NEWS,12.03.2013

British manufacturing output slumps

Britain's manufacturing output slumped by 1.5% in January compared with December, official data showed on Tuesday, dealing a fresh blow to the country's hopes of avoiding a fresh recession.The wider measure of industrial production - which includes mining and quarrying, electricity, gas and water supply dropped by 1.2% in January from December, the Office for National Statistics added in a statement.Analysts' consensus forecast had been for manufacturing and industrial output to have each grown by 0.1% in January month-on-month, according to a survey by Dow Jones Newswires.Industrial output fell as suspended production at the Schiehallion oil platform in the North Sea hit oil and gas extraction."January’s figures do little to ease fears that GDP may still be contracting and that the economy could therefore be in a triple-dip recession," said Capital Economics analyst Samuel Tombs.Recent official data showed that British gross domestic product (GDP) shrank by 0.3% in the final quarter of 2012, compared with the previous three months.Another contraction in the current first quarter of 2013 would place the British economy in its third technical recession since the 2008 global financial crisis."Industrial production measure fell 1.2% month-on-month in January, a far worse outturn than expected," said Royal Bank of Scotland economist Ross Walker."The slump in January leaves a decline in first-quarter GDP looking more likely than not."In a separate data release on Tuesday, the ONS also revealed that Britain's trade-in-goods deficit narrowed at the start of the year.The deficit shrank to £8.2bn in January from £8.7bn in December.That beat analysts' forecasts for a January deficit of £8.9bn.However, IHS Global Insight economist Howard Archer argued that the improvement masked a worrying trend."On the face of it, the sharply reduced trade deficit in January is better news for hopes that the economy can grow in the first quarter," Archer said."But even here the headline figure masks some worrying trends as the reduced deficit occurred because UK imports fell more than exports. This indicates that UK exporters are currently still finding life very tough while domestic demand is weak."

Eurozone crisis not over - ECB's Weidmann

The euro zone crisis is not over and governments must tackle the roots of their troubles with reforms, Bundesbank chief Jens Weidmann said on Tuesday, adding that France's reform drive seems to have gone off track."The crisis is not over despite the recent calm on financial markets," Weidmann, a member of the European Central Bank's policymaking governing council, told a news conference to present the Bundesbank's 2012 results.There was uncertainty about the reform course in Italy and Cyprus, he said, adding: "The reform course in France seems to have floundered".

Judge blocks NY ban on giant fizzy drinks

New York judge blocked mayor Michael Bloomberg's planned ban on giant sodas Monday, dealing a setback to his public health agenda just hours before curbs on selling such drinks were due to begin.Judge Milton Tingling ruled that measures to restrict soda servings to a maximum of 16 ounces (470 milliliters) in restaurants and other venues, were "arbitrary and capricious," and he was barring the plan "permanently."Bloomberg has made health issues a key plank of his administration, banning smoking in restaurants, bars and other public places. He quickly denounced the judge's decision on sodas as "clearly wrong," and said the city would appeal."I am trying to do what is right to save lives. Obesity kills," a visibly angry Bloomberg told reporters, noting that 5 000 New Yorkers and 70 000 US citizens would fall victim to the disease this year."Sugary drinks are a leading cause of obesity. We have a responsibility as human beings to do something, to save each other," he added.But Bloomberg's super-sized soda ban, which would have been a first for a US city, sparked frenzied debate, with petitions and media campaigns from both sides.Some supported Bloomberg's arguments, emphasizing that 30 years ago the average soda serving was just six ounces, but that these days, it's not rare to see young Americans with giant fizzy drinks of more than a litre (33 ounces).Opinion polls over the summer indicated that a majority of New Yorkers opposed the limited ban, with some suggesting the mayor was impinging on civil liberties and others arguing the rules would not be effective.Industry lobby groups led by the American Beverage Association (ABA) and the National Restaurant Association took the court action that led to Monday's judgment, and they praised the decision."The court ruling provides a sigh of relief to New Yorkers and thousands of small businesses in New York City that would have been harmed by this arbitrary and unpopular ban," the ABA said in a statement.As well as the thousands who die each year from obesity-linked problems, one in eight adult New Yorkers has diabetes, which can be aggravated by sugar consumption, and studies have shown that sodas, which often cost less than bottled water, are a contributing factor."Remember, for many years, the standard soda size was six ounces - not 16, it was six, then it was 12 ounces and people thought that was huge. Then it became 16, then 20 ounces," Bloomberg said."We believe it's reasonable to draw a line and it's responsible to draw a line right now," he added.The New York Board of Health approved the measures last September and they were due to come into force on Tuesday in restaurants and places of public entertainment, such as stadiums.In a boost for the soda limits, the newly-built basketball stadium for the Brooklyn Nets had said it would immediately adopt the rules.But under the measures put forward by the city there was nothing to stop people from buying as much soda as they like by refilling smaller containers.Also, the ban did not extend to drinks sold in supermarkets or any dairy or fruit drinks, many of which also contain huge quantities of sugar.Diet and alcoholic drinks were also exempted under the city's plan."The exclusion of all alcoholic beverages from the ban is completely irrational. Beer and soda have nearly the same calories per ounce," the legal complaint said.And "the application of the ban to some business establishments but not others is arbitrary and capricious," it argued.Bloomberg previously acknowledged that the plan would fall short of ending over-consumption of sugary drinks, but he said the disappearance of mega-sized cups would at least make people more aware of what they were consuming.

Australia unveils media shake-up

Australia's centre-left Labour government unveiled a shake-up of media laws on Tuesday, introducing a public interest test for mergers but stopping short of press regulation asfeared by the industry.Communications Minister Stephen Conroy said the reforms, drafted after an inquiry into Australia's media following the phone-hacking scandal in Britain, were aimed at modernising the industry and guarding fairness and diversity.If passed into law, the changes would bring a public interest test to "nationally significant" mergers and acquisitions, which Conroy said was not the same as the "fit and proper person" test seen in Britain.It would be monitored by a new statutory authority called the Public Interest Media Advocate, which would oversee a robust self-regulation model, the minister said, stressing that the government would have no role."The government will not fund or oversee press standards bodies, they will be run, funded and operated by the print media themselves," he said.Proprietors, most vocally Rupert Murdoch's dominant local arm News Limited, had feared official regulation of the press, but Conroy said the present model of self-regulation would continue, although it would be tightened.Conroy added that the government would be seeking a "more transparent and open process" on appointments to regulatory bodies such as the current Press Council and better enforcement of existing press standards.The Press Council could apply to be authorised under the new framework, but Conroy said it would be  expected to be "transparent, open and independent" of proprietors, not just the government, to address community concerns."In Australia there is a real risk that over time there will be fewer and fewer organisations owning and controlling sources of news and commentary," Conroy told reporters."There are two existing mechanisms that address this risk: competition law and foreign ownership restrictions. But these alone do not reflect the full question of public interest in media diversity."Conroy said the government would not barter on the legislation, which he believed had enough backing in parliament."If these reforms do not garner sufficient support to pass the parliament by the end of next week then the government will not proceed with the bills containing them," he said.

