NEW$ & VIEW$ (5 JUNE 2013)

Sorry for the gloom, but that’s seems to be all there is.

Storm cloud U.S. Trade Deficit Widens as Global Demand Falters Americans’ demand for foreign goods such as cars and cellphones pushed imports higher and widened the U.S. trade deficit in April, while slower overseas growth restrained U.S. exports.

Imports rose 2.4% from March, to $227.7 billion, and exports increased just 1.2%, to $187.4 billion, the Commerce Department said Tuesday. As a result, the nation’s trade gap expanded by 8.5% from March to $40.3 billion.

(…) exports are up only 0.8% this year compared with the same period last year.

U.S. exports to the European Union so far in 2013 have fallen 7.4% compared with the same period last year. U.S. exports to the U.K alone have dropped 20% this year compared with the same period last year, a reflection of pain across the British economy.

Lightning Euro zone GDP contraction slows in first quarter, April retail sales worse than forecast

The European Union’s statistics office confirmed its earlier estimates that gross domestic product in the 17 countries using the euro fell 0.2 percent quarter-on-quarter in the January-March period, for a 1.1 percent year-on-year contraction.

That came after a 0.6 percent decline in euro zone quarterly output in the previous three months.

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Pointing up  Retail sales in the euro zone fell 0.5 percent month-on-month in April for a 1.1 percent year-on-year decline.

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Some observations are warranted here:

  • Total sales volume has declined in each of the last 3 months and at a 4% annual rate.
  • Core sales are reported up 0.6% in April but that follows declines totalling 1.7% in the previous 2 months. Last 3 months: –4.5% annualized in real core sales. Things are clearly getting worse, not better.
  • Revisions are continually negative.
  • German retail sales declined 0.4% in April, the 3rd consecutive decline (-5.3% annualized).
  • France sales dropped 0.9%, 3rd consecutive decline (-5.7% a.r.).
  • Markit’s Eurozone retail PMI for May at 46.8 “indicated a further sharp year-on-year drop in Eurozone retail sales in May”.

And now this:

Auto  German Auto Sales Fall Again

Hopes of a nascent recovery in Europe’s car market were dashed at least temporarily as new-car registration data from Germany showed imageEurope’s largest market shrank by 9.9% in May, a worse-than-expected contraction after an uptick in April.

Registrations in Germany fell even more than those in Italy and Spain, where they declined by 8% and 2.6% in May. New-car registrations were down 10% in France.

Storm cloud  Poland Cuts Benchmark Interest Rate to Record Low 2.75%  Poland’s central bank cut borrowing costs to a record low as the European Union’s largest eastern economy grapples with its worst slowdown in four years.

Lightning  Finnish Economy Enters Recession as Euro Slump Saps Output
 
Flirt female  IMF head warns of ‘sombre trends’
Lagarde warns growth weakening in large emerging markets

 

“Recent data, for example, suggest some slowdown in growth. At the same time, the downside risks to growth remain as prominent as ever,” she said.

Ms Lagarde said that the US is suffering from self-inflicted wounds and needs to ease up on the pace of fiscal tightening, called for more monetary easing from the European Central Bank, and insisted that Japan must go through with a rise in consumption tax later this year. (…)

In the US – part of her second group of countries with middling growth – she said that good progress in the recovery was being hurt by overly aggressive fiscal policy. “The US is not doing as well as it should, largely because of self-inflicted fiscal wounds. This year alone, fiscal adjustment will constitute an enormous 2.5 per cent of GDP.”

Ms Lagarde urged an end to across-the-board, sequestration cuts to public spending, a “durable solution” to raising the debt ceiling, and a plan to tackle deficits in the longer-run. “The bottom line is clear: while fiscal adjustment might be too aggressive in the short term, it is certainly far too timid in the medium term.” (…)

Abe Unveils Blueprint

As global investors turn skeptical about Japan’s recovery program, the prime minister unveiled an ambitious blueprint for lifting long-term growth.

The blueprint includes some provisions that could have a short-term market impact, even if they don’t affect long-term growth—notably a recommendation to loosen investment rules for Japan’s mammoth public pension funds, allowing them to buy more stocks and shed some of their stable, but low-return, government bonds.

But the long-awaited growth strategy—crafted to supplement the bold fiscal and monetary stimulus that has jolted global markets—dodges some of the tough decisions that many economists say are needed to fix the root causes of Japan’s prolonged slump. It includes only modest measures to make it easier for industrial giants to shrink payrolls widely seen as too swollen for current demand, and avoids any provisions to ease layoffs, which are all but impossible in Japan. (…)

But some measures are considerably weaker than experts had urged. A proposal to require companies to appoint at least one independent director to their boards will allow them to avoid doing so as long as they provide a public explanation. Critics say the lack of independent directors in Japan has made Japanese companies less accountable to shareholders. Slightly more than half of all listed Japanese companies have any outside directors. In the U.S., boards are required to include independent directors.

The blueprint includes a detailed plan to increase “labor-market flexibility.” But rather than allow companies to quickly shed workers deemed unnecessary—a total the government estimates at 4.6 million—it does so with a series of new regulations, such as creating more job-matching and outplacement services, and creating a new category of workers who, once hired, could be let go more easily.

While the plan includes a range of targeted business tax breaks, it doesn’t provide the across-the-board tax relief endorsed by many business groups. Japan’s corporate-tax rate is the second-highest of countries in the Organization for Economic Cooperation and Development after the U.S., and is more than 10 percentage points higher than the global average. (…)

Storm cloud  Australian growth slows as miners cut back

Year-on-year growth falls to 2.5% in the first quarter

State final demand, which measures economic activity through the level of spending by the private and public sectors, dropped 3.9 per cent in the three months to March – the largest decline since the fourth quarter of 1989.

The weakness was driven by an 11 per cent fall in business investment as mining companies, which are under pressure to improve returns for investors, cut back on spending and investment. This was also reflected by a 24 per cent plunge in equipment spending and non-residential construction activity, which fell 4.5 per cent. Household spending also fell (by 0.2 per cent) for the first time since the fourth quarter of 2008.

Inflation Slows Across Most Developed Countries

 

Figures released by the Organization for Economic Cooperation and Development on Tuesday showed consumer prices in its 34 member countries rose by 1.3% in the 12 months to April, having risen by 1.6% in the 12 months to March. That was the lowest rate recorded since October 2009, when the global economy was emerging from the recession that followed the 2008 financial crisis.

Excluding volatile items such as food and energy, the “core” rate of inflation slowed to 1.4% in April from 1.6% in March.

Four of the Paris-based research body’s 34 members experienced deflation–an outright fall in prices over a 12-month period–during April, including Sweden and Switzerland.

However, inflation rates picked up in a number of large developing economies, suggesting that global inflationary pressures have not entirely receded.

Punch  IMF Urges Faster Change in France

The International Monetary Fund cut its growth forecast for the French economy and said France must act quickly to make its economy more competitive, or it will lose out to southern European countries that have cut costs and raised productivity.

“The external environment is changing rapidly with euro-area periphery countries registering large competitiveness gains,” the IMF said.

Angry smile  EU Hits China With Solar-Panel Duties in Dumping Dispute
 
Smile with tongue out  China’s tit-for-tat move in trade dispute
Beijing to investigate European wine exports

 

Sarcastic smile  One of Wall Street’s Riskiest Bets Returns

In a sign of how hard Wall Street is trying to satisfy investor demand for higher returns, J.P. Morgan Chase and Morgan Stanley bankers are moving to assemble synthetic collateralized debt obligations, or CDOs

 
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