السبت، 30 يوليو 2016
الثلاثاء، 28 أغسطس 2012
Economy tracker: GDP
The UK economy is still in recession,after shrinking by 0.5% in the three months from April to June.
This revised figure is not as bad as the 0.7% decline originally reported, but it is still worse than the 0.3% drop in the first three months of the year.
The sharp slowdown in construction continued, with output in the building sector falling 5.2% in the second quarter of the year.
Production output, which includes manufacturing, was also down, by 1.3%, while there was a 0.1% fall in services.
Understanding GDP:- Gross domestic product is a measure of a country's economic activity, namely of all the services and goods produced in a year
- It is based on a huge survey of businesses and government departments compiled by the Office for National Statistics
- An economy is generally considered to be in recession if it has contracted for two consecutive quarters
- The first figures for any quarter are known as the "flash estimate" as they are based on incomplete data. The figures are revised at least twice as more information is collected
After 1992, the UK economy and average household incomes enjoyed a period of unbroken growth.
But in 2008, the global financial crisis plunged the UK into its longest and deepest recession since comparable records began in the 1950s.
More than a million people lost their jobs as businesses - from shops to manufacturers and banks - either closed or laid off staff.
Consumer spending had been rising in the years leading up to the crisis thanks to a buoyant housing market and cheap and easy credit.
But the credit crunch and job fears meant consumers cut spending, deciding to pay off debt and save instead.
A fall in demand at home, and from abroad, hit businesses. They also found that borrowing from banks - which most rely on - was harder or more expensive.
The recession ended in the middle of 2009, as the economy began to grow. But economists say the UK has not experienced a bounce-back as big as the ones seen after the recessions in the 1980s and 1990s.
Continue reading the main story
Over the past year, sluggish growth has been interspersed with quarters of mild contraction. The economy then went back into recession at the start of 2012 after two periods of negative growth.
This period of slow growth or small falls is expected to continue into 2012, in what the Bank of England has described as a "zig-zag" path to recovery.
It has been estimated that the output of the economy is now 10% smaller as a result of the recession and its aftermath.
China Retailers Lose Steam, Deepening Wen’s Challenges
China’s retailers from clothing to computers are reporting weaker sales growth, undermining Premier Wen Jiabao’s goal of relying more on consumer spending for expansion as the economy cools.
Passenger-vehicle sales trailed analysts’ estimates in July. Sportswear seller Li Ning Co. shut 1,200 stores in the first half and department-store chain Parkson Retail Group Ltd. (3368)’s same-store sales rose at less than a quarter the pace of a year earlier. Electronics retailerGome Electrical Appliances Holding Ltd. (493) said it would report a first-half loss on lower sales.
The reports show an extra drag on the second-largest economy after export growth almost stalled in July and factory output missed forecasts. The year’s fastest decline in industrial companies’ earnings and a stock market at a three- year low mean income gains may slow, giving consumers less money to spend and boosting odds Wen will add stimulus.
“The pressure on retail sales is growing bigger and bigger,” said Shen Jianguang, Hong Kong-based chief Asia economist at Mizuho Securities Asia Ltd. “When exports are fragile and investment is weak, if companies started to reduce their production or workforce, how can it be possible for consumer spending to stay strong?”
Retail sales missed economists’ forecasts in three of the last four months and Mizuho said they will stay weak. Sales increased 13.1 percent in July from a year earlier, the National Bureau of Statistics said Aug. 9, compared with the median 13.5 percent estimate of 32 analysts surveyed by Bloomberg News.
Government Spending
The official data include government purchases and aren’t adjusted for inflation or broken down by consumer or government spending. Fiscal spending is rising at a faster clip than retail sales, up 37 percent in July from a year earlier, according to the Ministry of Finance. After adjusting for prices, retail sales rose 12.2 percent in July and 12.1 percent in June, the NBS said.
“Consumers have generally become more conservative in their spending, especially on certain higher-end discretionary products,” Natural Beauty Bio-Technology Ltd., which sells skin-care items in China, said in an Aug. 16 filing with the Hong Kong stock exchange.