NEWS,31.01.2013

Income surge releaves US consumers

American income growth surged in December as companies rushed to make dividend payments before higher tax rates set in, while buoyant wage growth also gave a lift to households. US personal income rose 2.6% last month, the biggest increase in eight years, the Commerce Department said on Thursday. While much of the gain was due to special payments aimed at beating tax increases due to begin this month, wages still grew at one of the faster rates seen last year. That should lend support to consumer spending and provide some underlying momentum for the economy despite a surprise contraction in gross domestic product during the fourth quarter."Even abstracting from the one-off surge in dividend payments ... the general tone of this report was quite encouraging," said Millan Mulraine, an economist at TD Securities in New York.The increase in overall personal income was well above analysts' expectations for a 0.8% gain. However, another economic report showed an increase in new jobless claims last week, and US stocks traded lower as investors sifted through the mixed data, while prices for US Treasuries were higher.The big rise in incomes put consumers on stronger footing entering the new year, even if the gains may not have been distributed evenly throughout the workforce. Extra dividend payments likely went to the nation's wealthier households who derive more of their income from investments.Still, wages and salary payments grew 0.6% last month, building on a sizable 0.9% gain in November.The income gains helped push the saving rate, the amount of disposable income households socked away, to 6.5%, the highest since May 2009. That offers a cushion for consumer spending as the temporary boost in incomes from investments unwinds and households deal with higher tax rates that took effect this month.Last month, consumer spending rose a modest 0.2%, which was just below the pace expected by analysts.The Commerce Department report also showed cooling inflation, which could help the US Federal Reserve continue easy-money policies aimed at boosting employment.Prices rose 1.3% in the 12 months through December, down a tenth from the reading in November and well below the Fed's 2% target. A core price reading, which strips out volatile food and energy prices to provide a better sense of inflation trends, was up a tame 1.4% from a year ago. A separate report from the Labour Department showed initial claims for state unemployment benefits increased 38 000 last week to 368 000. However, the increase followed a week where new claims were at their lowest in five years and still pointed to an economy where employers are adding jobs, albeit at a lackluster pace. The four-week moving average for new claims, which provides a better sense of underlying trends, gained 250 to 352 000.A report on Friday is expected to show employers added 160 000 jobs to their payrolls in January after an increase of 155 000 in December. The unemployment rate is seen holding steady at 7.8%.The number of planned layoffs at US firms rose in January from the prior month, but declined from a year earlier, another report showed on Thursday. Employers announced 40 430 job cuts this month, up 24.2% from 32 556 in December, according to the report from consultants Challenger, Gray & Christmas, Inc. Layoffs were down 24.4% from January 2012.

Worldwide tablet sales soar

Worldwide tablet sales jumped in the fourth quarter beyond even some of the most optimistic forecasts to 52.5 million, with Android-powered devices pacing growth, a survey showed on Thursday.The preliminary survey by business research firm IDC showed the tablet market grew 75.3% year over year in the quarter and rocketed 74.3% from the previous quarter's total of 30.1 million.IDC said the strongest growth came from Android, including tablets made by South Korea's Samsung and Taiwan's Asus, which makes a Google-branded Nexus tablet.Apple remained the biggest seller, but its market share was under 50%, IDC said. The survey found that Microsoft, which launched its new Surface tablet in the quarter, failed to break into the top five sellers and shipped a modest 900 000 of the devices in the quarter.Overall, the market's strong gains came from a spate of new product launches, including the iPad mini, and lower prices, which encouraged buyers over the holiday shopping season, IDC said."We expected a very strong fourth quarter, and the market didn't disappoint," said IDC analyst Tom Mainelli."The record-breaking quarter stands in stark contrast to the PC market, which saw shipments decline during the quarter for the first time in more than five years."Apple's iPad held its top position with 22.9 million units shipped. That was up 48% from a year earlier, but lower than overall market growth.As a result, Apple's market share declined for a second quarter in a row to 43.6% from 46.4% in the third quarter.Samsung, the number two vendor, saw year-on-year growth of 263%, selling 7.9 million tablets and grabbing a 15.1% market share.IDC said Amazon, which does not provide its own sales data, delivered some six million tablets in the quarter to retain its spot as the number three vendor.That represented 26.8% growth, giving Amazon a market share of 11.5%, IDC said.Fourth place belonged to Asus, which sold 3.1 million tablets, year-on-year growth of more than 400%. That gave the Taiwan-based firm a 5.8% market share.Barnes & Noble sold one million of its Nook tablets and accounted to 1.9% of the market, the survey found.IDC analyst Ryan Reith said Microsoft will need to shift its strategy to compete better in the tablet market."There is no question that Microsoft is in this tablet race to compete for the long haul," he said, calling the market reaction to Surface "muted.""We believe that Microsoft and its partners need to quickly adjust to the market realities of smaller screens and lower prices. In the long run, consumers may grow to believe that high-end computing tablets with desktop operating systems are worth a higher premium than other tablets, but until then (selling prices) on Windows 8 and Windows RT devices need to come down to drive higher volumes."

Ukraine economy in official recession

 

Kiev Ukraine's economy plunged into recession in the final quarter of 2012 with GDP contracting 2.7%, the second quarter running of negative growth, the statistics office said.Gross domestic product in Ukraine contracted 2.7% in the fourth quarter of 2012 compared with the same period last year. The economy had already shrunk by 1.2% in the third quarter.For the whole of 2012, growth was almost stagnant at 0.2% compared with 5.2% in 2011 and the projection in the budget for growth of 3.9%.Ukraine, which was one of the European states worst hit by the 2009 economic crisis, is hugely vulnerable to the current global slowdown due to its dependence on metals exports.

Bitter taste for German chocolate makers

German antitrust authorities have fined 11 chocolate makers €60m for colluding to rig the price of confectionary.The Federal Cartel Office says the offences committed by companies, including Kraft and Nestle, occurred between 2004 and 2008.The offences include agreeing on how much to increase the price of chocolate bars when the cost of raw materials rose sharply in 2007.The cartel office said in a statement on Thursday that the companies "simply ceased competing with each other and piled the price rises on to consumers".It said that Mars avoided a fine by alerting authorities to the illegal practices.

