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No New Normal JPMorgan Sees V-Shaped Recovery on Robust Growth
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By Steve Matthews
Aug. 14 (Bloomberg) -- Instead of a so-called New Normal of subdued growth, the U.S. may be heading for a robust recovery.
The worst recession since the 1930s has created a reservoir of demand that will buoy the economy, say a growing number of economists led by
James Glassman at JPMorgan Chase & Co., former Federal Reserve Governor
Laurence Meyer and
Stephen Stanley at RBS Securities Inc.
“Whenever we have plunged off a cliff and fallen into a deep hole in the past, for a while the economy has a tendency to bounce back very quickly,” said Glassman, a senior economist at JPMorgan in New York. Glassman and his colleagues this month said forecasts of 3 percent to 4 percent growth in coming quarters may be too low given “pent-up” consumer demand.
JPMorgan’s outlook contradicts
the view popularized by
Mohamed El-Erian at Pacific Investment Management Co. that elevated
unemployment and record wealth destruction will keep growth at 2 percent or less for years. The divergence highlights the dilemma for policy makers, who must decide whether to maintain record fiscal and monetary stimulus or begin to pull back and prevent a surge in inflation should growth accelerate.
El-Erian, chief executive officer of Newport Beach, California-based Pimco, said “the indicators we follow continue to point to sluggish medium-term growth in the U.S.,” when asked to respond to arguments for a so-called v-shaped recovery.
Retail Sales
Retail sales figures released yesterday indicated that consumers have yet to ramp up spending. The Commerce Department said purchases fell for the first time in three months, by 0.1 percent. A Labor Department report showed 558,000 Americans, more than forecast, filed
claims for unemployment insurance last week; the U.S. has lost 6.7 million jobs in the recession that began in December 2007.
The New Normal theory predicts that the recession will leave unemployment, forecast to reach 10 percent for the first time since 1983 early next year, higher for years. Glassman and Meyer dispute that.
“The thing I object to most about the New Normal idea is that we are stuck and have to accept higher unemployment --if you look at the Fed, they are doing everything they can to fight it,” said Glassman, who formerly worked as a Fed economist in Washington.
Meyer’s Projections
Meyer, who served as a central bank governor from 1996 until 2002, said he and his colleagues “don’t find any evidence” that the unemployment rate consistent with stable inflation is now higher. Meyer is now vice chairman of St. Louis-based Macroeconomic Advisers LLC, whose economic estimates are monitored by the National Bureau of Economic Research panel
charged with dating U.S. recessions.
Meyer expects gross domestic product to jump by 3.6 percent in 2010 and 3.9 percent in 2011. Annual growth surpassed 3 percent only once so far this decade, in 2004, and has averaged just 2.2 percent.
“The big driver of that is home prices,” said Meyer, referring to his recovery forecast. “If home prices stabilize, that is a tremendous boost to housing that dominates every other variable in our equation. There is a lot of pent-up demand in that particular area.”
Home construction has subtracted from GDP growth for a record 14 straight quarters through June 2009. Consumer spending has also dropped in four of the past six quarters, and is down 2 percent from its peak in July-to-September 2007, the biggest retrenchment since 1980.
‘Very Depressed’
Housing and
automobile sales are at “very depressed levels” and are likely to contribute to growth even if they don’t reach prior peaks, said Stanley, chief economist at RBS Securities in Greenwich, Connecticut, who used to work at the Richmond Fed.
“Consumers are holding off on practically all of their discretionary purchases,” said Stanley, who sees the expansion picking up from 2.9 percent next year to 4.4 percent in 2011 and “about” 3.5 percent in 2012. “There is a lot of pent-up demand.”
Recoveries from the past two recessions were weaker than in previous decades. After the 2001 recession, the economy expanded just 1.6 percent in 2002, picking up to 2.5 percent the next year. The 1990-91 recession was followed by 3.3 percent growth in 1992 and a 2.7 percent gain in 1993.
By contrast, the U.S. roared out of the 1981-82 recession. In 1983, GDP rose 4.5 percent, accelerating to a 7.2 percent pace in 1984, when
Ronald Reagan won re-election with victories in 49 of 50 states.
Blinder ‘Skeptical’
Alan Blinder, the former Fed vice chairman who is now an economics professor at Princeton University in New Jersey, has described himself as “skeptical” of the New Normal scenario.
“To accept a 2 percent trend, you have to believe in about a 1.2 or 1.3 percent
productivity trend -- I don’t,” Blinder said in an e-mailed response to questions. He added that he sees growth sustained at “closer, but not quite, to 3 percent” in coming years.
Fed policy makers in their latest projections submitted in June anticipated an expansion of 2.1 percent to 3.3 percent from this year’s fourth quarter to the same period next year and 3.8 percent to 4.6 percent in 2011.
Chairman
Ben S. Bernanke and his Federal Open Market Committee colleagues two days ago said the economy is “leveling out.” The central bank has pumped about $1 trillion into the banking system in a campaign to end the crisis, triggered by mortgage defaults, that has caused more than $1.6 trillion in losses and writedowns among financial firms worldwide.
Victory Call
President
Barack Obama last week said: “We are pointed in the right direction,” in remarks at the White House. “We’ve rescued our economy from catastrophe.” The administration anticipates a gathering impact from its $787 billion fiscal stimulus into next year.
Some companies are also seeing signs of a turn in the economy.
Karen Hoguet, chief financial officer at
Macy’s Inc., the second-biggest U.S. department store chain, said on a conference call Aug. 12 that the Cincinnati-based company is “cautiously optimistic” its sales trends will improve.
A rebound in equities in recent months will help repair households’ balance sheets and buttresses the outlook for spending, said Glassman at JPMorgan.
