesman David Skidmore declined to comment yesterday. No public money was lost in the Fed’s emergency lending programs, Chairman Ben S. Bernanke testified to the Senate Banking Committee in July, 2010. The loans didn’t represent permanent cash given to the dealers and had to be repaid the next day.
The Fed loans on Sept. 29, 2008, represented a 5.49 percent “collateral cushion,” the amount by which the pledged assets exceeded the loan value, according to the Fed data. Equities comprised $71.7 billion, or 43.6 percent of the total. High- yield debt, including the defaulted issues, accounted for $18.4 billion, or 11.2 percent. Collateral of unknown rating was $28 billion, or 17 percent.
High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
Index Fell
The S&P 500 index (SPX) fell 8.8 percent on that day.
“To put things in perspective, the market haircut on most debt securities during the period of the crisis starting in September 2008 was above 40 percent,” Pirrong said.
The U.S. central bank allowed borrowers to use $929 million in market-valued debt that had gone into default, rated D, as collateral on that day, 2008, more than the $905.5 million in Treasuries that were pledged, according to the Fed documents. The documents released yesterday included the most detailed view of collateral to date for the facility, which operated from March 16, 2008 to Feb. 1, 2010.
Small Cushion
The cushion “was far too small for the risk of the underlying collateral,” Pirrong said. “Collateral that’s junk or defaulted debt and equities at a time when market volatility was huge is pretty eye opening.”
The amount the Fed discounted based on the specific asset classes like the defaulted debt or equity collateral can’t be determined by the data released yesterday.
Morgan Stanley (MS) was the largest borrower on Sept. 29, 2008, totaling $61.3 billion, the data show. The New York-based firm pledged $66.5 billion in collateral, including $21.5 billion in equities, $19.4 billion in unknown rated securities and $6.7 billion in junk or defaulted debt.
Mark Lake, a Morgan Stanley spokesman, didn’t immediately return a call for comment.
Merrill Lynch was next, with a $36.3 billion loan. Its $39.1 billion in collateral included $23.3 billion in equities, $6.3 billion in unknown rated securities and $3 billion in junk or defaulted bonds.
Jerry Dubrowski, a spokesman for Bank of America Corp. (BAC), which bought Merrill Lynch in 2009, declined to comment.
Recourse Loans
The loans extended to primary dealers under the PDCF by the New York Fed were recourse loans, meaning the potential liability of borrowers who defaulted was greater than the value of the collateral pledged, according to the Fed.
In September 2008, as Lehman Brothers was on the brink of filing for bankruptcy, the PDCF was expanded to accept all types of collateral pledged in tri-party repo deals. In such transactions, a third party functions as the agent between borrower and lender, holding the collateral, which the borrower repurchases at a later date.
Acceptable collateral for the Fed’s dealer facility expanded from only investment-grade debt securities to include high-yield, high-risk securities and equities.
“Our broad-based programs achieved their intended purposes with no loss to taxpayers,” Bernanke told lawmakers last year. “All of the loans extended through the multi-borrower facilities that have come due have been repaid in full, with interest.”
Thousands of Pages
The Fed released thousands of pages of secret loan documents under court order, almost three years after Bloomberg LP first requested details of the central bank’s unprecedented support to banks during the financial crisis.
The records -- 894 files in PDF form with 29,346 pages -- reveal for the first time the names of financial institutions that borrowed directly from the central bank through the so- called discount window. The Fed provided the documents after the U.S. Supreme Court this month rejected a banking industry group’s attempt to shield them from public view.
Bloomberg News is posting the raw documents here for subscribers to the Bloomberg Professional Service as well as online at www.bloomberg.com. Accessing them will take several minutes.
Collateral of those asset types made up 72 percent of the total $164.3 billion in market-rate securities pledged to the Fed on Sept. 29, 2008, two weeks after the bankruptcy of Lehman Brothers Holdings Inc., according to documents released yesterday. The collateral backed $155.7 billion in loans on the largest day of borrowing from the Primary Dealer Credit Facility, which was created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.
“The fact that the Fed was willing to accept that collateral was indicative that collateral was very hard to come by at the time,” said Craig Pirrong, a finance professor at the University of Houston. It also highlights “the seriousness with which the Fed viewed the situation,” he said.
Fed spokesman David Skidmore declined to comment yesterday. No public money was lost in the Fed’s emergency lending programs, Chairman Ben S. Bernanke testified to the Senate Banking Committee in July, 2010. The loans didn’t represent permanent cash given to the dealers and had to be repaid the next day.
The Fed loans on Sept. 29, 2008, represented a 5.49 percent “collateral cushion,” the amount by which the pledged assets exceeded the loan value, according to the Fed data. Equities comprised $71.7 billion, or 43.6 percent of the total. High- yield debt, including the defaulted issues, accounted for $18.4 billion, or 11.2 percent. Collateral of unknown rating was $28 billion, or 17 percent.
High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
Index Fell
The S&P 500 index (SPX) fell 8.8 percent on that day.
“To put things in perspective, the market haircut on most debt securities during the period of the crisis starting in September 2008 was above 40 percent,” Pirrong said.
The U.S. central bank allowed borrowers to use $929 million in market-valued debt that had gone into default, rated D, as collateral on that day, 2008, more than the $905.5 million in Treasuries that were pledged, according to the Fed documents. The documents released yesterday included the most detailed view of collateral to date for the facility, which operated from March 16, 2008 to Feb. 1, 2010.
Small Cushion
The cushion “was far too small for the risk of the underlying collateral,” Pirrong said. “Collateral that’s junk or defaulted debt and equities at a time when market volatility was huge is pretty eye opening.”
The amount the Fed discounted based on the specific asset classes like the defaulted debt or equity collateral can’t be determined by the data released yesterday.
Morgan Stanley (MS) was the largest borrower on Sept. 29, 2008, totaling $61.3 billion, the data show. The New York-based firm pledged $66.5 billion in collateral, including $21.5 billion in equities, $19.4 billion in unknown rated securities and $6.7 billion in junk or defaulted debt.
Mark Lake, a Morgan Stanley spokesman, didn’t immediately return a call for comment.
Merrill Lynch was next, with a $36.3 billion loan. Its $39.1 billion in collateral included $23.3 billion in equities, $6.3 billion in unknown rated securities and $3 billion in junk or defaulted bonds.
Jerry Dubrowski, a spokesman for Bank of America Corp. (BAC), which bought Merrill Lynch in 2009, declined to comment.
Recourse Loans
The loans extended to primary dealers under the PDCF by the New York Fed were recourse loans, meaning the potential liability of borrowers who defaulted was greater than the value of the collateral pledged, according to the Fed.
In September 2008, as Lehman Brothers was on the brink of filing for bankruptcy, the PDCF was expanded to accept all types of collateral pledged in tri-party repo deals. In such transactions, a third party functions as the agent between borrower and lender, holding the collateral, which the borrower repurchases at a later date.
Acceptable collateral for the Fed’s dealer facility expanded from only investment-grade debt securities to include high-yield, high-risk securities and equities.
“Our broad-based programs achieved their intended purposes with no loss to taxpayers,” Bernanke told lawmakers last year. “All of the loans extended through the multi-borrower facilities that have come due have been repaid in full, with interest.”
Thousands of Pages
The Fed released thousands of pages of secret loan documents under court order, almost three years after Bloomberg LP first requested details of the central bank’s unprecedented support to banks during the financial crisis.
The records -- 894 files in PDF form with 29,346 pages -- reveal for the first time the names of financial institutions that borrowed directly from the central bank through the so- called discount window. The Fed provided the documents after the U.S. Supreme Court this month rejected a banking industry group’s attempt to shield them from public view.
Bloomberg News is posting the raw documents here for subscribers to the Bloomberg Professional Service as well as online at www.bloomberg.com. Accessing them will take several minutes.
Ireland’s Rating Cut One Level to BBB+ By S&P on Banking Costs
Ireland’s credit rating was cut one level by Standard & Poor’s and put on watch for a possible downgrade by Fitch Ratings after the cost of rescuing Irish banks reached as much as 100 billion euros ($141.5 billion).
S&P today lowered the rating to BBB+ from A-, putting the country on the same level as Thailand and the Bahamas. The outlook is stable, S&P said in a statement. Fitch placed its long-term foreign and local-currency issuer default ratings of BBB+ on negative, “indicating a heightened probability of a downgrade in the near term,” it said in a statement.
The stable outlook from S&P “is a very good thing for a credit that has been under intense pressure,” said Padhraic Garvey, head of developed-market debt at ING Groep NV (INGA) in Amsterdam. “It’s good for holders of Irish paper.”
After carrying out stress tests, Ireland’s central bank yesterday ordered four lenders, including the largest, Bank of Ireland Plc, to raise 24 billion euros in capital. Ireland, which agreed to an 85 billion-euro bailout in November, can sustain mounting debt levels if it fixes its lenders and maintains economic growth, Finance Minister Michael Noonan said.
‘Positive Surprise’
“The outlook on the ratings is now stable, reflecting our opinion of the credibility of the stress tests,” S&P said. The company on March 29 downgraded Portugal and Greece, saying the European Union’s new bailout rules may mean those nations eventually renege on debt obligations.
“The downgrade isn’t surprising given that S&P is only bringing its rating into line with the other main ratings agencies,” said Eoin Fahy, chief economist at Kleinwort Benson Investors Dublin Ltd. “The fact that S&P has given Ireland a ‘stable’ outlook and described the bank stress tests as credible is a positive surprise.”
Ireland is trying to convince investors at home and abroad that it has finally plugged all the holes in the banking system, whose collapse crippled what was once Europe’s most dynamic economy. Central bank Governor Patrick Honohan said yesterday it is realistic to expect Bank of Ireland and Irish Life & Permanent Plc to fall under state control.
