NEWS,18.01.2013

US consumer sentiment hits record low

US consumer sentiment unexpectedly deteriorated for a second straight month to its lowest in over a year in January, with many consumers citing the recent fiscal cliff debate in Washington, a survey released on Friday showed.The sharp drop in sentiment over the last two months coincides with rancorous federal budget negotiations that have led to higher taxes for many Americans.Just weeks after that deal, President Barack Obama and Republican lawmakers are expected to enter another tough round of negotiations over spending cuts, which could dent consumer confidence still further."The handling of the fiscal cliff talks and the realization that paychecks are going to be smaller due to the sunset of the payroll tax holiday are probably weighing on consumer attitudes at the moment," said Thomas Simons, a money  market economist at Jefferies & Co. in New York. "With the debt ceiling yet to be tackled and more political acrimony on the way, we suspect that confidence has room to deteriorate further."The Thomson Reuters/University of Michigan's preliminary reading on the overall index of consumer sentiment came in at 71.3, down from 72.9 the month before. The index was at its lowest since December 2011. It was also below the median forecast of 75 among economists polled by Reuters."The most unique aspect of the early January data was that an all-time record number of consumers - 35% - negatively referred to the fiscal cliff negotiations," survey director Richard Curtin said in a statement. "Importantly, the debt ceiling debate is still upcoming and could further weaken confidence," he said.House Republicans signaled on Thursday they might support a short-term extension of U.S. borrowing authority when the government exhausts that capacity sometime between mid-February and early March. A failure by Congress to raise this debt ceiling could result in a market-rattling government default. US stocks remained little changed after the data. The S&P 500 hit a five-year high in the last session. But on Friday, a weak outlook from Intel offset encouraging data out of China and a fourth-quarter profit at Morgan Stanley So far there has been a disconnect between what consumers say and do. US retail sales increased a better-than-expected 0.5% in December. But given the recent weakening in sentiment investors will be watching for any signs that spending is starting to slip."The impact on consumers will be from the hike in the social security tax. That is undoubtedly going to hit discretionary spending. So this may be a signal of things to come," said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York.The consumer survey's barometer of current economic conditions fell to 84.8 from 87.0 and was below a forecast of 88.0. The gauge hit its lowest since July.The survey's gauge of consumer expectations also slipped, hitting its lowest since November 2011 at 62.7 from 63.8, and was below an expected 65.2.The survey's one-year inflation expectations rose to 3.4% from 3.2%, while the survey's five-to-10-year inflation outlook was at unchanged at 2.9%.