The Standard & Poor’s 500 Stock
Index has climbed about 50 percent from its low in March. U.S. stock-market capitalization has increased by almost $4 trillion in that time.
Economists’ Forecasts
Economists this month lifted their projection for third- quarter growth by 1.2 percentage points to 2.2 percent compared with July, according to the median of 55 forecasts in a Bloomberg News survey. That is the biggest such boost in surveys dating from May 2003. Forecasts for 2010 were raised to 2.3 percent from 2.1 percent.
Neal Soss, chief economist at Credit Suisse Group AG in New York, played down concern that the economy may suffer a “double dip” recession.
“Historically these double dips are routinely forecast and actually very rarely come to pass,” Soss said in a Bloomberg TV interview this week. “Once the economy tends to get some upward momentum, it tends to keep going that way.”
To contact the reporter on this story:
Steve Matthews in Atlanta at
smatthews@bloomberg.net.
Last Updated: August 14, 2009 00:01 EDT
| Updated: 14th August 2009, 1734 hrs |
| June retail sales up 2.3% from May |
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By Irene Chan
Singapore's retail sales rose a seasonally adjusted 2.3 percent in June from May.
This is the second consecutive on-month improvement with local retail sales edging up 0.7 percent in May from April.
The trend gives more evidence that the economy is on the mend.
Compared to a year earlier, retail sales fell by 8.2 percent in June, a slowdown from the double digit declines seen in earlier months.
This beat analyst expectations of a 9.2 percent on-year decline.
Data from the Statistics department showed that consumers bought more big ticket items in the month of June.
Sales of furniture and household equipment rose 7.2 percent while telecom equipment and computers rose 6.1 percent from May.
Terry O'Connor, CEO of electronics equipment and furniture retailer, Courts Singapore, believes the worst is over for retail sales.
"At the sort of start of what I called the international economic downturn, which I guess was sort of September and October last year, October was particularly difficult and Chinese new year was muted as well, although there were some strong blips in between. But really, since April, we've been seeing a reasonably strong recovery. "
Mr O'Connor adds that the pick up in sales has been broadbased, with more people buying notebooks PCs, flatpanel TVs, refrigerators and airconditioners in recent months.
Shoppers also spent more on food, recreational goods, clothes as well as watches and jewellry, with such sales rising in the low single digits during the month.
But a decrease in COE quota weighed on car sales, which such transactions dropping 1.4 percent from the previous month.
Citigroup economist Kit Wei Zheng says the improvement in discretionary spending is encouraging as it signals that consumer confidence is returning.
He expects retail sales to continue improving in the months ahead.
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Wall Street at new '09 highs
Stocks muster gains as optimism in Fed report ultimately trumps weaker retail sales and more jobless claims.
By Alexandra Twin, CNNMoney.com senior writer
Last Updated: August 13, 2009: 6:05 PM ET
The Dow Jones industrial average (INDU) added 37 points, or 0.4%, ending at its highest point since Nov. 4.
The S&P 500 (SPX) index rose 7 points, or 0.7%, ending at its highest point since Oct. 6.
The Nasdaq composite (COMP) gained 10 points, or 0.5%, ending at its highest point since Oct. 1.
Wal-Mart (WMT, Fortune 500)'s better-than-expected earnings report and a spike in financial shares also helped support stocks.
Financial shares added to the gains. Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), and Wells Fargo (WFC, Fortune 500) all rose along with regional banks such as Fifth Third Bancorp (FITB, Fortune 500) and Regions Financial (RF, Fortune 500). The KBW Bank (BKX) index gained 3.1%.
Thursday's jump followed a rally Wednesday after the Federal Reserve held interest rates near historic lows and signaled the economy has finally started to stabilize.
Earlier this week, stocks had stalled out as the major gauges struggled to remain above key psychological levels -- 2,000 for the Nasdaq and 1,000 for the S&P 500. But shares managed to close decidedly above those levels Thursday.
In bonds, the last of the government's three debt auctions this week -- this time $15 billion in 30-year bonds -- saw strong demand, helping to support the market.
Economy: Indications that the global economy could be stabilizing provided investors with some optimism, but that was countered by Thursday's weak readings on consumers.
On Thursday, both France and Germany posted GDP growth in the second quarter, surprising economists.
In the United States, the Federal Reserve provided a little optimism Wednesday, saying that although economic activity is likely to remain weak, the decline is leveling out and financial market conditions appear to have improved. This seemed to echo recent reports showing the economy is stabilizing.
"We're starting to see an improvement and we could see a quarter or so of higher growth on recovering inventories," said Stephen Mahoney, fixed income portfolio manager at Glenmede Investment Management.
"But the question is where do we go from here?," he said. "We need to see a few quarters of strong growth, not just one quarter."
Future growth could be constrained by consumers, who continue to beef up their savings and avoid spending on non-essentials, as Thursday's retail sales and jobless claims reports made clear.
The Commerce Department reported Thursday that business inventories declined for the 10th straight month.
Friday brings reports on consumer sentiment, industrial production and capacity utilization -- and consumer prices.
The Consumer Price Index (CPI) for July is expected to come in unchanged, as inflationary pressure remains benign. CPI rose 0.7% in June. The so-called Core CPI, which strips out volatile food and energy prices, is expected to have risen 0.1% after rising 0.2% in June. The Labor Department releases the report.
Retail sales slip: Retail sales fell 0.1% in July, the Commerce Department reported Thursday. The results were a surprise to economists who were looking for a rise of 0.7%, on average, according to a Briefing.com survey. Sales rose 0.8% in June.
Results would have been worse if not for the government's Cash for Clunkers program, which boosted auto sales. Retail sales excluding autos fell 0.6% in July versus forecasts for a rise of 0.1%. Sales without autos rose a revised 0.5% in June.