Irish Contraction
The extra yield investors demand to hold Irish 10-year bonds rather than German securities of similar maturity narrowed by 17 basis points to 670 points today. That’s below an euro-era record of 680 points on Nov. 30, two days after Ireland accepted the bailout from the EU and the International Monetary Fund.
Irish gross domestic product “figures for the fourth quarter of 2010, released last week, were unexpectedly weak, showing GDP growth contracted by 1.6 percent quarter-on-quarter and 0.7 percent year-on-year,” Fitch said in the statement. The ratings firm, which downgraded Ireland’s long-term rating to BBB+ on Dec. 9, will “incorporate the new information” from the banking stress tests into its review, it said.
The government, struggling to draw a line under the country’s bank crisis, said it will probably end up with a majority stake in Irish Life, which needs to raise 4 billion euros. Allied Irish Banks Plc (ALBK), which was ordered to raise 13.3 billion euros, is to be merged with EBS Building Society.
The government has pledged to provide that money from a 35 billion-euro fund set up under the country’s international bailout if banks fail to raise it themselves. Noonan said today in an interview with Dublin-based RTE that the debate on imposing losses on senior bondholders at Bank of Ireland and Allied Irish is “over” because of opposition from the European Central Bank.
European support
S&P cut Portugal for the second time in a week to the lowest investment-grade rating of BBB-. Greece’s rating was lowered two grades to BB-, three levels below investment grade. New rules on bailout loans, which take effect in 2013, mean sovereign-debt restructuring is a “potential precondition to borrowing” from the future European Stability Mechanism and that senior unsecured government debt will be subordinated to ESM loans, S&P said on March 29.
Both aspects, announced after a meeting of European leaders in Brussels on March 25, are “detrimental to commercial creditors,” the rating company said.
Indebtedness for Ireland, which sought a bailout in November, will surge to 125 percent of gross domestic product by 2013, the IMF forecasts. Debt was 25 percent of GDP in 2007. Fitch Ratings downgraded Ireland to BBB+ from A+ on Dec. 9, with a “stable” outlook. Moody’s Investors Service the same month lowered its rating on Ireland to Baa1 from Aa2, with a “negative” outlook.
“The government continues to pump capital into the banks and it is the sovereign that is taking the hit,” said Brian Devine, chief economist at Dublin-based NCB Stockbrokers. “My view is that we won’t be able to fund ourselves and that we will need” support from Europe’s permanent European rescue after 2013, he said.
S&P today lowered the rating to BBB+ from A-, putting the country on the same level as Thailand and the Bahamas. The outlook is stable, S&P said in a statement. Fitch placed its long-term foreign and local-currency issuer default ratings of BBB+ on negative, “indicating a heightened probability of a downgrade in the near term,” it said in a statement.
The stable outlook from S&P “is a very good thing for a credit that has been under intense pressure,” said Padhraic Garvey, head of developed-market debt at ING Groep NV (INGA) in Amsterdam. “It’s good for holders of Irish paper.”
After carrying out stress tests, Ireland’s central bank yesterday ordered four lenders, including the largest, Bank of Ireland Plc, to raise 24 billion euros in capital. Ireland, which agreed to an 85 billion-euro bailout in November, can sustain mounting debt levels if it fixes its lenders and maintains economic growth, Finance Minister Michael Noonan said.
‘Positive Surprise’
“The outlook on the ratings is now stable, reflecting our opinion of the credibility of the stress tests,” S&P said. The company on March 29 downgraded Portugal and Greece, saying the European Union’s new bailout rules may mean those nations eventually renege on debt obligations.
“The downgrade isn’t surprising given that S&P is only bringing its rating into line with the other main ratings agencies,” said Eoin Fahy, chief economist at Kleinwort Benson Investors Dublin Ltd. “The fact that S&P has given Ireland a ‘stable’ outlook and described the bank stress tests as credible is a positive surprise.”
Ireland is trying to convince investors at home and abroad that it has finally plugged all the holes in the banking system, whose collapse crippled what was once Europe’s most dynamic economy. Central bank Governor Patrick Honohan said yesterday it is realistic to expect Bank of Ireland and Irish Life & Permanent Plc to fall under state control.
Irish Contraction
The extra yield investors demand to hold Irish 10-year bonds rather than German securities of similar maturity narrowed by 17 basis points to 670 points today. That’s below an euro-era record of 680 points on Nov. 30, two days after Ireland accepted the bailout from the EU and the International Monetary Fund.
Irish gross domestic product “figures for the fourth quarter of 2010, released last week, were unexpectedly weak, showing GDP growth contracted by 1.6 percent quarter-on-quarter and 0.7 percent year-on-year,” Fitch said in the statement. The ratings firm, which downgraded Ireland’s long-term rating to BBB+ on Dec. 9, will “incorporate the new information” from the banking stress tests into its review, it said.
The government, struggling to draw a line under the country’s bank crisis, said it will probably end up with a majority stake in Irish Life, which needs to raise 4 billion euros. Allied Irish Banks Plc (ALBK), which was ordered to raise 13.3 billion euros, is to be merged with EBS Building Society.
The government has pledged to provide that money from a 35 billion-euro fund set up under the country’s international bailout if banks fail to raise it themselves. Noonan said today in an interview with Dublin-based RTE that the debate on imposing losses on senior bondholders at Bank of Ireland and Allied Irish is “over” because of opposition from the European Central Bank.
European support
S&P cut Portugal for the second time in a week to the lowest investment-grade rating of BBB-. Greece’s rating was lowered two grades to BB-, three levels below investment grade. New rules on bailout loans, which take effect in 2013, mean sovereign-debt restructuring is a “potential precondition to borrowing” from the future European Stability Mechanism and that senior unsecured government debt will be subordinated to ESM loans, S&P said on March 29.
Both aspects, announced after a meeting of European leaders in Brussels on March 25, are “detrimental to commercial creditors,” the rating company said.
Indebtedness for Ireland, which sought a bailout in November, will surge to 125 percent of gross domestic product by 2013, the IMF forecasts. Debt was 25 percent of GDP in 2007. Fitch Ratings downgraded Ireland to BBB+ from A+ on Dec. 9, with a “stable” outlook. Moody’s Investors Service the same month lowered its rating on Ireland to Baa1 from Aa2, with a “negative” outlook.
“The government continues to pump capital into the banks and it is the sovereign that is taking the hit,” said Brian Devine, chief economist at Dublin-based NCB Stockbrokers. “My view is that we won’t be able to fund ourselves and that we will need” support from Europe’s permanent European rescue after 2013, he said.
Japan Manufacturers Grew More Confident Before Quake, Tankan Survey Shows
Japan’s large manufacturers grew more confident about the economic outlook before the nation was hit by a record earthquake, a central bank survey showed today.
The quarterly Tankan index of sentiment among big manufacturers climbed to 6 in March from 5 in December, the Bank of Japan said in Tokyo today, noting that 72 percent of responses came by March 11, the day of the quake. The bank on April 4 will release a breakdown of pre-quake and post-quake responses, offering a gauge of the magnitude of the hit to business sentiment.
Signs are already emerging that the quake that has claimed 11,000 lives and triggered a nuclear crisis have taken a toll on the economy, with a report yesterday showing manufacturing deteriorated at the fastest pace in at least nine years in March. Honda Motor Co. and Sony Corp. are among manufacturers that have halted production after the disaster.
“The post-quake number will paint a very grim picture,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo. “This will definitely be a recession. The economy’s trend completely flipped with this earthquake.”
The median estimate of 19 economists surveyed by Bloomberg News was for a reading of 5. A positive reading means optimists outnumber pessimists.
Manufacturing Deteriorates
The Nikkei 225 (NKY) Stock Average fell 0.1 percent at 10:15 a.m. in Tokyo. The yen traded at 83.53 per dollar, from 83.36 before the report was published. Large manufacturers forecast on average that the yen will trade at 84.20 per dollar in the year through March 2012, according to today’s report.
Confidence among large manufacturers is expected to fall to 2 in June, the Tankan showed. Big companies plan to cut spending by 0.4 percent in the fiscal year started today, according to the report.
An index of purchasing managers fell to 46.4 from 52.9, the Japan Materials Management Association and Markit Economics said yesterday, the biggest drop since the survey began in October 2001. A number below 50 indicates a contraction.
The report overshadowed February data that showed industrial production rose for a fourth month and the unemployment rate dropped to a two-year low.
Disaster’s Damage
The magnitude-9.0 temblor and an ensuing tsunami have caused a plunge in Japanese stocks and sent the yen to a post- World War II high against the dollar, prompting the first coordinated currency intervention by Group of Seven nations in more than a decade. The disaster’s damage is estimated by the government to swell to as much as 25 trillion yen ($300 billion).
The BOJ doubled its asset-purchase program to 10 trillion yen on March 14, increasing the funds injections into the financial system. It is also considering offering temporary loans to banks to encourage lending to companies with cash-flow problems in the aftermath of the quake, according to three people familiar with the matter.
Toyota Motor Corp., the world’s largest automaker, has said the company lost 140,000 units of production from March 14 to March 26, citing a shortage of electronic parts, rubber and plastics. Scarce parts and electricity may prompt it to delay at least 500,000 vehicles in Japan, according to Koji Endo, an auto analyst at Advanced Research Japan. Honda Motor Co. has seen a production loss of 46,600 cars and trucks and 5,000 motorcycles.
Sentiment to Worsen
“It’s unavoidable production will slump as the disaster and blackout has confined corporate activities, so corporate sentiment will deteriorate in the coming months,” Norio Miyagawa, senior economist at Mizuho Securities Research and Consulting Co. in Tokyo, said before the report.
Prime Minister Naoto Kan abandoned a proposal to increase cash handouts to families with young children, to win opposition approval for spending plans to rebuild areas devastated by the disaster. He said earlier this week that more than one spending package may be needed and that he’s considering dropping a planned 5-percentage-point cut in corporate taxes.