Nappy hunters bare Norwegian bottoms

Southern Norway is in the midst of a nappy shortage after a supermarket price war lured enterprising bulk shoppers from eastern Europe who have cleaned out the shelves, customs officials and retailers said.Norway is one of the world's most expensive countries. However, supermarkets in the south trying to lure local customers by undercutting rivals on the price of nappies inadvertently made it profitable enough for residents of nearby countries to start trading in them."They buy every last diaper [nappy], I mean everything we have on the shelves, throw it in the back of their car and take them home, where they sell it for a nice profit," says Terje Ragnar Hansen, a regional director for retail chain Rema 1000."It's not stealing and it's not even criminal but it's a big problem, ... they leave nothing for our regular customers.Customers come into Norway from Sweden, drive along the coast to fill their cars, then take a ferry back to the continent, said Helge Breilid, the chief of customs in Kristiansand on Norway's southern coast.Some have been stopped with nappies worth up to $9 100, roughly 80 000 nappies, a legal shipment even though Norway is not part of the European Union. "They told us that the only reason they came to Norway was to drive around and buy nappies to bring back home and resell," Breilid said. "These people mainly come from Poland and Lithuania, and we have no reason to believe that they are part of any criminal gangs."Norwegian nappies cost as little as $5.47 for 50, less than half of the prevailing price in Lithuania. Coincidentally, the internet is heaving with Lithuanian sellers advertising Norwegian nappies.

French civil servants go on strike

French civil servants went on strike on Thursday for better pay in their first mass show of dissent since the Socialist Francois Hollande became president last year.Dozens of street protests were planned across the country as part of the day of action called by three of the several unions which represent France's 5.2 million state workers.The main complaint of the unions relates to the index used to calculate salaries, which has been frozen for three years.Raising the index by one point would cost €800m if applied only to central government workers or €1.8bn if applied to all civil servants, according to the state audit authority.Jean-Marc Canon of the CGT union said the situation was "absolutely catastrophic", and noted that nearly a million civil servants were being paid the minimum wage.The unions are seeking to put pressure on Civil Service Minister Marylise Lebranchu ahead of pay talks next Thursday.She has acknowledged "the difficult situation facing civil servants" but hinted that pay rises were unlikely given the budgetary constraints on the government.The government was due later on Thursday to announce how many civil servants had answered the strike call.

NEWS,10.12.2012

Slight gains on Wall Street

Wall Street moved higher amid promising data on China's economy, fuelling hopes that the world's second-largest economy is gathering steam again. China offered better-than-expected data on both industrial output and retail sales, welcomed by a market that is on tenterhooks about US budget talks aimed at avoiding the US$600 billion in tax increases and spending cuts scheduled to kick in on January 1. "China hit that trough and is starting to see an acceleration of growth," Tom Wirth, who helps manage US$1.6 billion as senior investment officer for Chemung Canal Trust, in Elmira, New York, told Bloomberg News.Meanwhile, no details were offered on yesterday's meeting between US President Barack Obama and Republican House Speaker John Boehner about an agreement to avoid the so-called fiscal cliff  and a potential recession for the world's largest economy.A study by the US National Intelligence Council, however, predicted that China's economy will take over the top spot from the US before 2030.In afternoon trading in New York, the Dow Jones Industrial Average was up 0.25%, the Standard & Poor's 500 Index gained 0.16%, while the Nasdaq Composite Index advanced 0.31%.Better-than-expected November sales data for McDonald's lifted its shares 1.3%, following a dismal October during which sales declined for the first time in nine years. Global sales at restaurants open at least 13 months increased 2.4% last month. "One month does not a trend make ... but it's a nice sign to see them rebound after a horrible October," ITG Investment Research analyst Steve West .Investors are eyeing a two-day meeting by Federal Reserve policy makers starting tomorrow. In Europe, the Stoxx 600 Index eked out a 0.1% gain from the previous close. It is at the highest level in 18 months, according to Bloomberg. National benchmark stock indexes also rose in London, Paris and Frankfurt. Italian Prime Minister Mario Monti's unexpected announcement over the weekend that he plans to resign soon after lawmakers approve his budget plan later this month sent the nation's stocks and bonds lower. Italy's FTSE MIB stock index dropped 2.2%, while the yield on the country's 10-year bond was last up 29 basis points at 4.82%. Elections may be held as early as February one to two months earlier than expected. European political and financial leaders today pressed for the next Italian government to hold fast on the reforms initiated by Monti. Still, the uncertainty may increase wariness among investors. "The underlying cracks within the euro zone are actually widening," Georg Grodzki, head of credit research at Legal & General Investment Management in London, told Bloomberg. "Investors will be reading Italian politicians' lips very, very closely."