The report is worrisome, as consumer spending fuels two-thirds of gross domestic product growth. So far, low prices and government stimulus have helped the economy stabilize, but without a pickup in spending, any recovery will be moderate at best.
In related news, Ford Motor (F, Fortune 500) said it is boosting production for the rest of the year to meet increased demand as a result of Cash for Clunkers.
Wal-Mart Stores: The No. 1 retailer reported quarterly earnings Thursday.
On the upside, Wal-Mart earned 88 cents per share versus 87 cents a year ago and more than what analysts surveyed by Thomson Reuters expected. Wal-Mart also said that it expects current-quarter earnings in line with analysts' forecasts.
But revenue fell more than expected and the company said customers were cutting back. The Dow component also said that sales at stores open a year or more, also known as same-store sales, fell 1.2% in the quarter.
Nonetheless, investors focused on the positive and shares gained 2.7% Thursday.
Labor market: The number of Americans filing new claims for unemployment rose to 558,000 last week, surprising economists who were expecting jobless claims to drop to 545,000 claims.
However, the Labor Department report also showed that continuing claims, which measures people who have been receiving benefits for a week or more, fell to 6,202,000 from 6,343,000 in the previous week.
Housing: The housing market remains constrained, according to a new report released Thursday. Foreclosure filings jumped almost 7% in July from the previous month, according to RealtyTrac. Filings rose 32% from a year ago.
Bonds: Treasury prices gained, lowering the yield on the benchmark 10-year note to 3.59% from 3.71% Wednesday. Treasury prices and yields move in opposite directions.
The government is auctioning $75 billion in debt this week as part of its efforts to reduce the deficit and fuel its recovery efforts.
On Thursday, Treasury auctioned $15 billion in 30-year bonds to strong demand.
The first two auctions had mixed results. Tuesday's sale of $37 billion in three-year notes saw stronger demand than other recent auctions. Wednesday's auction of $23 billion in 10-year notes showed demand roughly in line with recent levels.
Oil and gold: U.S. light crude oil for September delivery rose 36 cents to settle at $70.52 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery rose $4 to settle at $956.50 an ounce.
Other markets: In global trading, European markets ended higher, while Asian markets ended lower.
In currency trading, the dollar fell versus the euro and the Japanese yen.
Market breadth was positive and trading volume was moderate. On the New York Stock Exchange, winners topped losers two to one on volume of 776 million shares. It was the second slowest trading day of the year for the NYSE, eclipsed only by the day before the July 4th holiday.
On the Nasdaq, advancers beat decliners seven to six on volume of 2.11 billion shares. 
First Published: August 13, 2009: 9:46 AM ET
U.S. Stocks Climb as Paulson Buys Banks, Consumer Shares Drop
By Whitney Kisling
Aug. 13 (Bloomberg) -- U.S. stocks rose for a second day after investor
John Paulson’s hedge fund bought stakes in banks and Wal-Mart Stores Inc. reported better-than-estimated earnings, overshadowing an unexpected slump in retail sales.
Bank of America Corp., Regions Financial Corp. and Goldman Sachs Group Inc. advanced after Paulson’s firm said it purchased stakes in the companies. Walmart, the largest retailer, added 1.7 percent. Alcoa Inc., the largest U.S. aluminum producer, climbed as metals advanced. Stocks retreated earlier as the Commerce Department said sales at retailers dropped for the first time in three months.
The Standard & Poor’s 500 Index added 0.4 percent to 1,010.17 at 11:12 a.m. in New York. The
Dow Jones Industrial Average increased 18.74 points, or 0.2 percent, to 9,380.35.
“The news on the economy is that it’s recovering, the news on corporate profits is that they’re recovering,” said
Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees more than $27 billion. “That’s what’s bolstered the stock market.”
The S&P 500 rose 1.2 percent yesterday after the Federal Reserve said the recession is easing, while pledging to keep its benchmark interest rate near a record low, and analysts boosted their outlook on insurers.
Bank of America rallied 4.8 percent to $16.69, the biggest climb in the Dow. Paulson’s hedge fund bought 168 million shares of the company in the second quarter, a regulatory filing showed, becoming the lender’s fourth-largest shareholder.
Regions, Goldman Gain
Regions Financial Corp. rallied 7.7 percent to $5.19 after Paulson also bought 35 million shares, becoming the second- largest stakeholder in the Alabama bank. Goldman Sachs added 0.6 percent to $164.70.
Citigroup Inc., the bank rescued by a $45 billion U.S. bailout, increased 2.8 percent to $4.09 after the shares surged 7.9 percent yesterday.
Walmart posted second-quarter profit of 88 cents a share, compared with analysts’ estimates of 86 cents. The stock added 1.7 percent to $51.35.
Alcoa climbed 5 percent to $13.61.
Stocks dropped earlier following reports on retail sales and initial jobless claims that were worse than economist estimated, signaling the economy is still suffering. U.S. retail sales fell 0.1 percent in July, marking the first drop in three months, as consumers cut spending amid concern over jobs and stagnant incomes.
Jobless Claims
A separate report showed the number of Americans filing initial claims for jobless benefits rose to 558,000 last week. The world’s largest economy has lost 6.7 million jobs since the recession started in December 2007.
Kohl’s Corp. lost 1.9 percent to $51.30 after sales at stores open at least a year slid, dragging second-quarter profit down 3 percent. Additionally, the department-store chain’s annual earnings forecast of $2.59 to $2.70 a share missed analysts’ consensus estimate of $2.78.