Goldman Sachs Group Inc. said this week that Japan’s gross domestic product will shrink next quarter and lowered its growth forecast for the year starting today to 0.7 percent from 1.3 percent.
The earthquake and tsunami crippled Tokyo Electric Power Co.’s Fukushima Dai-Ichi atomic plant, causing the world’s worst nuclear crisis since Chernobyl in 1986. That limited the supply of electricity to the country’s most industrialized area, as the utility began rolling blackouts in Tokyo and surrounding areas.
“The disaster in northern Japan has dramatically changed the near-term outlook for production and the economy in general,” said Ryutaro Kono, chief economist at BNP Paribas in Tokyo. “From the destruction of capital stock and heavily devastated social infrastructure to the disruption of supply chains and a bottleneck due to insufficient electrical power, production activity is sure to drop sharply in the months ahead.”
The Tankan, which was conducted from Feb. 24 to March 31, surveyed 11,101 businesses and received 95.6 percent valid responses.
The quarterly Tankan index of sentiment among big manufacturers climbed to 6 in March from 5 in December, the Bank of Japan said in Tokyo today, noting that 72 percent of responses came by March 11, the day of the quake. The bank on April 4 will release a breakdown of pre-quake and post-quake responses, offering a gauge of the magnitude of the hit to business sentiment.
Signs are already emerging that the quake that has claimed 11,000 lives and triggered a nuclear crisis have taken a toll on the economy, with a report yesterday showing manufacturing deteriorated at the fastest pace in at least nine years in March. Honda Motor Co. and Sony Corp. are among manufacturers that have halted production after the disaster.
“The post-quake number will paint a very grim picture,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo. “This will definitely be a recession. The economy’s trend completely flipped with this earthquake.”
The median estimate of 19 economists surveyed by Bloomberg News was for a reading of 5. A positive reading means optimists outnumber pessimists.
Manufacturing Deteriorates
The Nikkei 225 (NKY) Stock Average fell 0.1 percent at 10:15 a.m. in Tokyo. The yen traded at 83.53 per dollar, from 83.36 before the report was published. Large manufacturers forecast on average that the yen will trade at 84.20 per dollar in the year through March 2012, according to today’s report.
Confidence among large manufacturers is expected to fall to 2 in June, the Tankan showed. Big companies plan to cut spending by 0.4 percent in the fiscal year started today, according to the report.
An index of purchasing managers fell to 46.4 from 52.9, the Japan Materials Management Association and Markit Economics said yesterday, the biggest drop since the survey began in October 2001. A number below 50 indicates a contraction.
The report overshadowed February data that showed industrial production rose for a fourth month and the unemployment rate dropped to a two-year low.
Disaster’s Damage
The magnitude-9.0 temblor and an ensuing tsunami have caused a plunge in Japanese stocks and sent the yen to a post- World War II high against the dollar, prompting the first coordinated currency intervention by Group of Seven nations in more than a decade. The disaster’s damage is estimated by the government to swell to as much as 25 trillion yen ($300 billion).
The BOJ doubled its asset-purchase program to 10 trillion yen on March 14, increasing the funds injections into the financial system. It is also considering offering temporary loans to banks to encourage lending to companies with cash-flow problems in the aftermath of the quake, according to three people familiar with the matter.
Toyota Motor Corp., the world’s largest automaker, has said the company lost 140,000 units of production from March 14 to March 26, citing a shortage of electronic parts, rubber and plastics. Scarce parts and electricity may prompt it to delay at least 500,000 vehicles in Japan, according to Koji Endo, an auto analyst at Advanced Research Japan. Honda Motor Co. has seen a production loss of 46,600 cars and trucks and 5,000 motorcycles.
Sentiment to Worsen
“It’s unavoidable production will slump as the disaster and blackout has confined corporate activities, so corporate sentiment will deteriorate in the coming months,” Norio Miyagawa, senior economist at Mizuho Securities Research and Consulting Co. in Tokyo, said before the report.
Prime Minister Naoto Kan abandoned a proposal to increase cash handouts to families with young children, to win opposition approval for spending plans to rebuild areas devastated by the disaster. He said earlier this week that more than one spending package may be needed and that he’s considering dropping a planned 5-percentage-point cut in corporate taxes.
Goldman Sachs Group Inc. said this week that Japan’s gross domestic product will shrink next quarter and lowered its growth forecast for the year starting today to 0.7 percent from 1.3 percent.
The earthquake and tsunami crippled Tokyo Electric Power Co.’s Fukushima Dai-Ichi atomic plant, causing the world’s worst nuclear crisis since Chernobyl in 1986. That limited the supply of electricity to the country’s most industrialized area, as the utility began rolling blackouts in Tokyo and surrounding areas.
“The disaster in northern Japan has dramatically changed the near-term outlook for production and the economy in general,” said Ryutaro Kono, chief economist at BNP Paribas in Tokyo. “From the destruction of capital stock and heavily devastated social infrastructure to the disruption of supply chains and a bottleneck due to insufficient electrical power, production activity is sure to drop sharply in the months ahead.”
The Tankan, which was conducted from Feb. 24 to March 31, surveyed 11,101 businesses and received 95.6 percent valid responses.
Construction Spending in U.S. Decreased More Than Estimated in February
Construction spending in the U.S. fell more than forecast in February, indicating the economic recovery has not yet spread to the building industry.
The 1.4 percent drop was the third in a row and brought the value of all projects down to a $760.6 billion annual rate, the lowest since October 1999, Commerce Department figures showed today in Washington. The median estimate of economists in a Bloomberg survey called for a 0.2 percent decline.
Outlays on home building dropped during the month as new- home prices and sales continued to fall. In addition, deficit- strapped state and local governments are restricting funding for public works.
“The housing sector still looks to be in pretty dire straits,” Scott Brown, chief economist at Raymond James & Associates Inc. in St Petersburg, Florida, said before the report. “We’re seeing prices still weakening at this point. If we get much better job growth, we’ll have better results in the housing sector.”
Another report today showed employers added 216,000 workers to payrolls in March, and the jobless rate dropped to a two-year low of 8.8 percent, beating the median projection of economists surveyed by Bloomberg. Private employment, which excludes government agencies, climbed by 230,000 after a 240,000 February increase, marking the biggest back-to-back gain since 2006.
Estimates for the construction figures of 49 economists ranged from a drop of 1.2 percent to an increase of 2.5 percent. The Commerce Department revised the January reading down to a 1.8 percent from a previously estimated decline of 0.7 percent.
14-Year Low
Private construction spending fell 1.4 percent in February from the prior month to a $468 billion annual pace, the weakest since April 1997. Homebuilding outlays decreased 3.7 percent.
Spending on public construction slid 1.3 percent, the fifth consecutive drop, the report said. Federal construction spending increased 0.7 percent, while outlays at state and local agencies fell 1.5 percent.
Faced with declining home prices and the swelling supply of unsold properties, residential real estate developers are reluctant to increase construction. Housing starts in the U.S. declined more than forecast in February to the slowest pace since April 2009 and building permits slumped to a record low, the Commerce Department said March 16.
Residential real-estate prices dropped in the 12 months to January by the most in more than a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 3.1 percent, the biggest year-over-year decrease since December 2009, the group said earlier this week.
Builder Concern
Home sales haven’t recovered for the U.S. spring selling season, usually the busiest time for buyers, Stuart Miller, chief executive officer of homebuilder Lennar Corp. (LEN), said during a conference call with investors March 29.
“The long-awaited selling season of 2011 has not yet defined itself as the beginning of a recovery cycle,” Miller said. “We’ve all seen evidence of a sluggish recovery in the reported national sales numbers for both existing homes and new homes and we have clearly seen the same on a real time basis in the field. We continue to believe that the housing recovery will take time and patience and will be inconsistent and uneven.”
Miami-based Lennar, the second-most profitable U.S. builder last year, unexpectedly reported net income for the first quarter after booking a lawsuit settlement and adding income from its distressed-investing unit.
The 1.4 percent drop was the third in a row and brought the value of all projects down to a $760.6 billion annual rate, the lowest since October 1999, Commerce Department figures showed today in Washington. The median estimate of economists in a Bloomberg survey called for a 0.2 percent decline.
Outlays on home building dropped during the month as new- home prices and sales continued to fall. In addition, deficit- strapped state and local governments are restricting funding for public works.
“The housing sector still looks to be in pretty dire straits,” Scott Brown, chief economist at Raymond James & Associates Inc. in St Petersburg, Florida, said before the report. “We’re seeing prices still weakening at this point. If we get much better job growth, we’ll have better results in the housing sector.”
Another report today showed employers added 216,000 workers to payrolls in March, and the jobless rate dropped to a two-year low of 8.8 percent, beating the median projection of economists surveyed by Bloomberg. Private employment, which excludes government agencies, climbed by 230,000 after a 240,000 February increase, marking the biggest back-to-back gain since 2006.
Estimates for the construction figures of 49 economists ranged from a drop of 1.2 percent to an increase of 2.5 percent. The Commerce Department revised the January reading down to a 1.8 percent from a previously estimated decline of 0.7 percent.
14-Year Low
Private construction spending fell 1.4 percent in February from the prior month to a $468 billion annual pace, the weakest since April 1997. Homebuilding outlays decreased 3.7 percent.
Spending on public construction slid 1.3 percent, the fifth consecutive drop, the report said. Federal construction spending increased 0.7 percent, while outlays at state and local agencies fell 1.5 percent.
Faced with declining home prices and the swelling supply of unsold properties, residential real estate developers are reluctant to increase construction. Housing starts in the U.S. declined more than forecast in February to the slowest pace since April 2009 and building permits slumped to a record low, the Commerce Department said March 16.