Berlusconi lashes out at foreign leaders

Former Italian Prime Minister Silvio Berlusconi has reacted angrily to negative comments from foreign politicians and media about his decision to run as a candidate to lead Italy for the fifth time, calling it an offensive interference in domestic affairs.He said in a statement that he had always been a "convinced supporter of Europe" and that the comments criticising him were "out of place" and "offensive not so much to me personally but to the free choice of the Italians".He suggested that the "interference" in Italian affairs may be an attempt to weaken the share price of Italian companies and make them easier takeover targets.The current Italian Prime Minister Mario Monti has been attempting to reassure rattled financial markets that Italy will not be left adrift following his surprise decision to resign from - and Berlusconi's return to frontline politics.Monti's weekend announcement that he will quit after Berlusconi's People of Freedom (PDL) party withdrew its support for his technocrat government pushed up Italy's borrowing costs and prompted a stock market sell-off on Monday."I understand market reactions. They need not be dramatised," Monti told reporters in Oslo where he attended the award of the Nobel Peace Prize to the European Union and where other EU leaders queued up to praise him.The former European Commissioner said he was confident the elections would produce a responsible government "which should be in line with the huge efforts already pursued by Italy... markets should not fear a decision-making vacuum".He added: "Let me remind markets that the current government has not left - it's fully in charge and will be so until a new government comes in after the elections."The campaign for a vote expected in mid-February is likely to be fought over Monti's reform agenda, which Berlusconi, his predecessor as prime minister, said had condemned Italy to recession and forced him to reluctantly run for a fifth term.European leaders were anxious to stress that any new government must stick to Monti's economic reform agenda."Monti was a great prime minister of Italy and I hope that the policies he put in place will continue after the elections," said European Council President Herman Van Rompuy in Oslo.There were similar comments from policymakers ranging from French President Francois Hollande to the head of the European bailout fund Klaus Regling and European Commission President Jose Manuel Barroso.Spanish Economy Minister Luis de Guindos warned that instability in Italy could spill over and put Spain's fragile public finances at risk of further turmoil.Attention is now focused on whether Monti will enter politics himself, either as a candidate or by endorsing one of the centrist forces that have backed his reforms and made more or less explicit pleas for him to run."I'm not considering this particular issue at this stage. All my efforts are being devoted to the completion of the remaining time of the current government," he said in Oslo.Monti has repeatedly warned of the danger posed by the rise of populist, anti-European forces in the region and said he hoped such forces would not dominate the Italian election campaign.Monti's decision to resign once the 2013 budget is approved, probably before Christmas, has brought forward to February an election that had already been expected in March or April at the latest. Opinion polls suggest Berlusconi has little chance of re-election, and he has struggled to reassert a previously undisputed domination of rival factions and courtiers in his deeply divided centre-right party. In contrast, his enemies in the centre-left Democratic Party (PD) under Pier Luigi Bersani hold a strong lead and are likely to form the next government on a broadly pro-European platform, largely in line with Monti's agenda.Bersani who hopes that the former European Commissioner will stay on in some capacity, possibly as Italy's president said on Monday that "precisely because Monti should still be able to be of service to this country, it would be better for him to stay out of the (election) contest" .Berlusconi's strategy appears designed to ensure he retains influence in the next parliament with a substantial voting bloc that, among other things, can protect his business and personal interests .After several weeks of calm, markets bridled at the prospect of Berlusconi's return to lead the centre right, just over a year after a financial crisis drove the scandal-plagued billionaire from office to be replaced by Monti's technocrats. Berlusconi's reappearance and the prospect of a messy anti-Monti election campaign has galvanised attention in Italy and abroad, reawakening memories of the financial and sexual scandals that peppered the media magnate's last government.Not that such memories have had much chance to slumber. This week the prosecutor in Berlusconi's trial for allegedly having sex with a juvenile prostitute accused the 76-year-old of delaying tactics after the young woman failed to appear as a witness.The Roman Catholic Church made outspoken and thinly veiled criticism of the former premier that could influence the PDL's conservative voting base."What leaves one astonished is the irresponsibility of those who think of arranging things for themselves while the house is still burning," the head of the Italian bishops' conference, Angelo Bagnasco, told the Corriere della Sera.French Finance Minister Pierre Moscovici also weighed in."The direction that Italy has been going in for the last year and a half is a solid direction, there is no reason to worry," he said."Berlusconi is returning to politics, but I'm convinced that he will not return to power," he said.With a new government likely to be formed in a few months, Italy's European partners have now started to look more closely at Bersani, the overwhelming victor in a centre-left primary election last month.A no-frills former communist who is close to Italy's unions, Bersani has promised to stick to Monti's promises on fiscal discipline.While Italy's election laws are likely to give Bersani a strong majority in the lower house, the complicated rules may make it more difficult for him to take control of the Senate, posing a possible risk to the formation of a stable government.Whoever wins will have to confront a severe recession, record unemployment and a ballooning public debt expected to surpass 126% of gross domestic product this year.

Concerns over Japan's economy

On Monday confirmed that the world's third-largest economy shrank in the three months to September, stoking fears the country is slipping into a recession.Financial turmoil in Europe, a strong yen that has dented exports and a painful diplomatic row with major trade partner China have dented Japan's economy, dousing hopes it had cemented a recovery after the 2011 quake-tsunami disaster.Some economists have warned the current quarter is likely to see another contraction, meaning two successive quarters of negative growth that would reflect a technical recession.On Monday, official data confirmed earlier figures that showed Japan's economy shrank 0.9% in the July-September quarter, or down 3.5% on an annualised basis.Revised figures from the Cabinet Office also showed the nation's growth in the previous quarter was essentially flat, further underscoring recession fears.Separate data released Monday showed Japan's current account surplus was down about 30% on-year to ¥376.9bn ($4.56 billion) in October, although the latest figure beat market expectations for a ¥218bn surplus, according to Dow Jones Newswires.The current account is the broadest measure of Japan's trade with the rest of the world, including exports, tourism and overseas income.Japan's current account surpluses have been hit by a slowing global economy and a spike in fuel imports due to the shutdown of most of the country's nuclear reactors following last year's disaster which triggered a major atomic crisis.Last month, Tokyo approved $10.7bn in fresh spending to help boost the limp economy, more than double a package announced in October.The new package was announced as the nation prepares for December 16 elections which are expected to see Prime Minister Yoshihiko Noda and his Democratic Party of Japan defeated by the main opposition Liberal Democratic Party led by Shinzo Abe.Abe has vowed to spend heavily on public works and pressure the Bank of Japan into launching aggressive monetary easing measures to boost growth if his party wins the election.The BoJ has unveiled two policy easing measures in recent months as its counterparts in the US and Europe launched major moves to counter slowing growth.The yen has been weakening as speculation grows that the BoJ will usher in further easing measures after its policy meeting this month, with the central bank's closely-watched Tankan corporate sentiment survey due this week. "The BoJ will have no choice but to consider additional monetary easing in case its own Tankan survey shows worsening in near-term corporate sentiment," said RBS Securities chief Japan economist Junko Nishioka. 

China one of the most unequal nations

 

China's wealth gap has widened to a level where it is among the world's most unequal nations, a Chinese academic institute said in a survey, as huge numbers of poor are left behind by the economic boom.China's Gini coefficient a commonly used measure of inequality - was 0.61 in 2010, the Survey and Research Center for China Household Finance said, well above what some academics view as the warning line of 0.40.A figure of 0 would represent perfect equality, and 1 total inequality."Currently, China's household income gap is huge," said the institute, founded by the Southwestern University of Finance and Economics and the Institute of Financial Research, which operates under China's central bank."The Gini coefficient is as high as 0.61, rare in the world."China's growing wealth gap is a major concern for Communist authorities, who are keen to avoid public discontent that could lead to social unrest in the country of 1.3 billion people.In a sign of the sensitivity surrounding the issue the government has not released an official Gini coefficient for the country as a whole for more than a decade, since it put the statistic at 0.412 in 2000.A figure of 0.61 would put China at the top of a list of 16 countries by 2010 Gini coefficient on the World Bank website. The largest set of figures available on the site is for 2008, covering 47 countries and headed by Honduras on 0.613.The Global Times newspaper, which reported the latest survey results on Monday, said China's wealth gap had reached an "alarming" level.But the research centre played down its own findings, saying such a phenomenon was common in rapidly developing economies.It called on the government to use its vast financial resources to support low-income earners in the short term, while improving education to help address the imbalance in the long term."The Gini coefficient certainly points to the serious issue of income inequality," the director of the Chengdu city-based centre Gan Li said."But more importantly about the interpretation of the figure is that it does not necessarily indicate imbalance in China's economy," he said, adding it was normal for greater resources to flow to developed areas."There's no need to make a big fuss about it."The government-backed Chinese Academy of Social Sciences estimated China's Gini coefficient at nearly 0.47 in 2005.Another research institute, the Centre for Chinese Rural Studies, in August put the Gini coefficient at around 0.39 for rural residents last year, but gave no figure for the overall national level.