D.R. Horton Inc. fell the most in the S&P 500, slipping 3.5 percent to $12.98 after Citigroup Inc. downgraded the shares to “sell” from “hold,” saying the stock is at least 15 percent overvalued. KB Home also fell after being downgraded. Raymond James cut the company to “underperform,” sending the shares down 1.9 percent to $17.93.
To contact the reporter on this story:
Whitney Kisling in New York at
wkisling@bloomberg.net.
Last Updated: August 13, 2009 11:15 EDT
Stock Bulls Increase as Survey Shows Most Optimism in Two Years
By Whitney Kisling and Alexis Xydias
Aug. 12 (Bloomberg) -- Investor sentiment improved around the globe this month, turning bears into bulls in five of the world’s biggest stock markets as earnings and economic data topped estimates.
Optimism on U.S. equities climbed the most since April, according to the Bloomberg Professional Confidence Survey. Investors expect equities to rise during the next six months in a record seven countries, with indexes in Brazil, Italy, the U.K., France, Mexico, Japan and Switzerland forecast to advance.
Stocks surged for four straight weeks as companies worldwide beat second-quarter earnings
estimates by 13 percent and the U.S. economy shrank less than forecast in the second quarter. The MSCI World Index of 23 developed nations has gained 52 percent since sinking to the lowest level in more than a decade on March 9, the biggest rally since it was introduced in 1970, according to data compiled by Bloomberg.
“The more stocks go up, the more optimism there will be,” said
Alberto Espelosin, who helps manage about $10 billion at Zaragoza, Spain-based Ibercaja Gestion and was among 1,375 participants in the survey. “The U.S. will clearly come out of a recession at the end of this quarter, but stock prices may already be discounting this.”
Investor sentiment was within 1 point of reaching 50 in the U.S. and Germany, the level that shows participants expect prices to rise in the next six months. Confidence in the
Standard & Poor’s 500 Index, the benchmark gauge for American equities, increased to a three-month high of 49.7, twice the record low of 23.5 in January 2008. For Germany’s DAX Index, the reading of 49.5 is the highest since December 2007, the second month the survey was conducted.
Spain’s reading of 40 was the lowest among those in the survey.
Quarterly Gain
The S&P 500 has jumped 8.2 percent since May as the Conference Board’s index of leading economic indicators rose for three straight months. The Labor Department said last week that the
U.S. unemployment rate fell for the first time in 15 months.
Equities increased after companies from Santa Clara, California-based
Intel Corp. and
JPMorgan Chase & Co. in New York to BP Plc in London reported profit that beat analysts’ estimates. On average, companies in the MSCI World beat projections by 13 percent during the second quarter, according to data compiled by Bloomberg.
‘Very, Very Good’
“There’s absolutely no question that the earnings news has been very, very good,” said
Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, which manages $2.3 billion. “That’s really been a positive for the market.”
The U.K. had the biggest advance among the 10 nations in the survey, rising 43 percent to 60.6 since July. The
FTSE 100 Index posted an 11-day winning streak last month, jumping 11 percent through July 27. The nation’s housing market improved in July, while retail sales increased.
Europe’s
Dow Jones Stoxx 600 Index has surged 44 percent since March 9. Optimism for equities in France, the second- largest economy in the region, climbed 21 percent to 57.8. Industrial production increased for a second straight month in June, helped by auto sales, and business confidence reached an 11-month high in July.
The Italian economy benefited from European auto demand that boosted sales at Turin-based
Fiat SpA, while Switzerland’s
leading economic indicators rose in June. Both nations’ readings rose to all-time highs, with Italy’s level up 28 percent to 62.9 and Switzerland’s increasing 36 percent to 53.6.
Smallest Increase
Confidence in Germany’s
DAX rose the least, advancing 5.3 percent to 49.5. The stock index has surged 45 percent since March 6, pushing it to the most expensive level relative to earnings in more than five years.
The sentiment measure for Brazil rose 12 percent to 68.1, the highest of the 10 countries. The nation’s
Bovespa Index has jumped 49 percent in 2009 on speculation a rebound in commodity prices and record-low interest rates will fuel growth in Latin America’s largest economy. Confidence in Mexico climbed 6.7 percent to 53.9.
In Japan, the Nikkei 225 Stock Average has advanced 48 percent in the past five months. The confidence gauge for equities in the world’s second-biggest economy rose 13 percent to 53.7 percent.
To contact the reporters on this story:
Whitney Kisling in New York at
wkisling@bloomberg.net;
Alexis Xydias in London at
axydias@bloomberg.net.
Last Updated: August 12, 2009 07:00 EDT
| Updated: 13th August 2009, 1120 hrs |
| More job ads placed out in Singapore in Q2 |
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Firms in Singapore placed out more advertisements for professional jobs in the second quarter this year.
Recruitment consultant Robert Walters Asia Job Index found that 177 thousand openings were offered in the April to June period.
That’s 8 percent higher than the 164 thousand positions advertised for in the first quarter this year.
Looking at the various sectors, the construction and building industry placed the most ads in the second quarter, in line with the property sector boom.
Close to 29 thousand jobs in the sector were made available, as firms looked to hire engineers, surveyors, architects and technicians.
Retail servicing, sales and business development personnel were also in high demand, with about 27 thousand ads placed out.
Robert Walters says there has been evidence of an increase in marketing and advertising here since April.
It says this suggests that businesses are starting to spend more money on business generation.
The consultant notes that there were also fewer examples of hiring freezes, and a greater level of visibility in the financial services sector.
Singapore’s growth in advertisements was second to Hong Kong, which saw a 9.1 percent increase on-quarter.
Robert Walters Asia Job Index tracks ad volumes across job websites and national newspapers in Singapore, Hong Kong, China and Japan
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Global Confidence Increases on Signs Recession Is Nearing End
By Shamim Adam
Aug. 13 (Bloomberg) -- Confidence in the world economy surged to a 22-month high in August on signs the worst global recession since World War II is approaching an end, a Bloomberg survey of users on six continents showed.