Residential real-estate prices dropped in the 12 months to January by the most in more than a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 3.1 percent, the biggest year-over-year decrease since December 2009, the group said earlier this week.
Builder Concern
Home sales haven’t recovered for the U.S. spring selling season, usually the busiest time for buyers, Stuart Miller, chief executive officer of homebuilder Lennar Corp. (LEN), said during a conference call with investors March 29.
“The long-awaited selling season of 2011 has not yet defined itself as the beginning of a recovery cycle,” Miller said. “We’ve all seen evidence of a sluggish recovery in the reported national sales numbers for both existing homes and new homes and we have clearly seen the same on a real time basis in the field. We continue to believe that the housing recovery will take time and patience and will be inconsistent and uneven.”
Miami-based Lennar, the second-most profitable U.S. builder last year, unexpectedly reported net income for the first quarter after booking a lawsuit settlement and adding income from its distressed-investing unit.
Russian Economy Grew 4.5% in Fourth Quarter, Less Than Economists Forecast
Russia’s economic growth accelerated in the fourth quarter as commodity prices rose and companies boosted investment to meet rising domestic demand.
Gross domestic product rose an annual 4.5 percent compared with a revised 3.1 percent in the previous three months, the Federal Statistics Service in Moscow said today in an e-mailed statement. The median estimate in a Bloomberg survey of 14 economists was for 4.8 percent.
President Dmitry Medvedev set a growth target of 10 percent within five years to pull the world’s biggest energy supplier into line with emerging-market peers in China, Brazil and India. The economy lost momentum in the third quarter after the worst drought in at least half a century slowed expansion by as much as 0.8 percentage point, according to the Economy Ministry.
“I still think we can say this is a pretty lackluster recovery, particularly by historic standards,” Neil Shearing, senior emerging-market analyst at Capital Economics in London, said by phone. “There’s mounting evidence that real wage growth has started to slow and that’s feeding into slow retail sales.”
Russia’s growth continued to lag among the so-called BRIC economies. China’s economy grew 10.3 percent in the fourth quarter, followed by Indian GDP growth of 8.2 percent and Brazil’s rise of 5 percent.
Manufacturing Rise
Manufacturing rose an annual 13 percent in the fourth quarter, while construction jumped 6.1 percent after declines in the previous three quarters, the service said. Agricultural output shrank 7.1 percent from the same period last year.
Companies including United Co. Rusal, the world’s largest aluminum producer, and OAO TMK, Russia’s largest producer of steel pipes, increased profit last year after sales gained and prices for their goods rose.
New car sales rose an average 67 percent in the fourth quarter, benefitting OAO AvtoVAZ (AVAZ), Russia’s largest automaker.
The ruble-denominated Micex Index (INDEXCF) of 30 stocks added to gains after the data release and was 1.6 percent higher at 1841.62 at 6:11 p.m. in Moscow. The ruble strengthened 0.1 percent against the dollar to 28.4050 by the 5 p.m. close of trading in the capital. The Russian currency was 0.6 percent stronger against the euro at 40.0650.
Year-End Rush
Industrial output unexpectedly eased in February and fixed- capital investment shrank during the first two months of the year after 10 consecutive monthly gains.
Real disposable incomes fell an annual 1.5 percent in February after a 5.8 percent drop in January. Unemployment was 7.6 percent in February, almost the highest level in 10 months.
“Construction activity and investment” may have peaked as companies “rushed to close their projects by the end of last year,” Natalia Orlova, chief economist at Alfa Bank in Moscow, said by telephone before the release. “Overall, the business mood is more complicated this year as opposed to the fourth quarter” after the government raised payroll taxes from Jan. 1.
GDP grew 4 percent last year, the statistics service said, reiterating its first reading. Second-quarter growth was revised down to 5 percent and expansion in the first quarter was upgraded to 3.5 percent, the service said.
Gross domestic product rose an annual 4.5 percent compared with a revised 3.1 percent in the previous three months, the Federal Statistics Service in Moscow said today in an e-mailed statement. The median estimate in a Bloomberg survey of 14 economists was for 4.8 percent.
President Dmitry Medvedev set a growth target of 10 percent within five years to pull the world’s biggest energy supplier into line with emerging-market peers in China, Brazil and India. The economy lost momentum in the third quarter after the worst drought in at least half a century slowed expansion by as much as 0.8 percentage point, according to the Economy Ministry.
“I still think we can say this is a pretty lackluster recovery, particularly by historic standards,” Neil Shearing, senior emerging-market analyst at Capital Economics in London, said by phone. “There’s mounting evidence that real wage growth has started to slow and that’s feeding into slow retail sales.”
Russia’s growth continued to lag among the so-called BRIC economies. China’s economy grew 10.3 percent in the fourth quarter, followed by Indian GDP growth of 8.2 percent and Brazil’s rise of 5 percent.
Manufacturing Rise
Manufacturing rose an annual 13 percent in the fourth quarter, while construction jumped 6.1 percent after declines in the previous three quarters, the service said. Agricultural output shrank 7.1 percent from the same period last year.
Companies including United Co. Rusal, the world’s largest aluminum producer, and OAO TMK, Russia’s largest producer of steel pipes, increased profit last year after sales gained and prices for their goods rose.
New car sales rose an average 67 percent in the fourth quarter, benefitting OAO AvtoVAZ (AVAZ), Russia’s largest automaker.
The ruble-denominated Micex Index (INDEXCF) of 30 stocks added to gains after the data release and was 1.6 percent higher at 1841.62 at 6:11 p.m. in Moscow. The ruble strengthened 0.1 percent against the dollar to 28.4050 by the 5 p.m. close of trading in the capital. The Russian currency was 0.6 percent stronger against the euro at 40.0650.
Year-End Rush
Industrial output unexpectedly eased in February and fixed- capital investment shrank during the first two months of the year after 10 consecutive monthly gains.
Real disposable incomes fell an annual 1.5 percent in February after a 5.8 percent drop in January. Unemployment was 7.6 percent in February, almost the highest level in 10 months.
“Construction activity and investment” may have peaked as companies “rushed to close their projects by the end of last year,” Natalia Orlova, chief economist at Alfa Bank in Moscow, said by telephone before the release. “Overall, the business mood is more complicated this year as opposed to the fourth quarter” after the government raised payroll taxes from Jan. 1.
GDP grew 4 percent last year, the statistics service said, reiterating its first reading. Second-quarter growth was revised down to 5 percent and expansion in the first quarter was upgraded to 3.5 percent, the service said.
Portugal Calls June 5 Election as Looming Bond Payments Raise Bailout Risk
Portugal will elect its next government on June 5, just 10 days before its last bond redemption of the year, as surging financing costs threaten to push the country to the brink of requiring a bailout.
“The amount of payments to be made this year in the form of interest costs and maturing loans is quite high,” President Anibal Cavaco Silva said last night in a speech in Lisbon after calling the vote two years early. “The next government faces an unprecedented economic and financial crisis.”
Prime Minister Jose Socrates resigned on March 23 after opposition parties rejected his deficit-cutting plan that aimed to prevent Portugal from following Greece and Ireland in seeking a European Union rescue. After consulting political parties last week and former leaders in Lisbon, Cavaco Silva announced the vote after a day when yields on Portugal’s two-, five- and 10- year bonds reached euro-era records.
Portugal is already raising taxes and implementing the deepest spending cuts in more than three decades as it tries to narrow its budget gap, curb debt and bring down bond yields. The election, which couldn’t be set before the last week of May under Portuguese law, will fall between two bond redemptions, on April 15 and June 15. The maturities total 9 billion euros ($13 billion) and may determine whether Portugal can avoid a rescue.
June Maturity
Portugal’s cash balance “is unlikely to be far above 3 billion euros,” Emilie Gay, an economist at Capital Economics in London, wrote in a note to investors yesterday. “While this figure remains uncertain, it is hard to see how Portugal could cope without external support beyond June.”
The president’s consultations yesterday began hours after Portugal reported a budget deficit of 8.6 percent of gross domestic product for 2010, higher than the 7.3 percent the government had previously forecast. The EU’s statistics office, Eurostat, has required accounting changes in some countries and costs related to a 2008 bank failure were added to last year’s accounts, Finance Minister Fernando Teixeira dos Santos said.
Without the charges the shortfall would have been 6.8 percent, he said, adding that the government was still committed to trimming the gap to 4.6 percent this year.
“More important than the issue of elections is what the next austerity plan will be and how the new government will fight the deficit,” said Filipe Silva, who manages 60 million euros at Banco Carregosa SA in Oporto, Portugal.
Bonds Slump
Portugal’s two-year government bond yield fell 8 basis points 8.7 percent, after surging 75 basis points yesterday to 8.78 percent, topping the rate on the nation’s 10-year debt for the first time since 2006. The difference in yield that investors demand to hold Portugal’s 10-year bonds instead of German bunds reached a euro-era record of 510 basis points today. The 10-year bond yield rose to a euro-era record of 8.49 percent, and the five-year bond yield also climbed to a record 9.706 percent.
“Currently accessing the European Union and International Monetary Fund loans would be far cheaper for Portugal than market financing,” Gay said. Ireland pays an average interest rate of 6 percent on its seven-year maturity bailout loans.
Portugal’s bonds are down 7.7 percent in the first quarter, the worst performance among 26 indexes tracked by the European Federation of Financial Analysts Societies.
Rating Cut
Standard & Poor’s on March 29 downgraded Portugal for the second time in a week to BBB-, the lowest investment grade, saying the country will “likely access” Europe’s rescue fund. Portugal is rated lower than Ireland, which in November became the first to request aid from the European Financial Stability Facility, set up after Greece’s rescue in April 2010.
The surge in financing costs is lending urgency to resolving the political impasse to have a government in place that can seek aid if necessary.