NEWS,14.08.2012

Europe's Economic Crisis -- Follow the Politics

 

If you've been following the Eurozone's crisis but have found the economic technicalities trying (or worse, boring) don't despair. The roots of the crisis, the obstacles impeding solutions, and the consequences of success or failure are essentially political.The technicalities of bond yields, the implications of creating Eurobonds, the appropriate size and ground rules of the proposed European Stability Mechanism (ESM), the proper role of the European Central Bank (keeping inflation low vs. providing stimulus to economies crippled by massive unemployment and stalled growth), and the pros and cons of cutting budgets as opposed to running short-term deficits to create jobs and increase demand  these are all undoubtedly important. But ultimately the economic decisions will depend on what European leaders  those needing help and those able to give it  decide they can do politically.German Chancellor Angela Merkel leads the European Union's powerhouse and is certainly no economic neophyte. She knows that the downside of pushing Greece and Spain to slash public spending is that their unemployment rates could increase, thus reducing demand and preventing the economic recovery that will produce the increased tax revenues required to reduce their debt and increase their creditworthiness. She also understands that the worse things get in Spain, the more likely that the bond markets will make life untenable for Italy's leaders, and that the euro itself will then be in (greater) peril.Yet Merkel isn't an economics professor; she's a politician and, as such, can't ignore the political reality that German taxpayers are unwilling to guarantee bonds that will allow the Greek, Spanish, and Italian governments to borrow at lower interest rates, or to make big contributions to schemes that will enable them to revive their economies by spending more in hopes of creating jobs and boosting demand. On the streets of Stuttgart or Hamburg, it doesn't much matter what Keynes said. True, Germany's big export surpluses have been enabled in large measure by the big imports of the very European countries now being castigated for their profligacy. So it is in Germans' self-interest to help them recover. But imagine Merkel the politician making this pitch to the German electorate. For all the happy talk of the European Union having created a unity that has transcended nationalism, the reality is that that stubborn sentiment remains alive and well on the continent. Germans won't write checks or take big economic risks for foreigners (even of the European variety) who, as they see it, are suffering from self-inflicted wounds. Pumping huge sums of money  over 1 trillion euros since 1990  into the former East Germany was one thing; making sacrifices for Greeks and Spaniards, let alone for "Europe," is another. Likewise, while Greek and Spanish leaders understand that they must cut government spending, they can't keep doing so at the risk of losing ground to opposition parties that accuse them of succumbing to the diktat of a German-dominated EU and ignoring the plight of the poor, the unemployed, and the retired. Elections are not imminent in either country, but in democracies all politicians are exquisitely and perennially sensitive to polls, and the risk of social unrest in Greece and Spain is ever present. So imagine Greek Prime Minister Antonis Samaras telling his fellow citizens that, yes, he feels their pain, but that, unfortunately, it's the price they must now pay for their rampant tax evasion and attachment to social programs that had to be financed by running red ink. Picture Spanish Prime Minister Mariano Rajoy whose country's problems, unlike Greece's, stem from the insolvency of its banks rather than outsize government spending giving a national television address, the gist of which is that, yes, the bankers messed up and damaged the economy, but now everybody has to pay for the repairs and that bigger bills await. That refrain won't be well received at a time when a nearly a quarter of the Spanish workforce is jobless and feels that it's footing the bill for the blunders of well-heeled bankers.Politics also explains the roots of the Eurozone's crisis. A common economic explanation is that what's happening was bound to happen because the EU foolishly decided to create a monetary union without a fiscal counterpart. That's true as far as it goes, but the choice didn't result from economic illiteracy. Countries were simply unwilling to transfer that much political power to distant European institutions and bureaucrats. The primacy of politics applies to the future as well. It's in the political realm that we'll see the biggest results of the Eurozone's success, or lack thereof, in solving its economic crisis. If it succeeds, the idealistic post-World War II project of pan-Europeanism will survive, even if the Eurozone may not retain all of its current members. The coordination of domestic and foreign policies and EU enlargement will resume, albeit at a reduced tempo, and Europe will prove that it is indeed more than the sum of its parts. If it fails, European politics will be transformed as parties with nationalistic, populist, anti-immigrant platforms overshadow moderate ones. "European" positions on major global issues will prove elusive. NATO's unity and sense of purpose, already hard to maintain in a non-Soviet world, will fray as American presidents, facing their own budgetary pressures, push European allies to spend more on defense and the latter, preoccupied with domestic problems and facing inward-looking voters, refuse.So if you find the economic details of Europe's crisis soporific keep your eyes on the politics. That's the main event.

 