The Bloomberg
Professional Global Confidence Index jumped to 58.12 this month from 39.13 in July. It is the first time the reading exceeded 50, which means optimists outnumber pessimists. A measure of U.S. participants’ confidence in the world’s largest economy rose to 47.3 from 29.5, the survey showed.
“It’s clear the recession is over and some kind of recovery is underway,” said
Nick Kounis, chief European economist at Fortis Bank Nederland Holding NV in Amsterdam, and a regular survey participant. “We have the biggest monetary and fiscal stimulus policy in history, globally, and we’re starting to see it work. Probably the next debate will be about how strong and sustainable the recovery is.”
The
MSCI World Index has increased 12 percent in the past month and President
Barack Obama said last week’s unexpected drop in the U.S. unemployment rate indicates the worst may be over. Nobel Prize-winner
Paul Krugman said Aug. 10 that the world, now in a “rough stabilization” mode, has averted another Great Depression.
The survey of more than 2,300 Bloomberg users was conducted between Aug. 3 and Aug. 7. Since the previous survey, the U.S.
jobless rate declined, second-quarter growth in the U.S. and China was better than expected, and the European Central Bank held interest rates at a record low.
Jobless Rate
U.S. payrolls fell by 247,000 in July, after a 443,000 loss in June. The jobless rate unexpectedly dropped to 9.4 percent from 9.5 percent. The
Standard & Poor’s 500 Index closed above 1,000 for the first time since November last week.
The U.S. economy will expand 2 percent or more in four straight quarters through June, the first such streak in more than four years, according to the median forecast in the monthly Bloomberg News survey. Analysts lifted their estimate for the third quarter by 1.2 percentage points compared with July, the biggest such boost in surveys dating from May 2003.
In Europe, a recession is also showing signs of bottoming out. ECB President
Jean-Claude Trichet said on Aug. 6 that the euro-region economy will show a “gradual recovery” followed by a return to growth in 2010. The gauge for Western Europe rose to 41.1 from 31.
Slowing Contraction
Manufacturing and service industries in Europe contracted at a
slower pace in July and business confidence in Germany, its largest economy, rose for a fourth month.
Linde AG, the world’s second-largest maker of industrial gases, forecast business to pick up in the second half of 2009 from the previous six months, it said Aug. 3.
“Government and central bank measures are starting to show an impact,” said
Peter Leonhardt, an analyst at Dekabank in Frankfurt, and a regular survey participant. “Sentiment is improving much faster than expected. There’s a need to catch up after a deep slump.”
In Asia, respondents were more optimistic, with the index reaching 74.2 from 59.4. Goldman Sachs Group Inc. this week raised its forecast for China’s 2009 economic growth to 9.4 percent, and said Asian nations excluding Japan will expand faster than earlier expected as well.
The CLSA China Purchasing Managers’ Index reached the highest level in a year last month. Samsung Electronics Co., Hyundai Motor Co. and
LG Electronics Inc. are among South Korean exporters that reported increased profits last quarter.
Asia’s Recovery
“A lot of the recovery we see in Asia is driven by government spending and restocking,” said
Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore. “We need a genuine recovery or stabilization in consumer spending and private investment to ensure the slack will be picked up when the fiscal policy fades away and the restocking phenomenon disappears.”
Confidence also rose in Japan, where the economy is forecast to have expanded for the first time in more than a year last quarter. Elections in the world’s second-largest economy at the end of the month may result in a victory for the opposition Democratic Party of Japan, which has never held power. The index for Japan climbed to 50 from 34.1.
Bloomberg users became more optimistic on the outlook for their equity markets in the next six months. Respondents in Japan, the U.K. and Italy predict stocks will extend gains, while those in the U.S. and Germany are mixed about the direction of their markets. The global equity rally has added more than $15 trillion to the
value of global stocks since this year’s low on March 9.
‘Risk Appetite’
“Risk appetite is returning to a much more normal level,” Standard Chartered’s Hui said.
The U.S. dollar may weaken in the next six months against the world’s most active currencies, with the index falling to 38.8 from 43.8 in July, the survey showed.
Users in Japan are divided on the direction of the yen against the dollar, with the index dropping to 50.3 from 59.6. Most respondents in Western Europe are more optimistic the euro will strengthen against its U.S. counterpart.
Survey participants in the U.S., Japan and Western Europe are also more confident short- and long-term interest rates will rise in the next six months, the survey showed.
The Federal Reserve will forego raising its benchmark rate until the third quarter of 2010, according to the monthly Bloomberg survey. Bank of England Governor Mervyn King yesterday said inflation may miss the central bank’s target over the next three years, signaling investors may have to rein in expectations for interest rate increases.
Globally, “it’s too early to start tightening policy,” Kounis of Fortis Bank said. “In general, it’s not something that should be considered this year.”
To contact the reporter on this story:
Shamim Adam in Singapore at
sadam2@bloomberg.net Last Updated: August 12, 2009 12:27 EDT
German, French Economies Unexpectedly Grew in Second Quarter
By Jana Randow
Aug. 13 (Bloomberg) -- The German and French economies unexpectedly grew in the second quarter, bringing an end to their worst recessions since World War II.
Gross domestic product rose a seasonally adjusted 0.3 percent from the first quarter, Germany’s
Federal Statistics Office in Wiesbaden said today. The French economy also expanded 0.3 percent, Finance Minister
Christine Lagarde said. Economists predicted contractions of 0.3 percent in Germany and a 0.2 percent in France, Bloomberg News surveys showed. The euro climbed half a cent to $1.4262.