China's growth slows in 2012

China's economy grew at its slowest pace in 13 years in 2012, though a year-end spurt supported by infrastructure spending and a jump in trade signalled the foundation for the stable growth path Beijing says is vital for economic reform may be in sight.Evidence of a burgeoning recovery in exports, stronger than expected industrial output and retail sales, together with robust fixed asset investment, all indicated that Beijing's pro-growth policy mix has gained sufficient traction to underpin a revival without yet igniting inflationary risks.Year-on-year growth of 7.9% in the fourth quarter beat a consensus forecast of 7.8% in a Reuters poll and snapped a streak of seven consecutive quarters of slowdown.The performance was at the upper end of the 7%-8% rate economists reckon is needed to deliver on reforms essential to China's long-term development after three decades of red-hot, double-digit growth.Full year growth of 7.8% was also just ahead of the poll's 7.7% call and, although the weakest since 1999, comfortably ahead of the government's 7.5% target, which just months ago seemed to some economists to be in jeopardy."It's kind of like a golden spot - stronger growth, but not strong enough to trigger a lot more inflationary concern. That's perfect for equity markets." said Dariusz Kowalczyk, Asia ex-Japan senior economist and strategist at Credit Agricole CIB in Hong Kong."What everybody wants is growth that's strong enough to give us peace of mind that revenues will increase and there is no hard landing risk, but not excessive, not strong enough to trigger inflation. And this is what I think we are getting. I'm bullish on China still."Market reaction was generally upbeat, with Asian shares advancing and platinum and palladium following suit, while oil traders took the opportunity of data confirming the recovery to book profits after two sessions of steep rises.China's new leaders must stabilise the economy this year to keep employment high while avoiding a surge in housing prices and inflation that could undermine reforms needed to overhaul the country's export-oriented growth model.Without stability, incoming President Xi Jinping and Premier Li Keqiang, who are set to be confirmed in March, have no chance of delivering a slew of reforms they say are needed to tackle a host of financial, industrial and income imbalances that threaten China's future.China's statistics chief, admitting the country's wealth gap was "relatively large", released a recalculated indicator of economic inequality on Friday, the first time in several years that officialdom has addressed the sensitive issue head-on. China's Gini coefficient stood at 0.474 in 2012, down from 0.477 in 2011 and from a peak of 0.491 in 2008, Ma Jiantang, the head of the National Bureau of Statistics, told reporters at a press conference on 2012 economic performance. The index ranges from 0 to 1, with the 0.4 mark viewed by analysts as the point at which social dissatisfaction may come to a head. China's leaders say rebalancing the economy to consumption and away from the investment and export model followed for the last 30 years holds the key to tackling inequality, but detailed data on Friday underlined the scale of that task. While consumption made the biggest contribution to growth in 2012, with a 51.8% share, Q4 marked the third consecutive quarter of decline. The fall has been driven by the government's focus on using investment spending as the main expedient to underpin an economy still levered to external demand. Exports generate about a third of economic activity and sinking demand from foreign customers in struggling European Union and United States economies dragged on growth in 2012. Net exports made a negative 2.2% contribution, data showed. ith China's consumers still relatively poor - average annual urban disposable income was just 21,810 yuan ($3 500) in 2011 - it remains too hard for the government to rely on them to help compensate for any shortfall from the export sector. "There's just not enough money," said Liu Jiongda, 35, a manager at a Shanghai logistics company who earns just over 11,000 yuan ($1 500) per month, more than half of which goes straight into a mortgage on a property he bought in 2009. "If the government wants a so-called consumer culture, they have to cut the amount of tax I have to pay. That is simple. If I have more money then I'll be willing to spend more." Investment meanwhile, at 50.4%, has picked up as the new leadership has looked to underpin a recovery with spending on infrastructure a tried and tested method. Quarter-on-quarter growth of 2.0% was below the market's expectation of a 2.3% rise, which was taken as a sign that the recovery's momentum is not strong enough to worry the authorities into pre-emptive action to snuff out any whiff of inflation - China's long term policy pre-occupation. The People's Bank of China, which cut interest rates twice in mid-2012 and cut banks' reserve ratios (RRR) three times since late 2011, has since switched to short-term cash injections via open market operations to guide monetary policy, apparently wary of fanning price pressures or encouraging a property bubble."We need to keep vigilant against inflation," NBS chief Ma Jiantang told a news conference on Friday. The risk of policy tightening looms as growth gathers pace, leaving Beijing with a fine line to tread to ensure the recovery continues without reigniting speculative activity in the key area of real estate. Data released alongside GDP numbers on Friday showed home prices extending a slow rise in December, with an average rise of 0.3% month-on-month in 70 major Chinese cities, the fifth month in the last six to show an increase, despite government efforts to temper prices. Real estate investment, which accounted for 13.8% of China's gross domestic product in 2012, rose 16.2% last year from a year earlier and remains a key component of overall fixed asset investment - the cornerstone of Beijing's recovery strategy. Annual fixed asset investment (FAI) growth was 20.6% in 2012, versus the 20.7% forecast in the Reuters poll. "Typically FAI falls off at the end of the year - on average December FAI is 1 percentage point lower than November, but this time there was only a 0.1% edge off," said Ken Peng, an economist at BNP Paribas in Beijing, highlighting the strength of investment spending and the risk that it could be fuelling renewed speculation. Investment spending was the key near-term concern of Ren Xianfang, senior analyst at IHS Global Insight in Beijing. "We have to watch the investment numbers especially because China has started (to put) controls on local financing, so this could limit fund raising and investment by local governments," she said. "So far it's just talk, but if they implement measures like the sharp tightening in 2011 the impact on growth could be very substantial," Ren added, highlighting Beijing's policy dilemma. Other data released alongside GDP showed industrial output grew 10.3% in December from a year ago, versus expectations of 10.1%.Retail sales in December rose 15.2% on a year ago versus an estimated 14.9% in a Reuters poll.A fourth-quarter recovery had been heralded by an acceleration in industrial output in October and November and a jump in exports in December, although some analysts believe last month's sharp expansion in trade could be a blip.China's exports grew 14.1% last month compared with a year earlier, racing past market expectations of 4% and November's 2.9% pace. Ting Lu, chief China economist at Bank of America/Merrill Lynch in Hong Kong, was confident that the data would not change the near term policy stance. "Maintaining stable growth is the new leadership's key policy mandate in 2013," Lu wrote in a note to clients, adding that he expected a growth target of 7.5% to be adopted for 2013 and policy calibrated to delivering it."Pro-growth policies in 2012 will be extended into 2013, and big-bang stimulus will be avoided unless there is another global financial crisis. Within 2013, policy will likely be marginally tightened towards the second half of 2013 on concerns of rising inflation, rising home prices, investment overheating and financial system risks," Lu said.