Eurozone economy shrinks by 0.2%

The eurozone's debt-ravaged economy shrank in the second quarter, having flatlined in the first, despite continued German growth which economists said could soon be snuffed out.The 17-nation currency bloc contracted by 0.2% on the quarter, data showed on Tuesday. Germany eked out growth of 0.3%, marginally beating forecasts, but its forward-looking ZEW sentiment index slid for a fourth month running, undercutting even the lowest estimate in a Reuters poll.Economists said worse is likely to come and even Europe's largest economy is unlikely to defy gravity for long unless decisive action is taken to tackle the bloc's debt crisis. "Growth turned out to be pretty solid. But this could be the last positive piece of news out of Germany for some time," said Joerg Kraemer at Commerzbank. "The German economy could contract in the summer. It is fundamentally in good structural shape, but can't decouple from the recession in the euro zone, plus the global economy has also shifted down a gear."Aside from a downward blip in the last three months of 2011, the eurozone has posted pretty consistent, albeit anaemic, growth over the past three years although some of its debt-laden members have been in recession for some time."Overall it confirms the idea that the euro zone is in a recession phase," Aline Schuiling, economist at ABN AMRO, said."What we see is a vicious circle of budget cuts, high interest rates in the periphery and sovereign debt rising," she said. "Policymakers are moving very slowly ... We expect another contraction in Q3."For France, it was the third consecutive quarter of zero growth. The central bank has already said it expects a mild contraction in the third quarter. "These figures are not excellent, but at the same time France is not in recession while the majority of its European partners are," Finance Minister Pierre Moscovici told Europe 1 radio. Safe-haven German Bund futures fell and European stocks rose after the slightly stronger than expected German and French GDP reports. The euro also rose though its climb was thwarted after the ZEW survey came in worse than expected. The think tank's monthly poll of economic sentiment slid to -25.5 from -19.6 in July. ZEW economist Christian Dick said the German economy would slow due to weak growth in its main export markets, but would not deteriorate sharply.Austria and the Netherlands almost matched Germany's performance, each posting growth of 0.2%. But Finland, one of Germany's northern European allies in pushing for austerity, suffered a 0.7% year-on-year (y/y)fall in GDP.EU Economic and Monetary Affairs Commissioner Olli Rehn said the European Union and European Central Bank (ECB) were ready to act if needed to shore up the currency bloc."To my mind it is clear that both the European Union and ... ECB are ready to take action once certain conditions are met and if there is a request by some member state," he said in an interview.Spanish and Italian bond yields have steadied since ECB President Mario Draghi promised to do whatever it takes to save the eurozone although a government would first have to ask for help from the bloc's rescue funds.For the countries at the sharp end of the debt crisis, the picture is bleaker still and as economies shrink, so do tax revenues, making deficit-cutting even harder to achieve.That has fostered a growing debate inside and outside Europe about the sense of austerity drives.Bailed-out Portugal's recession deepened with GDP diving by 1.2% on the quarter and Cyprus contracted by 0.8%. Figures released on Monday showed deficit-cutting measures helped to shrink Greece's economy 6.2% y/y in the second quarter. Economists say the slump will persist as the government scrambles to secure billions in additional cuts to keep bailout funds flowing. Italy's second quarter data last week showed the economy contracted 0.7% quarter-on-quarter, compounding the difficulties for Mario Monti's technocrat government as it tries to avoid a bailout. Spain's economy shrank 0.4% over the same period, pushing it deeper into recession. The big unanswered question is whether a weakening economy will make Germany, the EU's paymasters, less likely to support government rescue efforts for the broader eurozone. German Chancellor Angela Merkel has said repeatedly over the past year that she will do everything to save the euro, most recently after the ECB signalled it would intervene in the bond market to lower Spanish and Italian borrowing costs.Not all Germans support that course and the chancellor's room for manoeuvre appears to be shrinking at a time when both Greece and Spain may soon require new rescues. However, if ordinary Germans start to feel real economic pain, their response could be to demand their leaders sort out the crisis that is now finally knocking at their door."I have full trust in the German people and political leaders that they are fully committed to the euro," Rehn said.It is quite possible that Madrid and Rome will seek help from the euro zone's rescue funds and the ECB before the year is out. If so, most economists expect the German economy at least to rebound after a gruelling third quarter as confidence revives.Christian Schulz, an economist at Berenberg Bank in London, said it was vital to get a grip on the euro zone crisis. "We expect that the ECB has initiated a turning point with its signal of bond purchases," he said. "After a weaker summer the German economy will be able to grow faster again from the fourth quarter."

Eurozone narrowly escapes recession

The eurozone economy narrowly skirted recession in the first half of the year, but austerity programmes across the region and a debt crisis weighing ever more heavily on its periphery suggest the reprieve will be short-lived. Gross domestic product (GDP) shrank by 0.2% in the second quarter from the first after risk-averse businesses and consumers reined in spending, European statistics agency Eurostat said on Tuesday. Quarterly growth flatlined in January-March, meaning the region averted the two consecutive quarters of contraction that define a recession. Eurostat revised up the year-on-year GDP figure for that period to zero from a 0.1% contraction. Europe’s debt crisis intensified during the second quarter, with Greece coming closer to an exit from the single currency and Spain struggling with a banking crisis that pushed its borrowing costs to danger levels. Analysts agree the gloomy picture is not about to change. “What we see is a vicious circle of budget cuts, high interest rates in the periphery and sovereign debt rising,” said Aline Schuiling, an economist at ABN AMRO. “There is still a lot of uncertainty related to the crisis.” A decline in GDP from the end of last year levelled off in the first quarter of 2012 as exports offset a plunge in investment and inventories. “The economy is avoiding recession by the skin of its teeth, but it will be a temporary reprieve,” Kenneth Wattret, economist at BNP, said. “You could argue we have one leg in the recession already,“ said Martin Van Vliet, economist at ING. “Leading indicators point to a further contraction in the third quarter, so we might indeed see a technical recession.” Tuesday’s flash GDP estimate for the second quarter was in line with the average of economists’ expectations as polled by Reuters. Industrial production, a key component of GDP, fell 0.6% in June from May and 2.1% compared to June 2011, another reading from Eurostat showed. This was slightly above forecasts of a 0.7% and 2.2% fall respectively. Earlier on Tuesday, Germany posted modest growth in the second quarter, while France stagnated, as Europe’s core gets drawn further into to the debt crisis. German analyst and investor sentiment also dropped for a fourth straight month in August, undercutting even the lowest forecast in a Reuters poll, a survey showed on Tuesday.