Corporate profits and stock markets may be keys to the direction of consumer spending. China’s industrial profits fell in July by the most this year, an Aug. 27 government report showed. A record number of Hong Kong-listed companies since the start of June have predicted lower profit or a loss for a specific period, based on data compiled by Bloomberg News.
The Shanghai Composite Index (SHCOMP) fell Aug. 27 to the lowest since February 2009. It rose 0.8 percent yesterday.
Wage Headwinds
“Consumer spending is decided critically by income, and as we can see, China’s industrial profits are falling at a faster speed in July, which means more headwinds for employee compensation, wages and bonuses,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. “For non- wage income such as investment income from property and stock markets, you don’t have to be an expert to tell that most people are actually losing money, so overall consumer disposable income is actually very weak.”
Retail sales growth may slow another one or two months before a possible rebound next quarter, Zhang said.
Wen signaled in March that leaders are determined to cut reliance on exports and capital spending in favor of consumption, saying in a speech to legislators that “expanding domestic demand, particularly consumer demand, which is essential to ensuring China’s long-term, steady, and robust economic development, is the focus of our economic work this year.”
Wang Tao, China economist at UBS AG in Hong Kong, said in a report yesterday that “if protecting growth is a more important short-term goal, rebalancing will have to wait.”
Stimulus Efforts
The People’s Bank of China cut interest rates in June and July for the first time since 2008 and has lowered banks’ reserve requirements three times starting in November. Authorities have accelerated approval of projects and local governments have announced trillions of yuan of investment- spending goals in the next few years.
Shares of Parkson, based in Beijing with shares listed in Hong Kong, fell 6.5 percent on Aug. 27, the most since October, following the Aug. 24 report of slowing sales. Barclays Plc analysts cut their rating on the company to “underweight” from “overweight” and said earnings in the next 12 months are likely to “remain lackluster.”
At Parkson’s seven-floor Beijing store located across the street from the central bank’s headquarters, Li Ruidong said yesterday that he’s cut back on shopping there and prefers low- end malls to Parkson, whose luxury brands include Armani, Cartier and Hermes.
Catching Up
“My salary can’t catch up with the rise in prices, and I have a daughter to feed,” said Li, 39, a bank employee.
Zhang Hong, a 42-year-old housewife who lives near the store, said she likes to try clothes on at Parkson, then purchase the items online. “I only buy coffee and eat McDonald’s here,” Zhang said.
Hengdeli Holdings Ltd. (3389) of Hong Kong, the retail partner of Swatch Group AG in China, said last week it expects sales growth to slow in the second half as shoppers curb spending on luxury watches.
Consumer spending may still contribute more to expansion than other parts of the economy. Compared with volatility in exports and investment, consumption is still a “stable growth engine,” said Zhu Haibin, the chief China economist with JPMorgan Chase & Co. in Hong Kong.
Some companies are counting on the government to aid revenue. Trinity Ltd., the high-end menswear retailer that sells Gieves & Hawkes and Cerruti in China, expects sales to accelerate next year as authorities take steps to boost growth, Managing Director Sunny Wong said Aug. 23. Parkson said China has room to “further adjust its macroeconomic policies.”
At the same time, “consumer confidence has weakened as the overall economic outlook is uncertain,” Zhu said. “The biggest problem at present is weak domestic demand -- if policy efforts can boost corporate sector investment and profitability, consumption may come naturally.”
Home Values Rise In U.S. For First Time Since 2010: Economy
Home prices in 20 U.S. cities climbed in June for the first time since a tax credit boosted sales in 2010, indicating the industry at the heart of the worst recession in the post-World War II era is starting to rebound.
The S&P/Case-Shiller index increased 0.5 percent from June 2011 after falling 0.7 percent in the year to May, a report from the group showed today in New York. The last 12-month increase took place in September 2010. Nationally, prices jumped last quarter by the most in more than six years.