“The government is not in condition and does not have the powers to request any type of external aid,” Teixeira dos Santos said yesterday. “The government will guarantee that there is the necessary financing for the country to face its responsibilities and honor its commitments.”
“The government is not blocked from carrying out the necessary acts to lead the country’s destiny,” Cavaco Silva said yesterday after accepting the prime minister’s resignation. “The current government will have all of my support to adopt the indispensable measures to safeguard the superior national interest and ensure the necessary financing means for the functioning of our economy.”
Extraordinary Auction
Portugal today sold 1.6 billion euros of 14-month debt due in June 2012 at an average yield of 5.793 percent, more than the 4.331 percent it paid at a sale of 12 month bills on March 16. The IGCP, as the government debt agency is known, yesterday announced the indicative amount for today’s sale was 1.5 billion euros and said it planned the “extraordinary” auction due to “specific demand” for the securities. It also announced plans to carry out bill auctions in April, May and June.
The country can meet “debt redemption commitments scheduled for 2011, especially the redemptions of long-term debt that will take place in April and June,” Secretary of State for Treasury and Finance Carlos Costa Pina said earlier this week.
Alberto Soares, the head of Portugal’s debt agency, said on March 29 that it had already carried out 36 percent of this year’s estimated issuance of medium and long-term debt. Portugal intends to sell as much as 20 billion euros of bonds this year to finance its budget and cover maturing debt.
Elections could help reduce Portugal’s borrowing costs, Costa Pina said. “The cost of financing was substantially worsened by the political crisis triggered by the opposition,” he said. “A clarification of the political situation is urgent.”
Latest Polls
Opinion polls suggest that Socrates, who leads the Socialists, will lose the election. The Social Democrats led the Socialists by 37.3 percent to 30.4 percent in a survey of voters published today on the website of weekly newspaper Expresso.
Socrates became prime minister in 2005 and his Socialist Party won re-election in 2009 without a majority in parliament. The Social Democrats agreed in October to let the government’s 2011 budget proposal pass by abstaining in parliament. Their opposition to the new austerity measures announced on March 11, which included a reduction in some pensions and cuts in tax benefits, was key to toppling Socrates.
Cavaco Silva said on March 28 that the three biggest political parties pledged their commitment to meet the current deficit targets and bring the shortfall down to the EU’s 3 percent limit in 2012.
Between 1995 and 1999, Socialist leader Antonio Guterres led the only minority government in Portugal to survive a full term since the end of a four-decade dictatorship in 1974. Portugal has been trying to avoid requesting aid for the first time since 1983, when it received external help from the Washington-based IMF.
“The amount of payments to be made this year in the form of interest costs and maturing loans is quite high,” President Anibal Cavaco Silva said last night in a speech in Lisbon after calling the vote two years early. “The next government faces an unprecedented economic and financial crisis.”
Prime Minister Jose Socrates resigned on March 23 after opposition parties rejected his deficit-cutting plan that aimed to prevent Portugal from following Greece and Ireland in seeking a European Union rescue. After consulting political parties last week and former leaders in Lisbon, Cavaco Silva announced the vote after a day when yields on Portugal’s two-, five- and 10- year bonds reached euro-era records.
Portugal is already raising taxes and implementing the deepest spending cuts in more than three decades as it tries to narrow its budget gap, curb debt and bring down bond yields. The election, which couldn’t be set before the last week of May under Portuguese law, will fall between two bond redemptions, on April 15 and June 15. The maturities total 9 billion euros ($13 billion) and may determine whether Portugal can avoid a rescue.
June Maturity
Portugal’s cash balance “is unlikely to be far above 3 billion euros,” Emilie Gay, an economist at Capital Economics in London, wrote in a note to investors yesterday. “While this figure remains uncertain, it is hard to see how Portugal could cope without external support beyond June.”
The president’s consultations yesterday began hours after Portugal reported a budget deficit of 8.6 percent of gross domestic product for 2010, higher than the 7.3 percent the government had previously forecast. The EU’s statistics office, Eurostat, has required accounting changes in some countries and costs related to a 2008 bank failure were added to last year’s accounts, Finance Minister Fernando Teixeira dos Santos said.
Without the charges the shortfall would have been 6.8 percent, he said, adding that the government was still committed to trimming the gap to 4.6 percent this year.
“More important than the issue of elections is what the next austerity plan will be and how the new government will fight the deficit,” said Filipe Silva, who manages 60 million euros at Banco Carregosa SA in Oporto, Portugal.
Bonds Slump
Portugal’s two-year government bond yield fell 8 basis points 8.7 percent, after surging 75 basis points yesterday to 8.78 percent, topping the rate on the nation’s 10-year debt for the first time since 2006. The difference in yield that investors demand to hold Portugal’s 10-year bonds instead of German bunds reached a euro-era record of 510 basis points today. The 10-year bond yield rose to a euro-era record of 8.49 percent, and the five-year bond yield also climbed to a record 9.706 percent.
“Currently accessing the European Union and International Monetary Fund loans would be far cheaper for Portugal than market financing,” Gay said. Ireland pays an average interest rate of 6 percent on its seven-year maturity bailout loans.
Portugal’s bonds are down 7.7 percent in the first quarter, the worst performance among 26 indexes tracked by the European Federation of Financial Analysts Societies.
Rating Cut
Standard & Poor’s on March 29 downgraded Portugal for the second time in a week to BBB-, the lowest investment grade, saying the country will “likely access” Europe’s rescue fund. Portugal is rated lower than Ireland, which in November became the first to request aid from the European Financial Stability Facility, set up after Greece’s rescue in April 2010.
The surge in financing costs is lending urgency to resolving the political impasse to have a government in place that can seek aid if necessary.
“The government is not in condition and does not have the powers to request any type of external aid,” Teixeira dos Santos said yesterday. “The government will guarantee that there is the necessary financing for the country to face its responsibilities and honor its commitments.”
“The government is not blocked from carrying out the necessary acts to lead the country’s destiny,” Cavaco Silva said yesterday after accepting the prime minister’s resignation. “The current government will have all of my support to adopt the indispensable measures to safeguard the superior national interest and ensure the necessary financing means for the functioning of our economy.”
Extraordinary Auction
Portugal today sold 1.6 billion euros of 14-month debt due in June 2012 at an average yield of 5.793 percent, more than the 4.331 percent it paid at a sale of 12 month bills on March 16. The IGCP, as the government debt agency is known, yesterday announced the indicative amount for today’s sale was 1.5 billion euros and said it planned the “extraordinary” auction due to “specific demand” for the securities. It also announced plans to carry out bill auctions in April, May and June.
The country can meet “debt redemption commitments scheduled for 2011, especially the redemptions of long-term debt that will take place in April and June,” Secretary of State for Treasury and Finance Carlos Costa Pina said earlier this week.
Alberto Soares, the head of Portugal’s debt agency, said on March 29 that it had already carried out 36 percent of this year’s estimated issuance of medium and long-term debt. Portugal intends to sell as much as 20 billion euros of bonds this year to finance its budget and cover maturing debt.
Elections could help reduce Portugal’s borrowing costs, Costa Pina said. “The cost of financing was substantially worsened by the political crisis triggered by the opposition,” he said. “A clarification of the political situation is urgent.”
Latest Polls
Opinion polls suggest that Socrates, who leads the Socialists, will lose the election. The Social Democrats led the Socialists by 37.3 percent to 30.4 percent in a survey of voters published today on the website of weekly newspaper Expresso.
Socrates became prime minister in 2005 and his Socialist Party won re-election in 2009 without a majority in parliament. The Social Democrats agreed in October to let the government’s 2011 budget proposal pass by abstaining in parliament. Their opposition to the new austerity measures announced on March 11, which included a reduction in some pensions and cuts in tax benefits, was key to toppling Socrates.
Cavaco Silva said on March 28 that the three biggest political parties pledged their commitment to meet the current deficit targets and bring the shortfall down to the EU’s 3 percent limit in 2012.
Between 1995 and 1999, Socialist leader Antonio Guterres led the only minority government in Portugal to survive a full term since the end of a four-decade dictatorship in 1974. Portugal has been trying to avoid requesting aid for the first time since 1983, when it received external help from the Washington-based IMF.
Manufacturing in U.S. Expands at Close to Seven-Year High
Manufacturing in the U.S. expanded in March at close to the fastest pace in almost seven years, reinforcing signs the industry will propel growth in the world’s largest economy.
The Institute for Supply Management’s manufacturing index was little changed at 61.2, after February’s 61.4 reading that was the highest since May 2004, the Tempe, Arizona-based group’s report showed today. Figures greater than 50 signal expansion.
Companies like Caterpillar Inc. (CAT) and United Technologies Corp. (UTX) are benefiting as production, fueled by inventory rebuilding at the start of the recovery, gets an added boost from rising demand in the U.S. and overseas. The strength in manufacturing is also generating job gains, a necessary ingredient to a sustained expansion.
“Everything still looks good for manufacturing for the next few months,” Mike Montgomery, an economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “Strong export orders are a very positive part of the story.”
Stocks extended gains and Treasuries fell after the figures, with the Standard & Poor’s 500 Index rising 0.8 percent to 1,336.62 at 10:34 a.m. in New York. The yield on the benchmark 10-year note rose to 3.49 percent from 3.47 percent late yesterday.
The median forecast of 79 economists surveyed by Bloomberg News was 61.1. Estimates ranged from 59 to 63.
A gauge of factories in the euro region dropped to 57.5 last month from February’s 59, London-based Markit Economics said. Manufacturing in China, India and Russia also expanded.
China Manufacturing
China’s manufacturing growth accelerated for the first time in four months with the index rising to 53.4 from 52.2, while India’s manufacturing grew for a 24th straight month and the index remained at 57.9. Russia’s factory output gauge increased to 55.6, the highest in almost five years, from 55.2.