NEWS,26.07.2012

G20 Tax Evasion Crackdown Yields Results But Challenges Remain

 A global campaign to tax trillions of dollars hidden in offshore tax havens has made revolutionary progress, an official leading the drive said, rejecting suggestions that the super rich are running rings around Western authorities.Pascal Saint-Amans, director of a unit at the Organisation for Economic Cooperation and Development, also cast doubt on estimates that the havens are illicitly sheltering wealth equivalent to several hundred times the fortune of Bill Gates.Leaders of the G20 group of leading Western and developing nations launched the campaign three years ago, aiming to claw back billions in lost tax revenue at a time when many governments are trying to cut huge budget deficits.Saint-Amans said his gut feeling was that before the G20's initiative at its 2009 London summit, people could hide their wealth in offshore havens without any risk of legal reprisals."Now you are at risk and that's a major change. That's a revolution," Paris-based Saint-Amans told in a telephone interview. Even if money is transferred abroad, rules improving transparency have made it easier for the taxman to find it, said Saint-Amans, whose unit is tasked with leading the Western efforts to fight tax evasion.The Tax Justice Network, a campaign group, estimated last weekend that as much as $21 to $32 trillion of financial assets are sheltered in offshore tax havens, representing up to $280 billion in lost income tax.That total wealth would dwarf the fortune of Microsoft Corp cofounder and philanthropist Bill Gates. In March Forbes magazine ranked Gates second on its global rich list with total wealth of a mere $61 billion.Saint-Amans suggested the TJN estimates might be overstated. "I was wondering where the equivalent of 450 Bill Gates are hiding from everyone. It looks like the equivalent 20,000 unknown billionaires in the world or 200,000 people with net worth of 100 million," he said.The Scorpio Partnership, a consultancy that analyses the global private wealth management industry, estimates the amount of money held offshore by people worth at least $1 million at a more modest $8-$9 trillion.Saint-Amans, who heads the OECD's Centre for Tax Policy and Administration, acknowledged his organisation makes no equivalent estimate. "I would rather spend the resource improving the legal framework and putting an end to loopholes than trying to find the magic number," he said.In a statement accompanying its research, TJN criticised the OECD and other international bodies for not doing enough to track offshore wealth, saying it was scandalous that institutions devoted so little research to the issue.G20 leaders agreed at their London summit to crack down on tax evasion and banking secrecy, and asked the OECD to publish lists of tax havens according to how cooperative authorities there are on releasing information about offshore wealth holdings.There are now 89 countries on the OECD's "white list" of jurisdictions that have implemented internationally agreed tax standards. These jurisdictions have between them signed more than 800 agreements on exchanging information with authorities other countries, Saint-Amans said."Until 2009, countries said being secretive is justified and fair. The change in the world is nobody says that any more, so that is a big change," he said.Western tax authorities have individually stepped up efforts to net more money hidden abroad by their own citizens through a series of amnesties targeting people with accounts in jurisdictions such as Switzerland and Liechtenstein.At the same time they have turned up the heat on citizens suspected of tax evasion. This has included using details of Swiss accounts originally stolen from HSBC by a former IT employee that found their way into the hands of tax authorities around Europe.Britain's HMRC tax office expects an amnesty offering leniency to people with accounts in Liechtenstein if they come clean to raise about 3 billion pounds, while a similar deal on Swiss accounts will bring in up to 7 billion pounds.Campaigners argue that such initiatives will achieve only limited success because a financial industry designed to ensure confidentiality across multiple jurisdictions makes it impossible to shut down tax fraud or money laundering."Anybody who's serious about holding money offshore ... will hold it through a trust," said Richard Murphy, a chartered accountant and director of Tax Research, a think-tank."You'd have the trust in one territory, the company in another territory, its directors in another territory and its bank account in a fourth territory. So making an application for information is not very simple."Murphy dismissed the OECD's progress in cracking down on tax havens, arguing that implementation of information exchange between territories is limited in practice and the process too complex to be workable."They've set up a system where it's virtually impossible to apply for information ... The OECD claiming they are making progress is like checking the stable door has been shut way after the horse bolted. Not just the horse, the entire stable has bolted," he said.The TJN research on offshore wealth - authored by James Henry, a former chief economist at consultant McKinsey & Co - highlights the "often unsavoury role" played by banks in catering to rich individuals who want to hide money offshore.Large private banks with offshore businesses reject the idea they aid tax evasion."Our Code of Conduct explicitly says not to assist clients in activities intended to breach their tax obligations," said a spokesman for Swiss bank Credit Suisse who declined to comment specifically on the contents of the TJN report But recent crackdowns by tax authorities in countries such as Britain, the United States and Germany have proved embarrassing for Swiss banks.German tax authorities are investigating roughly 5,000 German clients of Credit Suisse while French officials have searched the homes of UBS employees.At least 11 Swiss banks suspected of helping wealthy American clients dodge taxes are currently subject to a U.S. investigation.Saint-Amans said the OECD's efforts have focused on engaging with governments rather than imposing more supervision on financial institutions. The complexity of the industry, he said, meant that greater information exchange was the best way to tackle people using banking secrecy to break the law."I'm not sure that nationalising the banking industry throughout the world is the solution. The fact you have private practitioners being involved in a sophisticated environment is why you need to favour transparency and exchange of information," he said.Efforts to increase disclosure and combat both tax evasion and money laundering by international bodies such as the OECD and the Financial Action Task Force (FATF), a Paris-based inter-governmental body, have focused on self regulation."We've tried to ensure that what we're talking about is not to create some draconian system where we put a policeman in every financial institution which would be impossible to do," said a senior source at the FATF, which was set up to combat money laundering and terrorist financing.Nick Matthews, anti-money laundering and offshore financial industry specialist at Kinetic Partners, said purging the world's financial system is "incredibly difficult"."Clearly tax evasion leads to money laundering and is a crime but you would have money laundering even if there was no tax, because you still have proceeds from crime or corruption polluting the financial system," he said."That is why I say that no bank would ever stand up and claim that they are not being used to launder money. They appreciate that they are only as strong as their weakest link."

Wells Fargo In Analyst Note, 'Does Service Mean Anything?'

A banking analyst suggested that good customer service hurts a bank's profits. Wells Fargo pissed off the wrong customer.Earlier this week, Richard X. 'Dick' Bove, a well-known banking analyst, blasted the bank in a research note entitled "Does Service Mean Anything?" According to Bove, 71, Wells Fargo royally botched his personal account, charging him mystery fees, bungling his mortgage refinance application and basically blowing him off on the customer service front. Bove, who had been a Wachovia customer for around 10 years before Wells Fargo took over, said the changes at the Tampa, Fla., branch where he had been banking were considerable. Gone was the greeter at the door, for example. In place of a friendly 'Hello' were sales desks. He recounts one occasion when he visited his branch to speak with a personal banker but was left waiting in limbo. "The bank officer made me wait a bit; came out of his office and entered a public bathroom; and then left the bank," Bove recounted in his note. "Nothing was solved for me on that visit."Wells Fargo acquired Wachovia in 2008, and former Wachovia locations in Florida were fully rebranded by July 2011, according to Wells Fargo. Bove said all his experiences took place at the same location on North Florida Avenue in Tampa.In his note, he assaults Wells Fargo for paying far more attention to profits than people. He concludes that customer service  the kind of customer service that involves developing a relationship over time  might actually hurt the bank's business strategy. "What my Wells Fargo experience suggests is that a succesful bank is one that keeps seeking new customers and selling them more products and not getting bogged down by offering service," he wrote in his note on July 23. Bove said he has since moved his personal bank account to JPMorgan Chase, although he told his mortgage and several other business accounts are still active with the bank.Wells Fargo did not comment directly on Bove's note when contacted by HuffPost. "We...recognize that we're only as good as our last interaction and we remain committed to putting our customers at the center of everything we do," Mary Eshet, a senior spokeswoman for the bank, said in an emailed statement. Bove's comments come as the disconnect between banks' business strategy and customer experience continues to be an issue for Americans. The banking analyst is not alone in feeling abandoned by bank customer service. A survey released Tuesday from Consumers Union, the advocacy arm of Consumer Reports, reported that nearly one-fifth of all consumers said they considered switching banks in the last year. The survey participants, like Bove, cited high fees and bad customer service.However, actually moving from one bank to another is a complicated process. More than half of the people who said they wanted to switch banks in the survey, said the reason they didn't complete the process was because of difficulty in transferring automatic payments. The survey included 1,157 adults and took place in May 2012.Consumers Union is calling on Congress and the year-old Consumer Financial Protection Bureau to consider reforms that would make it easier for consumers to switch banks. Suzanne Martindale, staff attorney for Consumers Union, said more consumers want to move their money but feel frustrated at the process. “Moving your money takes a lot of time and money and some bank policies make it harder than it should be," she said in a statement released with the poll results. "We need to make it easier for consumers to switch banks so they have a real choice when it comes to where to keep their money.”Bove is known for his independent voice, which has occasionally gotten him into trouble, as The New York Times pointed out in a 2010 story detailing a lawsuit he faced over some of his analysis.

