NEW$ & VIEW$ (12 APRIL 2013)

Note: I am travelling this week.

Jobless Claims Drop by 42,000


Initial jobless claims, a measure of layoffs, decreased by 42,000 to a seasonally adjusted 346,000 in the week ending April 6, the Labor Department said Thursday. That was the biggest weekly drop since November.

The weekly figures are often volatile in the spring because of the shifting date of Easter each year and related school breaks. Cafeteria workers and bus drivers, for example, often file claims on a temporary basis during school vacations. A Labor Department economist said the data is difficult to adjust seasonally as a result.

It may take several more weeks for the claims data to be free of seasonal distortions, but the figures may still be reflective of an improving jobs market, some economists said. (…)

Last week’s figure is close to the four-week moving average, which smooths out week-to-week volatility. The moving-average figure last week rose by 3,000, to 358,000.

Second Month of Tepid Retail Sales

Retailers posted tepid sales for a second month in a row, with March blasted by cold weather and a still-uncertain consumer, much like February. Retailers were also up against strong figures from the year before.

Spring and summer merchandise remained on racks during a month that traditionally marks the beginning of warm-weather buying.

Together, the 11 retailers tracked by Thomson Reuters posted a 1.9% rise in same-store sales, or sales at stores open more than a year. The March figure fell short of an expected 2.2% increase, and was the lowest showing since late summer 2009.

The March figure compares with 7.1% a year ago, when much of the country was enjoying unseasonably warm weather that spurred demand and consumers to pay full price for merchandise. In February, retailers posted 3.9% growth in same-store sales, compared with a 7.4% rise for 11 companies a year earlier.

In the latest report, even Easter falling in March this year didn’t help, as traditional spring buying around the holiday was hurt by cold weather in many parts of the country.

Last month was the coldest March in the U.S. in 17 years, with the most snowfall in 20 years, according to Weather Trends International, a weather-tracking service.

Also, many retailers were closed on Easter.

State Government Tax Revenue Hits All-Time High State governments raked in almost $800 billion in revenue last year to reach an all-time high, according to a report released Thursday by the U.S. Census Bureau.

State tax receipts totaled $794.6 billion in 2012, a sizeable increase over the year before and the first time the figure has surpassed the previous peak of almost $780 billion in 2008, the Census Bureau reported.

Lisbon struggles to avoid second bailout

Portugal faces challenge even with extension on EU loans

Lisbon’s bailout is due to come to an end in July 2014 and the extension of maturities of its bailout loans is intended to smooth its full return to markets. But it has to raise €14.1bn next year and €15bn in 2015, whereas before the crisis it was typically raising €10bn-€12bn a year.

China Car Sales Rise, but at Slower Pace

China’s auto sales rose 11% in March, an unexpected deceleration from the first two months of this year as state-run media raised quality concerns about some foreign and domestic brands.

There were 2.04 million vehicles sold in China last month, up from 1.84 million a year earlier, according to the semiofficial China Association of Automobile Manufacturers. However, the growth rate eased from the 15% year-to-year gain for the January-February period.

The slowdown was more pronounced in the passenger-car segment. March sales growth for sedans, sport-utility vehicles and other passenger vehicles was 13%, down from 20% in the first two months of the year.



Loan Surge Tests Beijing

A surge in lending that defied Beijing’s efforts to mop up liquidity presents China’s new leaders with the tough prospect of risking a budding growth revival by cracking down too hard to head off a bad-loan crisis.

China has been on a credit binge since the global financial crisis of 2008, initially a deliberate strategy by leaders to finance investment and support economic growth. But the growing level of debt—domestic debt has topped 200% of gross domestic product, by some estimates—has prompted concerns that China faces a banking bust in the coming years. To forestall that prospect, Chinese regulators have tried to get banks and other financial institutions to somewhat dial back credit.

So far, those efforts have failed. Data Thursday showed that bank loans rose sharply in March to 1.06 trillion yuan ($171 billion) from 620 billion yuan a month earlier. A broader measure of credit that includes bonds and nonbank lending—also called total social financing—hit 2.54 trillion yuan in March, up from 1.07 trillion yuan the month before and just shy of January’s record. (…)

Fitch this week downgraded Chinas long-term domestic debt, saying “risks over China’s financial stability have grown.”

A high savings rate, closed capital account and robust growth mean there is no immediate trigger for a U.S.-style financial crisis. Relatively low government debt also means Beijing is well placed to backstop the banks, should problems emerge. Economists say the risk is rather that the current trajectory of credit creation is unsustainable, presenting Beijing with an unpalatable choice between slower lending and growth now, or crisis conditions a few years down the road.


Singapore economy unexpectedly contracts Central bank sticks to tight monetary policy

Singapore on Friday stuck to its tight monetary policy stance even as gross domestic product unexpectedly contracted in the first quarter, but lowered its inflation forecast for 2013, sending the Singapore dollar lower.

Singapore’s decision to stick to its tight monetary policy came despite advance estimates released on Friday that showed the economy contracted 1.4 per cent in the first quarter from the fourth quarter on a seasonally adjusted and annualised basis.

More buck, less bang
Oil companies’ costs soar in pursuit of reserves

(…) Analysis by Bernstein of Europe’s integrated oil companies found their costs soared by 10 per cent last year. (…)

Yet one of the most alarming elements of the increase in cost and complexity is that the majors have been getting much less of a bang for their buck. According to Schlumberger, the oil services group, annual capital spending for the industry has more than tripled in the past 10 years, reaching $550bn in 2011. But all this expenditure is not delivering. Last year, Bernstein says, the European majors failed to find enough new oil and gas to replace what they had produced, chalking up a reserve replacement ratio of only 92 per cent.

More alarming still is the oil majors’ seeming inability to deliver the new generation of multibillion-dollar “megaprojects” on time and on budget. A recent study by Independent Project Analysis shows the average big exploration and production project is 22 per cent late and 25 per cent over budget. (…)

Over the past 10 years the world’s top seven international oil and gas companies have increased their development capital expenditure by 255 per cent. Yet in terms of production, the companies have struggled, says Claudio Descalzi, chief operating officer at Eni, one of the majors. In the past decade, the compound average growth rate has been “practically zero”, as much of the new production has been used to make up for the natural depletion of mature oilfields.

Returns on capital employed are another worry. Analysis by PFC Energy shows that despite oil prices rising over the past three years, ROCE in exploration and production has fallen. (…)

All of these approaches can and do make a big difference. However, says Mr Bichsel: “We have to realise as an industry that the easy oil and easy gas is over. We are moving into areas that are more challenging and that tends to mean the costs per barrel are higher than 10 years ago.” (…)


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