Earlier, the Labor Department reported that the U.S. economy added 216,000 jobs in March, while the unemployment rate declined to 8.8 percent, signs the labor-market recovery is gathering speed.
The ISM’s production index increased to 69, the highest since January 2004, from 66.3. The new orders measure fell to 63.3 from 68, and the gauge of export orders decreased to 56 from 62.5.
The employment gauge slipped to 63 from 64.5 in the prior month.
Deliver Times
The index of prices paid jumped to 85, the highest since July 2008, from 82. A measure of supplier deliveries increased to a one-year high of 63.1 in March, indicating longer lead times.
“The delivery delays might have to do with anticipated or actual slowing from Japan” following the earthquake and tsumani, said Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts.
The measure of orders waiting to be filled fell to 52.5 from 59. The inventory index eased to 47.4 from 48.8, while a gauge of customer stockpiles was little changed at 39.5 from 40. A figure lower than 50 means manufacturers are reducing stockpiles.
Recent regional factory reports underscore the resilience of the manufacturing industry, which accounts for about 11 percent of the economy. The Federal Reserve Bank of Philadelphia’s index indicated factories expanded in March at the fastest pace since 1984, while the New York Fed’s measure rose to a nine-month high.
Export Growth
United Technologies, the maker of Pratt & Whitney jet- engines and Otis elevators, is among companies benefiting from growth in the so-called BRIC countries that include Brazil, Russia, India and China. The Hartford, Connecticut-based company in March boosted the low end of its 2011 earnings forecast amid improving markets across its divisions.
Peoria, Illinois-based Caterpillar, the world’s largest maker of construction equipment, is seeing a “slow, steady increase” in demand in North America, Chief Executive Officer Doug Oberhelman said at an industry conference on March 23. “Business is booming outside the U.S.,” Oberhelman said.
Auto dealers are also seeing improved demand. Car sales in February rose to a 13.38 million unit pace, the highest since the government’s cash-for-clunkers program in August 2009, according to industry data.
The Institute for Supply Management’s manufacturing index was little changed at 61.2, after February’s 61.4 reading that was the highest since May 2004, the Tempe, Arizona-based group’s report showed today. Figures greater than 50 signal expansion.
Companies like Caterpillar Inc. (CAT) and United Technologies Corp. (UTX) are benefiting as production, fueled by inventory rebuilding at the start of the recovery, gets an added boost from rising demand in the U.S. and overseas. The strength in manufacturing is also generating job gains, a necessary ingredient to a sustained expansion.
“Everything still looks good for manufacturing for the next few months,” Mike Montgomery, an economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “Strong export orders are a very positive part of the story.”
Stocks extended gains and Treasuries fell after the figures, with the Standard & Poor’s 500 Index rising 0.8 percent to 1,336.62 at 10:34 a.m. in New York. The yield on the benchmark 10-year note rose to 3.49 percent from 3.47 percent late yesterday.
The median forecast of 79 economists surveyed by Bloomberg News was 61.1. Estimates ranged from 59 to 63.
A gauge of factories in the euro region dropped to 57.5 last month from February’s 59, London-based Markit Economics said. Manufacturing in China, India and Russia also expanded.
China Manufacturing
China’s manufacturing growth accelerated for the first time in four months with the index rising to 53.4 from 52.2, while India’s manufacturing grew for a 24th straight month and the index remained at 57.9. Russia’s factory output gauge increased to 55.6, the highest in almost five years, from 55.2.
Earlier, the Labor Department reported that the U.S. economy added 216,000 jobs in March, while the unemployment rate declined to 8.8 percent, signs the labor-market recovery is gathering speed.
The ISM’s production index increased to 69, the highest since January 2004, from 66.3. The new orders measure fell to 63.3 from 68, and the gauge of export orders decreased to 56 from 62.5.
The employment gauge slipped to 63 from 64.5 in the prior month.
Deliver Times
The index of prices paid jumped to 85, the highest since July 2008, from 82. A measure of supplier deliveries increased to a one-year high of 63.1 in March, indicating longer lead times.
“The delivery delays might have to do with anticipated or actual slowing from Japan” following the earthquake and tsumani, said Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts.
The measure of orders waiting to be filled fell to 52.5 from 59. The inventory index eased to 47.4 from 48.8, while a gauge of customer stockpiles was little changed at 39.5 from 40. A figure lower than 50 means manufacturers are reducing stockpiles.
Recent regional factory reports underscore the resilience of the manufacturing industry, which accounts for about 11 percent of the economy. The Federal Reserve Bank of Philadelphia’s index indicated factories expanded in March at the fastest pace since 1984, while the New York Fed’s measure rose to a nine-month high.
Export Growth
United Technologies, the maker of Pratt & Whitney jet- engines and Otis elevators, is among companies benefiting from growth in the so-called BRIC countries that include Brazil, Russia, India and China. The Hartford, Connecticut-based company in March boosted the low end of its 2011 earnings forecast amid improving markets across its divisions.
Peoria, Illinois-based Caterpillar, the world’s largest maker of construction equipment, is seeing a “slow, steady increase” in demand in North America, Chief Executive Officer Doug Oberhelman said at an industry conference on March 23. “Business is booming outside the U.S.,” Oberhelman said.
Auto dealers are also seeing improved demand. Car sales in February rose to a 13.38 million unit pace, the highest since the government’s cash-for-clunkers program in August 2009, according to industry data.
European Ports, Shippers Brace for Delayed Quake Impact: Freight Markets
European ports including Rotterdam and Hamburg say the Japanese earthquake will begin to affect volumes later this month as dockside stockpiles are depleted and ships that left Tokyo soon after the disaster arrive in harbor.
A.P. Moeller-Maersk A/S, the world’s largest container line, has a transit time of 31 days between Yokohama and Rotterdam, Europe’s No. 1 port, so that vessels which left Japan the day after the March 11 quake would dock on April 11. Wilh. Wilhelmsen ASA’s car transporters take six weeks to complete the journey via Australia, indicating an arrival date of April 22.
“We haven’t reduced capacity or the number of port calls, but volumes have dropped moderately and we’re receiving fewer bookings,” Jens Eskelund, Copenhagen-based Maersk’s spokesman for North Asia, said yesterday in a phone interview. “There’ll be a delay before that moves through the export system.”
Cargo volumes may hold up even after ships start to arrive in Europe as Japanese companies tap inventories to meet export demand, then will decline when reduced production depletes stocks. That may lead to lighter loads, quieter ports and manufacturers running short of auto-parts and electronics, the biggest classes of container goods carried from Japan.
Pacific Ocean crossings are shorter than routes from Asia to Europe, with the trip from Tokyo to Los Angeles taking 12 days, according to the website of Marseille, France-based CMA CGM SA, the world’s third-largest container shipper.
Factory Disruption
Japan handles about 4 percent of the world’s containers and prior to the earthquake and tsunami almost 20 percent of the global fleet by box capacity was timetabled to call there, according to Clarkson Plc, the world’s biggest shipbroker.
The disaster has disrupted factories and transport infrastructure in the north of Japan, reducing production and making it tougher to get goods to port, while damage to nuclear facilities has led to widespread power shortages. Fujitsu Ltd. has shuttered one of its semiconductor plants until April 3.
Japan’s manufacturing deteriorated at the fastest pace in at least nine years in March, a report from Japan Materials Management Association and Markit Economics showed yesterday, underscoring forecasts for the economy to shrink in the aftermath of the earthquake.
“This could have an impact on trade volumes,” Clarkson said in an e-mail to Bloomberg on March 25. “Japan is a key exporter on the main shipping lanes and some portion of the economy’s ability to output export goods has no doubt been affected.”
Hamburg Concern
While Rotterdam has experienced no drop in volumes as yet, a decline is “not unlikely,” spokesman Minco van Heezen said. The Dutch complex imports 1.9 million metric tons of Japanese cargo a year -- compared with 12.9 million tons from China -- including 1.6 million tons of container goods such as electronics, parts and chemicals, and imports 100,000 cars.
At the port of Hamburg, Germany’s largest, “a decline is possible and could happen in coming months,” spokesman Bengt van Beuningen said, adding that forecasts aren’t yet available. All vessels arriving from Japan in Felixstowe, the biggest U.K. port, were also loaded before the events of March 11 and it’s too early to gauge the outcome, spokesman Paul Davey said.
Ports including Rotterdam, Felixstowe and Bremerhaven, Germany’s second-largest container dock, said any fall-off they do suffer is likely to have a limited impact on total volumes, with Bremerhaven expecting a “little decline” in Japanese cargo, according to spokesman Jan Janssen.
Beverages, Plastics
Hapag-Lloyd AG, the world’s fourth-biggest container line, said its ships need 34 days to travel from Japan to Hamburg, where it is based. The earthquake’s impact on cargoes of wood products, machinery, raw materials, foodstuffs, beverages, chemicals and plastics from the Asian country “remains to been seen,” according to Eva Gjersvik, a company spokeswoman.
Car shipments to Europe will probably one direct casualty of the disruption caused by the quake, said Benedicte Gude, a spokeswoman for Lysaker, Norway-based Wilh. Wilhelmsen, which describes Japan as among its “most important” flows.
“In the short term we expect export volumes out of Japan to be negatively affected,” Gude said by telephone. “In the medium and long term, it’s still uncertain.”
Lost Production
Wilhelmsen ships cars for companies including Toyota Motor Corp., which says it may have lost production of about 140,000 vehicles from March 14 to March 26. Honda Motor Co. estimates output will be cut by 46,600 autos between March 14 and April 3, and Daihatsu Motor Co. closed two factories at a cost of an estimated 35,000 units through March 29.
“Current production is using inventories and we are able to produce cars at the Tsutsumi plant in Aichi and at our factory in Kyushu until April 8,” Toyota spokeswoman Shiori Hashimoto said. “We don’t have information beyond that at this point.”