The resumption of growth in the euro region’s two largest economies makes it unlikely the European Central Bank will add to its stimulus measures. Global measures to revive growth have boosted demand for European exports, while government subsidies and lower interest rates are supporting spending at home. With unemployment rising, the recovery may be slow.
“With Germany and France expanding, there are chances we might see growth in the euro zone as well,” said
Ralph Solveen, an economist at Commerzbank AG in Frankfurt. “The recession is over.”
Eurostat, the European Union’s statistics arm in Luxembourg, publishes second-quarter data for the 16-nation euro region at 11 a.m. Economists had forecast a 0.5 percent decline from the first quarter.
The return to growth in Germany comes as Chancellor
Angela Merkel campaigns for a second term in office ahead of national elections on Sept. 27.
“While short-term prospects are good, we can’t exclude an aftershock next year because of unemployment,”
Andreas Scheuerle, an economist at Dekabank in Frankfurt, said before today’s report. “Still, the worst should be behind us.”
Germany’s second-quarter expansion was aided by increases in government and private consumption and construction, the statistics office said. Net trade also made a positive contribution as exports declined less than imports, it said. In the year, the
economy shrank 5.9 percent when adjusted for the number of working days.
To contact the reporter on this story:
Jana Randow in Frankfurt at
jrandow@bloomberg.net.
Last Updated: August 13, 2009 02:34 EDT
U.S. Enters Recovery as Stimulus Refutes Skeptics, Survey Shows
By Shobhana Chandra and Kristy Scheuble
Aug. 12 (Bloomberg) -- Recovery from the worst recession since the 1930s has begun as President
Barack Obama’s fiscal stimulus -- derided as insufficient and budget-busting months ago -- takes effect, a survey of economists indicated.
The economy will expand 2 percent or more in four straight quarters through June, the first such streak in more than four years, according to the median of 53 forecasts in the monthly Bloomberg News survey. Analysts lifted their estimate for the third quarter by 1.2 percentage points compared with July, the biggest such boost in surveys dating from May 2003.
“We’ve averted the worst, and there are clear signs the stimulus is working,” said
Kenneth Goldstein, an economist at the Conference Board in New York.
The new projections, following better-than-anticipated reports on manufacturing, employment and home construction, echo gains in investor confidence that have propelled the Standard & Poor’s 500 Stock Index to its high for the year. A rebound may help cushion declines in Obama’s approval ratings, political analysts said.
“The fact that people for the first time in over a year are starting to look at some glimmers of hope plays to the prospect of some strength in the stimulus,” said
Susan Molinari, a Republican strategist in Washington who advised
Rudy Giuliani during his presidential nomination campaign in 2008.
Unemployment, Fed
The anticipated expansion in the coming year won’t be enough to prevent the unemployment rate from reaching 10 percent for the first time since 1983, the survey also showed. That will force the Federal Reserve to forego raising its benchmark interest rate until the third quarter of 2010, according to the median projection.
The Fed’s policy-setting Open Market Committee will today keep the target rate at zero to 0.25 percent and retain plans to buy as much as $1.45 trillion of housing debt by year-end to help secure a recovery, analysts said. The FOMC’s statement is expected at about 2:15 p.m. in Washington.
Obama’s $787 billion economic recovery effort, spanning tax cuts, infrastructure spending and a goal to create or save 3.5 million jobs, was enacted about six months ago. Republican lawmakers, nearly all of whom voted against the package, have pilloried the plan as a waste of money.
Republican Criticism
“Trillions more in Washington spending will not end a recession, it only puts future generations under a mountain of unsustainable debt,” House Minority Leader
John Boehner, an Ohio Republican, said last week. The nonpartisan Congressional Budget Office estimated last week that the stimulus has pumped $125 billion into the economy so far.
A federal program to replace older vehicles with more fuel-efficient ones helped boost
sales of cars and light trucks last month to the highest level since September, according to industry figures. Automakers, operating with lean inventories, will resume output to meet the jump in demand.
“Cash-for-clunkers was the icing on the cake,” said
David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. “It’s well-timed stimulus syncing with cyclical forces leading to a ramping up of production.”
Company heads seeing an improvement include
David Weidman, chief executive officer of Dallas-based chemical maker Celanese Corp. “We exited the quarter with increasing optimism,” and there are “clear signs of economic recovery,” Weidman said in an interview in July.
Build ‘Credibility’
“The stimulus was really a long-term political and economic play by the administration, and now they’re starting to see the results they wanted,” said Bill Buck, a Democratic strategist who worked on the presidential campaigns of former Vice President Al Gore and retired General Wesley Clark. “The administration would be wise to use this to build their credibility with the public” on other issues like health care, he said.
The president’s approval rating is falling on concern over rising joblessness and the growing budget deficit, a Quinnipiac University poll showed last week.
Half of the registered voters surveyed from July 27 to Aug. 3 by Quinnipiac said they approve of the job Obama is doing, compared with 42 percent who disapprove. That’s down from 57 percent approval and 33 percent disapproval in a late June poll.
Americans are hurting as employers continue to cut jobs, albeit at a slower pace. The unemployment rate will average 9.8 percent in 2010, according to the Bloomberg survey taken from Aug. 5 to Aug. 11.
Jobs Key
“The labor market is going to be the key,” said
Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “The risk isn’t that it gets much worse, but that it doesn’t improve quickly enough. It’d be nice if the consumer found his legs.”
Consumer spending, which accounts for about 70 percent of the economy, will rise an average 1.5 percent from July to December, up from prior estimates, the survey showed.
“What’s happening now is a leveling off, not a strong increase in growth, and that owes a little to the stimulus package,” said
Robert Solow, a Nobel laureate and professor emeritus at the Massachusetts Institute of Technology in Cambridge, Massachusetts. “Seeing the rest of it filter through to the economy in the second half of the year will be extremely helpful.”