The lowest mortgage rates on record and a decline in sales of distressed properties may help the market contribute to the economic expansion that is now in its fourth year. A more sustained rebound may require easier lending conditions, which would also give consumers a lift after a report today showed household confidence sank to the lowest level of the year.
“Finally, the housing market is forming a bottom,” Mohamed El-Erian, chief executive officer and co-chief investment officer of Pacific Investment Management Co., said on Bloomberg Television’s “In the Loop” with Betty Liu. “That should be welcome. It is not surprising because affordability is so attractive right now.”
Stocks were little changed as investors weighed the economic reports ahead of Federal Reserve Chairman Ben S. Bernanke’s speech on the economy in three days. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,409.3 at the 4 p.m. close in New York.
Housing Overseas
Overseas, housing markets aren’t faring as well. Sales of newly built homes in Australia dropped in July to the second- lowest level on record, a report today showed.
In Europe, figures today showed Spain’s recession worsened in the second quarter as the government’s austerity measures to reduce the euro area’s third-biggest budget deficit and a slump in consumer spending offset growth in exports.
The S&P/Case-Shiller 20-City index was projected to drop 0.05 percent in the year to June, according to the median forecast of 29 economists surveyed by Bloomberg. Estimates ranged from declines of 1.5 percent to a 1 percent gain. The index is based on a three-month average, which means the June data were influenced by transactions in April and May. Year- over-year records began in 2001.
In an effort to boost home sales, lawmakers gave first-time homebuyers a tax credit worth up to $8,000 as part of the 2009 stimulus package. The break expired April 30, 2010, indicating the recent gains in sales are sustainable.
More Gains
“This ain’t tax credit driven,” said Thomas Lawler, a former Fannie Mae economist who is now a Virginia-based housing consultant. “There are fundamental reasons to expect home prices have bottomed and will continue to show gains.”
Consumer confidence fell in August as households grew more pessimistic about their employment prospects and the economic outlook, another report today showed. The Conference Board’s index decreased to 60.6, the lowest level since November, from a revised 65.4 in July, according to data from the New York-based private research group. The 4.8-point decrease was the biggest since October. The reading was less than the most-pessimistic forecast in a Bloomberg survey in which the median projection was 66.
Susan Wachter, professor of real estate and finance at theUniversity of Pennsylvania’s Wharton School, said the increase in prices will help aid consumer confidence, in turn benefiting other parts of the economy.
‘Real’ Rebound
“This is real,” Wachter said. “The market has turned and barring any new shocks, this should continue.”
Today’s home price figures also included quarterly national data. Property values in all the U.S. increased 1.2 percent in the second quarter from the same time in 2011 compared with a 1.4 percent drop in the year ended March. They jumped 6.9 percent from the previous three months before seasonal adjustment. The gauge increased 2.2 percent after taking those changes into account, the best performance since the fourth quarter of 2005.
Home prices in the 20 cities adjusted for seasonal variations increased 0.9 percent in June from the prior month. Unadjusted prices climbed 2.3 percent from the previous month.
The year-over-year gauge provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Broad Pickup
“The whole market in the process of a pickup -- it’s the little engine that could,” Case told Tom Keene and Ken Prewitt on Bloomberg Radio today. “It’s chugging along at a reasonable rate.”
Thirteen of the 20 cities in the index showed a year-over- year gain, led by a 14 percent increase in Phoenix. Atlanta had the biggest year-over-year drop, with prices falling 12 percent.
The swing in property values from a decline last year to a gain in 2012 will provide “meaningful support” to economic growth as rising home prices boost household wealth, economists at UBS Securities LLC wrote in an Aug. 24 research note. The improvement may boost consumer spending by as much as 0.5 percentage point at an annual rate, helping the world’s largest economy expand by 2.1 percent this year and 2.3 percent in 2013, they wrote.
Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, reported a better-than-estimated profit and an increase in revenue for its third quarter ended July 31. The average price of the homes that the Horsham, Pennsylvania-based company delivered in the quarter climbed to $576,000 from $557,000 in the previous three months.