The quake is also likely to hurt sales and earnings at European auto-parts companies in the second quarter, according to Rainer Neidnig, an analyst at Moody’s Investors Service who predicted in a March 30 note that it will take “some time” for supply chains to be realigned to cope with shortages.
Grammer AG (GMM), a car-seat maker based in Amberg, Germany, said in a statement this week that a lack of parts following the disaster may prompt carmakers to slow production and lead to the cancellation of contracts with suppliers.
Hapag Return
All of the world’s top six container shippers are once again accepting bookings for the Tokyo area after Hapag-Lloyd said yesterday it would start calling there again in about 10 days. Hapag has diverted ships further south because of concern about threats to equipment and crew from the crippled Fukushima Dai-Ichi nuclear plant, 220 miles north of the Japanese capital.
Vessels are continuing to avoid a 30-kilometer (19 mile) no-go area around the Fukushima site as instructed by the Japanese government, and many have adopted larger, self-imposed exclusion zones to avoid off-shore debris from the tsunami.
Maersk spokesman Michael Storgaard in Copenhagen said the company is hopeful that any slump in volumes will be followed by a strong rebound led by items needed in the rebuilding effort.
“Japan’s exports are clearly impacted, but there is also a reconstruction period which will entail increased imports,” he said. “The overall shipping balance between these two trends can’t be assessed exactly at this point.”
A.P. Moeller-Maersk A/S, the world’s largest container line, has a transit time of 31 days between Yokohama and Rotterdam, Europe’s No. 1 port, so that vessels which left Japan the day after the March 11 quake would dock on April 11. Wilh. Wilhelmsen ASA’s car transporters take six weeks to complete the journey via Australia, indicating an arrival date of April 22.
“We haven’t reduced capacity or the number of port calls, but volumes have dropped moderately and we’re receiving fewer bookings,” Jens Eskelund, Copenhagen-based Maersk’s spokesman for North Asia, said yesterday in a phone interview. “There’ll be a delay before that moves through the export system.”
Cargo volumes may hold up even after ships start to arrive in Europe as Japanese companies tap inventories to meet export demand, then will decline when reduced production depletes stocks. That may lead to lighter loads, quieter ports and manufacturers running short of auto-parts and electronics, the biggest classes of container goods carried from Japan.
Pacific Ocean crossings are shorter than routes from Asia to Europe, with the trip from Tokyo to Los Angeles taking 12 days, according to the website of Marseille, France-based CMA CGM SA, the world’s third-largest container shipper.
Factory Disruption
Japan handles about 4 percent of the world’s containers and prior to the earthquake and tsunami almost 20 percent of the global fleet by box capacity was timetabled to call there, according to Clarkson Plc, the world’s biggest shipbroker.
The disaster has disrupted factories and transport infrastructure in the north of Japan, reducing production and making it tougher to get goods to port, while damage to nuclear facilities has led to widespread power shortages. Fujitsu Ltd. has shuttered one of its semiconductor plants until April 3.
Japan’s manufacturing deteriorated at the fastest pace in at least nine years in March, a report from Japan Materials Management Association and Markit Economics showed yesterday, underscoring forecasts for the economy to shrink in the aftermath of the earthquake.
“This could have an impact on trade volumes,” Clarkson said in an e-mail to Bloomberg on March 25. “Japan is a key exporter on the main shipping lanes and some portion of the economy’s ability to output export goods has no doubt been affected.”
Hamburg Concern
While Rotterdam has experienced no drop in volumes as yet, a decline is “not unlikely,” spokesman Minco van Heezen said. The Dutch complex imports 1.9 million metric tons of Japanese cargo a year -- compared with 12.9 million tons from China -- including 1.6 million tons of container goods such as electronics, parts and chemicals, and imports 100,000 cars.
At the port of Hamburg, Germany’s largest, “a decline is possible and could happen in coming months,” spokesman Bengt van Beuningen said, adding that forecasts aren’t yet available. All vessels arriving from Japan in Felixstowe, the biggest U.K. port, were also loaded before the events of March 11 and it’s too early to gauge the outcome, spokesman Paul Davey said.
Ports including Rotterdam, Felixstowe and Bremerhaven, Germany’s second-largest container dock, said any fall-off they do suffer is likely to have a limited impact on total volumes, with Bremerhaven expecting a “little decline” in Japanese cargo, according to spokesman Jan Janssen.
Beverages, Plastics
Hapag-Lloyd AG, the world’s fourth-biggest container line, said its ships need 34 days to travel from Japan to Hamburg, where it is based. The earthquake’s impact on cargoes of wood products, machinery, raw materials, foodstuffs, beverages, chemicals and plastics from the Asian country “remains to been seen,” according to Eva Gjersvik, a company spokeswoman.
Car shipments to Europe will probably one direct casualty of the disruption caused by the quake, said Benedicte Gude, a spokeswoman for Lysaker, Norway-based Wilh. Wilhelmsen, which describes Japan as among its “most important” flows.
“In the short term we expect export volumes out of Japan to be negatively affected,” Gude said by telephone. “In the medium and long term, it’s still uncertain.”
Lost Production
Wilhelmsen ships cars for companies including Toyota Motor Corp., which says it may have lost production of about 140,000 vehicles from March 14 to March 26. Honda Motor Co. estimates output will be cut by 46,600 autos between March 14 and April 3, and Daihatsu Motor Co. closed two factories at a cost of an estimated 35,000 units through March 29.
“Current production is using inventories and we are able to produce cars at the Tsutsumi plant in Aichi and at our factory in Kyushu until April 8,” Toyota spokeswoman Shiori Hashimoto said. “We don’t have information beyond that at this point.”
The quake is also likely to hurt sales and earnings at European auto-parts companies in the second quarter, according to Rainer Neidnig, an analyst at Moody’s Investors Service who predicted in a March 30 note that it will take “some time” for supply chains to be realigned to cope with shortages.
Grammer AG (GMM), a car-seat maker based in Amberg, Germany, said in a statement this week that a lack of parts following the disaster may prompt carmakers to slow production and lead to the cancellation of contracts with suppliers.
Hapag Return
All of the world’s top six container shippers are once again accepting bookings for the Tokyo area after Hapag-Lloyd said yesterday it would start calling there again in about 10 days. Hapag has diverted ships further south because of concern about threats to equipment and crew from the crippled Fukushima Dai-Ichi nuclear plant, 220 miles north of the Japanese capital.
Vessels are continuing to avoid a 30-kilometer (19 mile) no-go area around the Fukushima site as instructed by the Japanese government, and many have adopted larger, self-imposed exclusion zones to avoid off-shore debris from the tsunami.
Maersk spokesman Michael Storgaard in Copenhagen said the company is hopeful that any slump in volumes will be followed by a strong rebound led by items needed in the rebuilding effort.
“Japan’s exports are clearly impacted, but there is also a reconstruction period which will entail increased imports,” he said. “The overall shipping balance between these two trends can’t be assessed exactly at this point.”
China Manufacturing Grows at Faster Pace as Economy Withstands Tightening
China’s manufacturing growth accelerated for the first time in four months, easing concern that monetary tightening may lead to a slowdown in the world’s second-biggest economy.
The Purchasing Managers’ Index rose to 53.4 in March from 52.2 in February, the China Federation of Logistics and Purchasing said in a statement on its website today. The reading compared with the median forecast of 54 in a Bloomberg News survey of 17 economists. A separate PMI released by HSBC Holdings Plc also gained.
Today’s data indicate that Premier Wen Jiabao is succeeding in sustaining economic growth while cracking down on inflation that topped the government’s 4 percent target in the first two months of this year. The central bank will boost interest rates again this quarter, according to all 20 economists in a Bloomberg News survey on March 22.
“The economy is still expanding at a good pace,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., who formerly worked for the International Monetary Fund and the European Central Bank. “More tightening is necessary to contain inflation pressure.”
The Shanghai Composite Index gained 0.4 percent as of 1:36 p.m. local time.
An Indian manufacturing index was unchanged at 57.9 for March, HSBC and Markit Economics said today.
Export Orders
Manufacturing in the U.S. may have expanded at about the same pace in March as in February, which was the strongest month in almost seven years, according to the median forecast of economists surveyed by Bloomberg News. The Institute for Supply Management will release the data today.
Readings above 50 for the PMIs indicate expansions.
Today’s data from China’s logistics federation showed output, orders and export orders grew at a faster pace in March than in February. Input prices rose at a slower pace, the survey suggested. The PMI released by HSBC and Markit Economics rose to 51.8 in March from 51.7 in February.
Bank of America-Merrill Lynch economist Lu Ting said the data was distorted by migrant workers returning to their jobs after a weeklong Lunar New Year holiday and high inventory levels may point to a looming slowdown in manufacturing. Nomura Holdings Inc. also cited “the seasonal factor.”
‘Not Too Worried’
Central bank adviser Xia Bin said that the sooner that China raises rates the better, the China Securities Journal reported today. In contrast, Deputy Governor Yi Gang said March 23 that rates are at a “comfortable” level and he’s “not too worried” by inflation because the pace of price increases will slow in the second half of the year.
The benchmark one-year deposit rate is 3 percent and the lending rate is 6.06 percent.
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 PMI covers more than 430 companies.
The central bank has boosted interest rates three times and raised banks’ reserve requirements six times since mid-October. Inflation held at 4.9 percent in February, compared with the government’s 4 percent target for the full year.
China’s economy is expanding at “a stable and relatively rapid pace” and growth in money supply and credit is “moving in the expected direction,” the People’s Bank of China said on March 28 after a monetary policy meeting.
The Purchasing Managers’ Index rose to 53.4 in March from 52.2 in February, the China Federation of Logistics and Purchasing said in a statement on its website today. The reading compared with the median forecast of 54 in a Bloomberg News survey of 17 economists. A separate PMI released by HSBC Holdings Plc also gained.