To contact the reporter on this story:
Shobhana Chandra in Washington
schandra1@bloomberg.netKristy Scheuble in Washington at
kmckeaney@bloomberg.net Last Updated: August 12, 2009 00:00 EDT
ya man.. what is happening to DBS. The rest all up .. this fellow still going south :(
Ha, DBS is still a letdwn today...............................lok at OCBC perform.....................
It might not be as bad as we think it will today...hope SSE can do some support as well....
Stocks suffer setback
Influential financial sector leads the retreat as investors gear up for the latest from the Fed. Big debt auctions in focus too.
By Alexandra Twin, CNNMoney.com senior writer
Last Updated: August 11, 2009: 5:58 PM ET
NEW YORK (CNNMoney.com) -- Stocks slumped Tuesday, with a pummeling in bank shares and jitters ahead of a Federal Reserve announcement giving investors a reason to retreat.
The Dow Jones industrial average (INDU) lost 97 points, or 1%. The S&P 500 (SPX) index fell 13 points, or 1.3%. The Nasdaq composite (COMP) dipped 23 points, or 1.1%.
Stocks slipped modestly in the first 30 minutes of the session, but lost more steam as new banking sector woes surfaced and after the government said wholesale inventories fell 1.7% in June versus forecasts for a drop of 0.9%.
Investors were also focusing on the Fed's 2-day meeting, which concludes Wednesday afternoon with the release of a decision on interest rates and a statement on the economy.
"I think there's some apprehension ahead of the Fed," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "We know they're going to leave rates alone, but there's some question about what they'll say."
The banking sector retreated after CIT Group (CIT, Fortune 500) delayed its quarterly filing, reviving bankruptcy fears, and several analysts sounded an alarm on the sector. Influential analyst Richard X. Bove of Rochdale Securities said that bank stocks are trading on "fumes" and that investors should take some short-term profits. JPMorgan Chase downgraded bond insurer MBIA (MBI), according to published reports.
Ahead of the Fed meeting, the Commerce Department releases the June trade gap. The trade gap is expected to have widened to $28.5 billion from $26 billion in May, a 10-year low.
The weekly oil inventories report from the Energy Information Administration is also due in the morning. The July Treasury budget is due in the afternoon.
Applied Materials (AMAT, Fortune 500) is likely to be active Wednesday. After the close Tuesday, the chipmaker reported a quarterly loss versus a profit a year ago on weaker revenue. However, the results were better than what analysts were expecting and shares gained 3% in extended-hours trading.
Rally takes a rest: Stocks rallied through the end of last week as part of a broader advance that lifted the S&P 500 over 50% off the March lows. But investors have dragged their feet this week as they look for new signs that the economy is stabilizing.
This week, the two-day Federal Reserve policy meeting and the Treasury auctions will take center stage.
"We don't expect any changes from the Fed," said Tim McCandless, senior equity analyst at Bel Air Investment Advisors. "Eventually they will outline an exit strategy, but not yet."
McCandless said that while stocks are lower so far this week, a rally can probably stretch out through the rest of August, before facing bigger challenges in the fall.
Fiscal stimulus and "less bad" economic news and profit reports fueled the stock market rally so far. But, longer term, "we need to see a shift from stabilization in the economy and cost cutting driving earnings to real growth," he said.
On the move: Stock declines were broad based, with 26 of 30 Dow issues falling.
Dow financial issues American Express (AXP, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Travelers Companies (TRV, Fortune 500) all declined. The KBW Bank (BKX) index lost 4.4%.
Among other financial sector movers, CIT Group (CIT, Fortune 500) slumped after saying it will delay filing its quarterly report as it continues to try to restructure its debt and avoid filing for bankruptcy protection.
IBM (IBM, Fortune 500), Cisco Systems (CSCO, Fortune 500), Chevron (CVX, Fortune 500), Caterpillar (CAT, Fortune 500), Walt Disney (DIS, Fortune 500) and General Electric (GE, Fortune 500) were the Dow's other big decliners.
Market breadth was negative. On the New York Stock Exchange, winners beat losers by almost three to two on volume of 1.2 billion shares. On the Nasdaq, advancers topped decliners by over two to one on volume of 1.96 billion shares.
Federal Reserve meeting: The Federal Reserve concludes its two-day meeting Wednesday with an announcement expected at around 2:15 p.m. ET.
The central bank is expected to hold rates steady at historic lows near zero percent.
In its closely scrutinized statement, the bankers are expected to say that economic activity is picking up, but that they remain cautious about the outlook. The bank is not expected to say anything too specific about what its exit strategy may be after putting so much stimulus into the financial system.
Economy: U.S. productivity in the second quarter jumped at the fastest pace in six years, the government said Tuesday. Productivity -- which measures how much workers produce per hour worked -- rose 6.4% versus forecasts for a rise of 5.5%. Productivity rose 0.3% in the first quarter.
Oil and gold: U.S. light crude oil for September delivery fell $1.15 to settle at $69.45 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery rose 70 cents to settle at $947.60 an ounce.
Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.67% from 3.77% late Monday. Treasury prices and yields move in opposite directions.
The government is offering $75 billion this week as part of its ongoing efforts to reduce the deficit and fuel its recovery efforts.
Investors reacted mildly to the conclusion of the first auction Tuesday. Treasury sold $37 billion in three-year notes and saw stronger demand than in other recent auctions.
On Wednesday, the government auction $23 billion in 10-year notes and on Friday it auctions $15 billion in 30-year bonds.
Other markets: In global trading, European and Asian markets tumbled.