‘Pent-Up Demand’
“The housing recovery is being driven by pent-up demand, very low interest rates and attractively priced homes,” Chief Executive Officer Douglas Yearley Jr. said on an Aug. 22 conference call with investors. “With an industry wide shortage of inventory in many markets, we are enjoying some pricing power.”
Recent reports also indicate a pickup in demand. Purchases of new homes rose more than projected in July to match a two- year high, Commerce Department data showed last week. Previously-owned house sales rebounded from an eight-month low, the National Association of Realtors reported.
Prices are improving in part because distressed homes are making up a smaller portion of sales. Distressed sales accounted for 24 percent of existing-home purchases in July, the Realtors data showed. That’s less than the prior month and down from 29 percent in July 2011. Such sales are comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage.
Fewer Foreclosures
There were 58,000 foreclosures in July, down from 69,000 a year earlier, CoreLogic Inc. said in a report today.
“The decline in completed foreclosures is yet another positive signal that the housing market is continuing on a progressive path of stabilization and recovery,” Anand Nallathambi, president and chief executive officer of Santa Ana, California-based CoreLogic said in a statement. “Alternative resolutions are helping to reduce foreclosures and often result in a more positive transition for the borrower and lower losses for investors and lenders.”
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BHP Billiton Ltd. (BHP), the world’s biggest miner, last week mothballed projects valued at more than A$50 billion ($52 billion) by Credit Suisse Group AG and Deutsche Bank AG. At the same time, Australia’s resources minister called the end of a bull run in commodity prices, and the central bank chief predicted the cresting of the investment wave within two years.
The deceleration of the industry that helped secure 21recession-free years heightens focus on the views of a minority seeing economic contraction in a nation where consumers took on more debt than Americans at the height of the mortgage bubble. While Bloomberg News surveys indicate growth exceeding 3 percent in 2013 and 2014, Deutsche Bank sees the danger of a recession.
“There is a view around Australia that says this is a different economy,” said Adam Boyton, chief economist for Australia at Deutsche Bank in Sydney, who previously worked at the nation’s Treasury. “My point is: was it skill or luck that drove iron ore and coking-coal prices higher from the Australian perspective,” he said. “It was more luck than skill.”
The windfall Australia gets from exports, called the terms of trade, will slump 15 percent in the final three months of 2012 from a year before, a magnitude that presaged a recession in three of the five times it’s happened in the past half century, according to Boyton. The central bank estimates the terms of trade reached a 140-year high last year.
Rate Cut
Such a drop would send growth lower and spur the central bank to cut interest rates, he said. Deutsche Bank has underestimated Australia’s annual gross domestic product in four of the past six quarters.
Others have been warning for months that the fastest- growing major developed economy is vulnerable to a collapse, bucking a majority view that Australia’s pipeline of resources projects, low unemployment, sustained wage gains and limited government debt give it the underpinnings for continued success.
The burst-bubble argument centers on Australia’s dependence on China. A quarter of its exports, or about 5 percent of GDP, goes to the world’s second-largest economy, and 60 percent of those shipments are a single commodity -- iron ore. The end of a Chinese residential-construction surge will sate demand for that product, says Andy Xie, a former Morgan Stanley (MS)chief Asia- Pacific economist.
China Impact
“China’s iron-ore imports are going to slow down dramatically,” Xie, a former World Bank economist who researched globalization and bubbles, said in an interview from Hong Kong. “It’s not just because of the economic downturn; it’s because construction of property and infrastructure has peaked” in Australia’s No. 1 customer, he said.
Premier Wen Jiabao in March cut the government’s growth target for China to 7.5 percent for this year, the lowest since 2004, as policy makers there seek to reduce the role of large- scale fixed-asset investment in favor of greater consumer demand. China also has applied limited stimulus relative to 2008-09, as officials rein in property market speculation.
“I don’t think there’s ever been a miracle economy that ultimately lived up to its billing,” said Dylan Grice, global strategist at Societe Generale SA (GLE) in London, who cited the Japanese experience of the 1980s, Thailand before the 1997-1998 Asian financial crisis and Ireland’s “Emerald Tiger” period last decade. “This year’s miracle is next year’s disaster.”