Today’s data indicate that Premier Wen Jiabao is succeeding in sustaining economic growth while cracking down on inflation that topped the government’s 4 percent target in the first two months of this year. The central bank will boost interest rates again this quarter, according to all 20 economists in a Bloomberg News survey on March 22.
“The economy is still expanding at a good pace,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., who formerly worked for the International Monetary Fund and the European Central Bank. “More tightening is necessary to contain inflation pressure.”
The Shanghai Composite Index gained 0.4 percent as of 1:36 p.m. local time.
An Indian manufacturing index was unchanged at 57.9 for March, HSBC and Markit Economics said today.
Export Orders
Manufacturing in the U.S. may have expanded at about the same pace in March as in February, which was the strongest month in almost seven years, according to the median forecast of economists surveyed by Bloomberg News. The Institute for Supply Management will release the data today.
Readings above 50 for the PMIs indicate expansions.
Today’s data from China’s logistics federation showed output, orders and export orders grew at a faster pace in March than in February. Input prices rose at a slower pace, the survey suggested. The PMI released by HSBC and Markit Economics rose to 51.8 in March from 51.7 in February.
Bank of America-Merrill Lynch economist Lu Ting said the data was distorted by migrant workers returning to their jobs after a weeklong Lunar New Year holiday and high inventory levels may point to a looming slowdown in manufacturing. Nomura Holdings Inc. also cited “the seasonal factor.”
‘Not Too Worried’
Central bank adviser Xia Bin said that the sooner that China raises rates the better, the China Securities Journal reported today. In contrast, Deputy Governor Yi Gang said March 23 that rates are at a “comfortable” level and he’s “not too worried” by inflation because the pace of price increases will slow in the second half of the year.
The benchmark one-year deposit rate is 3 percent and the lending rate is 6.06 percent.
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 PMI covers more than 430 companies.
The central bank has boosted interest rates three times and raised banks’ reserve requirements six times since mid-October. Inflation held at 4.9 percent in February, compared with the government’s 4 percent target for the full year.
China’s economy is expanding at “a stable and relatively rapid pace” and growth in money supply and credit is “moving in the expected direction,” the People’s Bank of China said on March 28 after a monetary policy meeting.
Harper's Trade Pledge Shows Canada Firms Lowering Reliance on U.S. Markets
Canadian Prime Minister Stephen Harper’s campaign pledge to complete free trade agreements with India in 2013 and the European Union next year underscores how the country’s exporters are lowering their reliance on U.S. markets.
Completing trade negotiations with India and the EU would give Canadian companies access to markets of 1.7 billion people, Harper said yesterday in Halifax, Nova Scotia, while campaigning for the May 2 election.
“We must diversify our trade beyond our southern border,” Harper, 51, said against a backdrop of shipping containers at the country’s largest port on the Atlantic Ocean. “Finally, under this Conservative government, that has begun in earnest.”
The share of Canada’s exports to the U.S. shrank to the smallest since 1982 at the end of last year, according to Statistics Canada data. While the value of shipments to the U.S. rose 7.5 percent during 2010, shipments to other countries rose more than five times faster.
Non-U.S. trade helped Canada exit a global recession faster than other Group of Seven countries, led by orders for commodities such as copper, gold, and wheat. The prices of these goods have increased 66 percent since the end of 2008 when they plunged during the global recession, according to Bank of Canada figures.
BRIC Shipments
Canada’s shipments to Brazil, Russia, India and China, known as the BRIC countries, rose to C$19.1 billion in 2010, almost doubling from 2005. Meanwhile, exports to the U.S. came to C$299 billion last year, compared with C$366 billion in 2005, according to Statistics Canada.
Coast Clear Wood Ltd. President Tom Sundher, 69, said in a March 8 interview that he will benefit from Canada’s effort to expand trade with India.
“My customers in the U.S., their business is down 60 percent, so there is little opportunity,” said Sundher, who predicts a partial recovery over the next several years. “India is a market that we are going to be able to develop, but it’s going to take a little while.”
Even companies that don’t produce commodities are tapping into new markets. Ottawa-based wireless equipment-maker DragonWave Inc. (DWI) signed a joint venture with Himachal Futuristic Communications Ltd. in October to enter the Indian market.
“We have been addressing markets outside the U.S.,” said Alan Solheim, 52, vice president of corporate development at DragonWave. “India is just the latest addition to that.”
World Cup Work
SNC-Lavalin Group Inc. and the law firm Heenan Blaikie LLP sent a trade mission to Brazil last month seeking to bid on work for the 2014 World Cup and the 2016 Summer Olympics.
“The diversification into non-traditional markets for me is one of the most exciting things that has happened in the Canadian economy,” Export Development Canada chief economist Peter Hall said in an interview at Bloomberg’s Ottawa newsroom.
In February, Lawrence Eade, chief financial officer of Wok Box Fresh Asian Kitchen, joined two dozen other business leaders on a trade mission to India led by the mayor of the Vancouver suburb of Surrey.
Wok Box already has a franchise in Beirut, and Eade wants to expand in India after his U.S. expansion plans were delayed by a recession. India “is such a big market that you can barely scratch it,” Eade said in a telephone interview.
Harper’s government has signed eight free-trade agreements since coming to office in 2006, and negotiations are under way with about 50 other countries, according to the trade department.
‘Derail’ Talks
The global recession increased the need for new trade partners while opposition leaders such as Jack Layton of the New Democratic Party and Michael Ignatieff’s Liberals would “derail” the talks, Harper said.
The U.S. “will be our principal trading partner for certainly my lifetime,” Trade Minister Peter Van Loan, 47, said in a telephone interview before the election was called. “What we have been doing in Canada is aggressively expanding our markets elsewhere.”
The Liberals will advance free trade if elected, Ignatieff said, adding that Harper is wrong to tie Conservative campaign fortunes to economic stability.
“He said if I don’t get a majority, Canada will never conclude another free trade agreement with another country and you will lose all your jobs,” Ignatieff said at a town hall meeting in London, Ontario.
“He’s like a kid I used to know when I was a boy who used to say ‘If I don’t get my way I’m going to hold my breath until I turn blue,’” Ignatieff said.
Completing trade negotiations with India and the EU would give Canadian companies access to markets of 1.7 billion people, Harper said yesterday in Halifax, Nova Scotia, while campaigning for the May 2 election.
“We must diversify our trade beyond our southern border,” Harper, 51, said against a backdrop of shipping containers at the country’s largest port on the Atlantic Ocean. “Finally, under this Conservative government, that has begun in earnest.”
The share of Canada’s exports to the U.S. shrank to the smallest since 1982 at the end of last year, according to Statistics Canada data. While the value of shipments to the U.S. rose 7.5 percent during 2010, shipments to other countries rose more than five times faster.
Non-U.S. trade helped Canada exit a global recession faster than other Group of Seven countries, led by orders for commodities such as copper, gold, and wheat. The prices of these goods have increased 66 percent since the end of 2008 when they plunged during the global recession, according to Bank of Canada figures.
BRIC Shipments
Canada’s shipments to Brazil, Russia, India and China, known as the BRIC countries, rose to C$19.1 billion in 2010, almost doubling from 2005. Meanwhile, exports to the U.S. came to C$299 billion last year, compared with C$366 billion in 2005, according to Statistics Canada.
Coast Clear Wood Ltd. President Tom Sundher, 69, said in a March 8 interview that he will benefit from Canada’s effort to expand trade with India.
“My customers in the U.S., their business is down 60 percent, so there is little opportunity,” said Sundher, who predicts a partial recovery over the next several years. “India is a market that we are going to be able to develop, but it’s going to take a little while.”
Even companies that don’t produce commodities are tapping into new markets. Ottawa-based wireless equipment-maker DragonWave Inc. (DWI) signed a joint venture with Himachal Futuristic Communications Ltd. in October to enter the Indian market.
“We have been addressing markets outside the U.S.,” said Alan Solheim, 52, vice president of corporate development at DragonWave. “India is just the latest addition to that.”
World Cup Work
SNC-Lavalin Group Inc. and the law firm Heenan Blaikie LLP sent a trade mission to Brazil last month seeking to bid on work for the 2014 World Cup and the 2016 Summer Olympics.
“The diversification into non-traditional markets for me is one of the most exciting things that has happened in the Canadian economy,” Export Development Canada chief economist Peter Hall said in an interview at Bloomberg’s Ottawa newsroom.
In February, Lawrence Eade, chief financial officer of Wok Box Fresh Asian Kitchen, joined two dozen other business leaders on a trade mission to India led by the mayor of the Vancouver suburb of Surrey.
Wok Box already has a franchise in Beirut, and Eade wants to expand in India after his U.S. expansion plans were delayed by a recession. India “is such a big market that you can barely scratch it,” Eade said in a telephone interview.
Harper’s government has signed eight free-trade agreements since coming to office in 2006, and negotiations are under way with about 50 other countries, according to the trade department.
‘Derail’ Talks
The global recession increased the need for new trade partners while opposition leaders such as Jack Layton of the New Democratic Party and Michael Ignatieff’s Liberals would “derail” the talks, Harper said.
The U.S. “will be our principal trading partner for certainly my lifetime,” Trade Minister Peter Van Loan, 47, said in a telephone interview before the election was called. “What we have been doing in Canada is aggressively expanding our markets elsewhere.”
The Liberals will advance free trade if elected, Ignatieff said, adding that Harper is wrong to tie Conservative campaign fortunes to economic stability.
“He said if I don’t get a majority, Canada will never conclude another free trade agreement with another country and you will lose all your jobs,” Ignatieff said at a town hall meeting in London, Ontario.
“He’s like a kid I used to know when I was a boy who used to say ‘If I don’t get my way I’m going to hold my breath until I turn blue,’” Ignatieff said.
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