In currency trading, the dollar fell versus the euro and the Japanese yen.
First Published: August 11, 2009: 9:48 AM ET
Inventories at U.S. Wholesalers Fell for a 10th Month in June
By Bob Willis
Aug. 11 (Bloomberg) -- Inventories at U.S. wholesalers fell in June for a tenth straight month as a gain in sales helped distributors move out more of their excess supply.
The 1.7 percent decrease in stockpiles was greater than forecast and followed a revised 1.2 percent drop in May, the Commerce Department said today in Washington. Wholesale inventories have had the longest series of declines since records began in 1987.
A record drawdown of inventories in the second quarter may have set the stage for a return to growth in the last half of the year as demand stabilizes. Low inventory levels at automakers will allow them to resume output to meet demand spurred by a federal program to replace older vehicles with more fuel-efficient cars.
``Inventories are declining as production was cut aggressively,'' David Semmens, an economist at Standard Chartered Bank in New York, said before the report. The consistent drops in inventories and increases in sales, he said, are ``encouraging for second-half production gains.''
Sales rose 0.4 percent for a second straight month.
Inventories at wholesalers were forecast to drop 0.9 percent after a previously reported 0.8 percent drop the prior month, according to the median estimate of 33 economists surveyed by Bloomberg News. Projections ranged from declines of 1.2 percent to 0.4 percent.
Durable Goods
At the current sales pace, it would take 1.26 months for distributors to deplete the amount of goods on hand, the lowest since October, compared with 1.28 months in May. The reading was as low as 1.1 months in June 2008. A reduction in months supply may leave more room for companies to buy more goods, helping to support production.
Today's inventories report showed stockpiles of durable goods, or those meant to last at least three years, fell 1.5 percent in June after a 1.8 percent decline the prior month. Durable sales increased 0.7 percent.
Auto inventories decreased 1.2 percent and sales increased 4.5 percent, today's report showed. That pushed the industry's inventory-to-sales ratio for June to 1.84 months from 1.94 months in May.
Falling inventory levels mean the auto industry may be poised to boost production as the federal ``cash-for-clunkers'' program stokes industry-wide car sales. Sales of cars and light trucks rose in July to an 11.3 million unit annualized pace, the most since September.
Auto Outlook
The automobile industry added 28,200 jobs in July, according to Labor Department data released last week, as workers returned to General Motors Co. and Chrysler Group LLC, which have exited bankruptcy.
Output at suppliers to automakers may also improve in coming months.
Having reduced inventory to ``just over 2 million units'' from about 4 million units, ``the industry is really in a good position going forward,'' Mike Jackson, chief executive officer of AutoNation Inc., the largest car retailer in the U.S., said July 31 on a conference call.
``Cash for clunkers has unleashed a surge'' of buyers, Jackson said the same day in a Bloomberg Television interview.
Labor Department figures earlier today showed productivity of U.S. workers grew in the second quarter at the fastest pace in almost six years as employers squeezed more out of remaining staff to bolster profits.
Productivity, a measure of how much an employee produces for each hour worked, rose at an annual 6.4 percent pace, more than forecast, after a 0.3 percent gain the prior three months, Labor data showed. Labor costs fell by the most in eight years.
Professional Equipment
The wholesale inventories report showed stockpiles of professional equipment, such as computers, fell 1.7 percent and sales decreased 0.5 percent. The months supply for this category dipped to 1.03 months from 1.05.
Inventories of metals plunged 6.2 percent while sales rose 0.1 percent. Stockpiles of furniture, drugs and machinery also declined.
Stockpiles of non-durable goods such as fuels and grains fell 2 percent after 0.2 percent in May. Sales of such items rose 0.1 percent.
An increase in crude oil costs may have pushed up the value of petroleum inventories, which rose 2.7 percent. The average closing price of a barrel of crude oil traded on the New York Mercantile Exchange was $69.70 in June, up from $59.21 in May.
Wholesalers make up almost a third of all business stockpiles. Factory inventories, which account for more than a third of the total, fell 0.8 percent in June, Commerce reported on Aug. 5. Retail stockpiles, which make up the rest, will be included in the Aug. 13 business inventories report.
Total business inventories shrank by a record $141.1 billion annual rate in the second quarter, subtracting 0.8 percentage points from gross domestic product, Commerce reported July 31.
To contact the reporters on this story: Bob Willis in Washington
bwillis@bloomberg.net Last Updated: August 11, 2009 10:00 EDT
| Updated: 11th August 2009, 1155 hrs |
| China's industrial output in July accelerates, but by less than expected |
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China’s industrial output growth accelerated on record loans and stimulus spending.
Data out today showed that industrial production climbed 10.8 percent in July from a year earlier, after a 10.7 percent advance in June.
But it was below forecasts of 11.7 percent growth
Urban fixed- asset investment for the seven months to July rose 32.9 percent.
Consumer prices, meanwhile, fell 1.8 percent last month.
On the trade front, China's exports dropped 23 percent in July from a year earlier, while imports fell 14.9 percent.
Last month's trade surplus came in at 10.6 billion US dollars, higher than June's 8.2 billion US dollars.
The credit boom and a 4 trillion yuan or 585 billion US dollar stimulus package enabled growth to hit 7.9 percent on-year in the second quarter.
Infrastructure spending also aided companies.
The Shanghai Composite Index has rallied almost 80 percent this year and real-estate prices have rebounded.
The improvement had raised concern that loans meant for infrastructure projects are being used for speculation.
Last week, China’s central bank said that it will use “dynamic fine-tuning” and guide “appropriate” lending growth.
But Chinese Premier Wen Jiabao assured investors when he said over the weekend that the government will maintain its current macroeconomic policy.
The policy is aimed at bolstering domestic spending.
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