Obama sends message with new cabinet

A dearth of diversity in Barack Obama's top picks for his new cabinet is overshadowing signs of intent the US president is sending with his freshened team ahead of his second term.Obama takes the oath of office on Sunday ahead of four more years in the White House, a watershed moment that will see familiar faces, led by Hillary Clinton, depart and new blood ushered in to implement the president's political agenda.His personnel decisions, both at the cabinet level and in a rejigging of his White House inner circle, presage a fierce defence of Obama's political legacy at home and abroad in his second term.While posts in a president's cabinet are highly sought after, the centralisation of power in the White House often leaves the secretaries of top government departments chafing at a lack of clout.But several of Obama's top cabinet picks - like Chuck Hagel, John Kerry and Jack Lew, his nominees to run the departments of Defence, State and Treasury - clearly reflect the president's worldview and may wield significant influence.Some cabinet members who are staying on, like Health and Human Services Secretary Kathleen Sebelius - in charge of implementing Obama's top domestic achievement health care reform - will also play key roles.Senator Kerry and ex-senator Hagel, Vietnam veterans both, are sceptical of US military adventures abroad, and backed a fundamental project of Obama's presidency - getting troops home from Iraq and Afghanistan.They are also wary of embroiling the United States in another war over Iran's nuclear programme, though they will publicly back Obama's position that he is ready to use force as a last resort should diplomacy fail.Sebelius will be entrusted with ensuring that ObamaCare, which has yet to be fully implemented, is irrevocably embedded in the fabric of US life by the time the president hands over the keys to the White House in January 2017.Media buzz surrounding Obama's second cabinet has focused mainly on the fact that the first African American president, who won power thanks to a diverse racial and gender coalition, picked middle aged white men for top cabinet jobs.In fact, but for winning a majority of votes among women back in November, Obama might not be living in the White House at all.Aides dismiss the idea that Obama has fallen short of diversity goals, pointing out that his two Supreme Court picks have been women, one a Hispanic, and that he has many females in positions of power around him.Perhaps Obama's closest adviser is Valerie Jarrett, a mentor who followed his family from Chicago to the White House, and he was brought up by strong female role models in his mother and grandmother in the absence of his father.Eric Holder, the African American attorney general, is also staying on.Obama had been expected to name UN Ambassador Susan Rice, an African American, as secretary of state, but her chances of Senate confirmation evaporated amid Republican outrage over the aftermath of the raid on the US mission in Benghazi, Libya on 11 September."I think his record demonstrates the value he places on diversity," White House spokesperson Jay Carney said, adding that more diverse appointments could be expected with remaining open cabinet posts.Obama also addressed the issue during a press conference last week."I think until you've seen what my overall team looks like, it's premature to assume that somehow we're going backward. We're not going backward, we're going forward." Thomas Mann, a political scholar at the Brookings Institution in Washington said that once Obama's full cabinet is announced  with expected or announced openings in big departments like Interior, Energy and the Environmental Protection Agency - the picture could be more diverse.But Obama's new cabinet will differ from his first term, in dispensing with the "Team of Rivals" approach that included his former Democratic primary foe Clinton and Republican secretary of defence Robert Gates, who had served under George W Bush's administration.The selection of Clinton, which surprised senior aides, turned out to be a masterstroke, as the former first lady proved to be a political asset at the State Department, and Obama in effect removed a potential critic from the fray.Few insiders expect Kerry and Hagel, substantial figures in their own right, to be shrinking violets, but they are expected to keep any policy differences inside the Obama administration tent.Some Obama critics question whether the president, who tends to stick to aides who have been with him for years for his White House kitchen cabinet, will get enough outside advice.In one promotion from inside, Deputy National Security Adviser Denis McDonough is expected to succeed Lew for the crucial post of chief of staff.