Aussie Outlook
Grice predicts the Aussie, one of the biggest beneficiaries of the economy’s outperformance, will collapse to 60 to 70 U.S. cents, and Xie sees a slide to about 70 cents, with neither putting a time frame on their calls. The currency was at $1.0376 at 6 p.m. in Sydney yesterday, and has averaged $1.02 in the past two years -- up from 72 U.S. cents for the prior decade.
Foreign-exchange markets don’t reflect Grice and Xie’s predictions. The currency, which historically has weakened as domestic economic prospects decline, has gained 1.3 percent this quarter. Currency forwards yesterday showed a 1.1 percent chance of a 30 percent drop in the Australian dollar in the next 12 months, according to data compiled by Bloomberg. The probability of a 10 percent drop in the Aussie was 51.2 percent.
The Aussie is up for the year so far against the dollar even after commodity prices cooled. That divergence may be unsustainable, according to John Quiggin, a professor at the University of Queensland’s School of Economics in Brisbane.
Export Crutch
“If we didn’t have this huge export boom, we could reasonably expect that the dollar would be at something like 80 U.S. cents,” said Quiggin, author of books on the economy including “Great Expectations: Microeconomic Reform and Australia.”
Iron ore dropped to a 2 1/2-year low in August, and thermal coal at the Australian port of Newcastle, the benchmark price for Asia, fell 17 percent in the three months through June, the worst quarter since 2009, according to data provider IHS McCloskey. Prices for Australian raw-materials exports slid in July to the lowest since 2010, and the commodity price index has fallen 10.8 percent over the past year, the RBA said this month.
Along with BHP, Origin Energy Ltd. (ORG), the nation’s largest energy retailer, is reducing spending targets. A proposed expansion of Woodside Petroleum Ltd. (WPL)’s A$15 billion Pluto project in Western Australia is on hold after the company said Aug. 22 it failed to find enough gas to support a second phase.
Mining Peak
“The boom in commodity prices is over -- no one can deny it,” Resource Minister Martin Ferguson told reporters Aug. 23. The next day, Reserve Bank of Australia Governor Glenn Stevens told lawmakers “the peak of the resource investment boom as a share of gross domestic product, the highest such peak in at least a century, will occur within the next year or two.”
In July, Stevens gave a speech he called “The Lucky Country” promoting optimism and using the same title as a 1964 book by Donald Horne that was critical of Australia’s dependence on natural resources for prosperity while other industrial nations pursued technological innovations.
This month’s shelved mining projects were a blow to Prime Minister Julia Gillard, who in May had called mining “our economy’s strong right arm.”
Policy makers have signaled confidence they have the tools to cope with any external turbulence, with Martin Parkinson, the Treasury’s top bureaucrat, on Aug. 16 citing “capacity across the arms of fiscal and monetary policy” and the RBA saying Aug. 10 Australia was “well placed” to respond to global shocks.
The central bank’s benchmark rate, at 3.5 percent, is the highest among major developed economies. Australia’s gross government debt, which the International Monetary Fund estimates at 24 percent of GDP compared with 107 percent for the U.S., also gives it scope for fiscal stimulus.
Policy Scope
The ability to respond to any Chinese hard landing with policy stimulus distinguishes Australia from much of the rest of the global economy, said Saul Eslake, chief economist for the country at Bank of America Corp.’s Merrill Lynch division in Melbourne, who has analyzed the Australian economy as a financial economist for a quarter century.
Eslake predicts 3.5 percent growth for the economy this year, slowing to 3.1 percent in 2013. He plays down the danger of a buildup in household borrowing, saying that “although Australians appear to have a lot of debt, the distribution of debt is skewed towards people who can afford to service it.”
The Australian economy last contracted for two straight quarters -- a textbook definition of a recession -- in the first half of 1991 after the benchmark interest rate was raised to 18 percent to deflate a credit boom. In the fallout from the slump, the unemployment rate soared to a record 11.2 percent in December 1992, on a par with the euro area’s level in June.