Tight security plans for Obama swearing-in

Crowds may be smaller on Monday than when Barack Obama was first sworn into office in 2009, but security is as tight as ever, with experts warning a "lone wolf" would pose the greatest threat.Between 500 000 and 800 000 people are expected to pass through the National Mall, the immense greenway that leads up to the Capitol, compared to the 1.8 million spectators who came to applaud Obama four years ago.Thousands of police  the official figure has not been made public  will fan across the area, with several posted at every street corner.Airspace over Washington will be under tight surveillance, as will the Potomac River that runs along the city.Teams on horseback and with bomb-sniffing dogs will crisscross the city looking for potential explosive devices.More than 13 000 soldiers will attend the parade, behind a security cordon, to escort President Obama and to keep watch on the Capitol, the seat of Congress where he will be officially sworn into office.There will be cameras everywhere surveillance, media and tourist alike - a number of roads around the Mall will be closed to vehicles and spectators will be thoroughly searched, controlled and screened at each checkpoint.On the roofs of the main buildings in the area, snipers will stand watch."We're prepared for a variety of threats," said US Capitol Police spokesperson Shennell Antrobus.He expressed confidence in the force's "robust, multi-task security plan" that has been in the works for months.Michael Clancy, deputy assistant director of the FBI's counterterrorism division, said "the bigger threat, the thing that keeps you awake at night, are the lone offenders, regardless of their affiliation"."Those are the ones that scare me the most, folks that we don't have on our radar. It's the Timothy McVeighs of the world," Clancy added in an interview.He was referring to an American former soldier turned political extremist whose 1995 bomb attack on an Oklahoma City federal building killed 168."It would be crazy for anybody to try anything because of the law enforcement in the area, but those are concerns," said Stephen Somers, vice president of operations for AlliedBarton Security Services, one of the private security firms tapped to support the force."Any lone wolf is a tremendous threat that's why security is so tight," added Somers, whose staff will be dispatched to the World Bank and International Monetary Fund."Everybody needs to be on top of their game that day."Worried about any leaks, officials have kept a tight lid on details about the security precautions.At an undisclosed location in the suburbs of Washington, a command centre will monitor in real time any developments in and around the proceedings. On the big day, agents will monitor a collage of massive flat screens and cutting-edge surveillance, while staying in contact with teams on the ground. Each one of the 42 agencies involved in security - headed by the US Secret Service that provides protection for the president will have representatives at the headquarters, the convergence of 94 bases spread across the city.Secret Service spokesperson Brian Leary said the Multi Agency Communications Centre "really gives us the ability to monitor and co-ordinate security from a central location".Antrobus, of the US Capitol Police, said this partnership helps ensure that everyone can "enjoy the democratic process and this historic day".Officials are also keen on avoiding a repeat of the planning mishaps of 2009, when thousands of spectators were stuck in a massive freeway tunnel for hours in the freezing cold, and missed Obama's speech.Survivors of the ordeal dubbed it the Purple Tunnel of Doom.