Inflation Quelled
Since then, the RBA’s preferred gauge of inflation has averaged near the middle of its 2 percent to 3 percent target range. Slower price gains allowed lower rates, contributing to Australians loading up on debt.
The country’s consumer borrowing stood at 149.7 percent of disposable income in the first quarter, compared with a record 156.3 percent in 2006, RBA data show. That’s higher than the 133 percent Americans accumulated at the peak of the U.S. subprime mortgage boom, according to the Federal Reserve Bank of San Francisco.
Seven of the world’s 25 most-expensive cities are in Australia, led by Sydney and the capital Canberra, according to ECA International’s Worldwide Cost of Living Survey conducted in March.
John Muellbauer, a professor of economics at the University of Oxford in the U.K., flagged the risks the country faces at an RBA conference on Aug. 20-21 in Sydney.
“Dependence on exporting to China and more generally its reliance on a permanent improvement in its international terms of trade does point to a potential vulnerability in other economic fundamentals,” Muellbauer said in his prepared remarks. “If these fundamentals turned negative, the high levels of household debt in Australia could seriously constrain growth.”
According to bloomberg
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IMF loan, reforms both vital for Egypt: analysts
CAIRO, Aug 26, 2012 (AFP) - IMF approval of Egypt's request for nearly $5 billion in aid would come as a vital boon to its reeling economy but President Mohamed Morsi must at the same time enact tough reforms, analysts say.
An economic slump following the February 2011 ouster of Hosni Mubarak aggravated the main problems inherited from his regime: budget-draining subsidies, extreme social inequality, corruption and poor energy infrastructure.
A chief concern is the decline in central bank reserves which have plunged from $36 billion at the start of January 2011 to $14.4 billion, threatening Egypt's ability to import basic goods such as wheat and refined oil products.
The budget deficit is projected to increase by 12.5 percent over the fiscal year from July 2012 to July 2013, to about $22.5 billion, official figures show.
"Much-needed" support from international lenders "could weaken if the Egyptian authorities are unable to effectively address ongoing economic, fiscal and external challenges," Standard and Poor's warned on Thursday.
But the agency also removed the ratings from CreditWatch in a nod to the working relationship between Morsi, who emerged from the Muslim Brotherhood, and the military after the removal of its chief, Field Marshal Hussein Tantawi.
IMF director general Christine Lagarde, who was presented with the $4.8 billion loan request during a visit to Cairo this week, said the lender "will accompany Egypt" as it undertakes its challenging journey of reform.
But Lagarde made no firm commitments, saying that the amount, details and terms of the loan programme -- which Cairo hopes to seal by the end of the year -- were still under discussion.
The IMF chief said its support was to be accompanied by an Egyptian economic programme incorporating fiscal, monetary and structural measures, which she said would require "determination" and "political courage".
Some Egyptian commentators doubt that the new authorities could use this loan to sustainably improve the economic conditions of the population.
"This credit is intended to cover expenses (wages, food imports)... to allow the Muslim Brotherhood to comfortably reach the upcoming elections and to calm the economic situation," writes Ibrahim Eissa of Al-Tahrir newspaper.
In the end, "it is the Egyptian people who will cough up" the money to repay the loan, he says.
Ahmad Galal, an analyst at the Economic Research Forum, estimates that Egypt needs $10 billion to begin to stem the crisis, and will have to obtain "other resources" in addition to the $4.8 billion requested from the IMF.
But the effort also requires deep internal reforms to be implemented over the years to come.
"In the short term, we must stimulate economic activity and create jobs. In the medium term, it is necessary to reform the education system, upgrade infrastructure and tackle the informal sector," among other steps, he said.
Economist Angus Blair, founder of the Signet Institute in Cairo, told AFP that "sorting out the (petrol and gas) subsidies programme to make sure it is better targeted" should be a top priority, along with encouraging investment.
According to AFP
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