NEWS,13.07.2012

Spain Protests: Civil Servants Protest Wage Cuts

 

Spanish civil servants, many dressed in mourning black, took to the streets Friday in angry protest as the government approved new sweeping austerity measures that include wage cuts and tax increases for a country struggling under a recession and an unemployment rate of near 25 percent.Spain is under pressure to get its public finances on track amid concerns in the markets over the state of the country's banks and the wider economy."Spain is going through one of its most dramatic moments," Deputy Prime Minister Saenz de Santamaria said after a Cabinet meeting at which sales tax hikes and spending cuts were approved.Admitting that the austerity measures were "neither simple, nor easy, nor popular," she said the government would try to enact the measures "with the maximum justice and equity."The conservative government has come under mounting criticism that the austerity measures are hitting the middle and working classes the hardest."The government should go after the big companies that don't pay tax and bankers that have committed fraud and have run this country to the ground," said Pablo Gonzalez, 52, who works for the Madrid regional government. "Instead, we have to pay."The aim of the latest package of measures is to chop (EURO)65 billion ($79 billion) off the budget deficit through 2015, the biggest deficit-reduction plan in recent Spanish history.Though the increase in sales taxes, which risks slowing consumption and worsening Spain's recession, will take effect Sept. 1, other reforms will be left for later in the year, including a plan to speed up the gradual raising of the retirement age from to 65 to 67.Meanwhile, Economy Minister Luis de Guindos announced the creation of a new mechanism to help Spain's 17 regions finance themselves more easily. Some, such as Valencia in the east, are finding it increasingly difficult to tap capital markets for much-needed cash.The latest bout of austerity is prompting widespread opposition, not least from civil servants. In Madrid, several hundred government workers blocked traffic briefly in different parts of the city. In Valencia, several hundred Justice Ministry workers shouted "hands up, this is a stick-up" at a protest rally.The civil servants  whose wages were cut 5 percent on average in 2010 in the first round of austerity cuts –are usually paid 14 times a year. The government is now axing an extra payment made just before Christmas. The prime minister, his cabinet and lawmakers will also suffer the cut. At the local, regional and central level, there are around 3 million public servants in Spain.In the Puerta del Sol in downtown Madrid, about 500 civil servants gathered, about half dressed in black. Some women wore veils, as if at funerals. Protesters blew whistles and horns. Civil servants are often ridiculed in Spain and seen as lazy, clock-in and clock-out types with the luxury of lifetime jobs. But many earn as little as (EURO)1,000 a month.Isabel Perez, a 40-year-old librarian, said "our wages have already been cut and now they take away the Christmas payment. I don't make it to the end of the month as it is. The extra payment gave some relief. We're not exactly millionaires." She earns (EURO)1,300 a month and had already faced a yearly (EURO)330 euro wage cut by the Madrid regional government.The latest austerity package has come after Spain won approval from the other 16 countries that use the euro for the first (EURO)30 billion tranche of a bailout of up to (EURO)100 billion for its troubled banking sector. Spain also managed to secure an extra year to meet a European deficit reduction target of 3 percent of GDP. The size of Spain's economy in 2011 is estimated to have been $1.5 trillion.Investors' response has been lukewarm, and the yield on Spain's benchmark 10-year bonds, a measure of investor wariness of a country's debt, remains very high at 6.61 percent, up 4 basis points for the day.Investors are also becoming increasingly wary of placing money in Spanish banks, which are having to turn to the European Central Bank for financing.In June, Spanish bank borrowing from the ECB rose 17 percent from May. The accrued total as of the end of that month was (EURO)337 billion, 77 percent of all the money owed to the ECB and seven times the figure from June 2011.A draft memorandum of understanding agreed by eurozone finance ministers for Spain's bank bailout suggests billions in problematic assets should be segregated into an "external asset management agency" to clean up Spanish banks' balance sheets.It also says that by the end of the year certain areas of jurisdiction  sanctioning and licensing  should be transferred from the Spanish economy ministry to the Bank of Spain.This is seen as paving the way for Europe having a single bank supervisory body that will oversee central banks and be empowered to recapitalize Spanish and other troubled banks directly instead of via debt-laden government.

 

Europe shows chocolate not recession-proof

 

An assumption that chocolate is a recession-proof treat that consumers continue to buy despite the grim economic outlook was proven wrong today by the sharpest fall on record in Europe's quarterly cocoa grind - an indicator of demand.Analysts said worsening economic conditions in the euro zone had prompted a sharp slowdown in European demand for chocolate, and the outlook could deteriorate further if the crisis deepens.The Brussels-based European Cocoa Association (ECA) reported that Europe's second-quarter cocoa grind tumbled 17.8% from the same period last year to 292,551 tonnes, far worse than even the most pessimistic predictions of a fall of up to 12%."We think the current slowdown in grindings reflects worsening economic conditions in the euro area. If contagion spreads to Spain and Italy, this would have undoubtedly an impact on demand for indulgence products like chocolate," said Francisco Redruello, senior food analyst at Euromonitor International.In Switzerland, the world's top chocolate consumer, domestic chocolate consumption dropped about 8% by volume in the first four months of the year, said Franz Schmid, managing director of the association of Swiss chocolate manufacturers Chocosuisse.Swiss chocolate exports - of which around two thirds are destined for Europe - also fell about 12% in the January to April period. Schmid said the strong Swiss franc also had hurt exports.In Germany, one of the world's largest chocolate consumers, retail sales of chocolate bars by tonnes fell 7.3% on the year in the first four months of 2012, according to the association of German confectionery producers BDSI.Following the grindings data, benchmark ICE September cocoa futures fell 5% to $2,177 per tonne 1516 GMT."It is by far the worst ever result in a quarter since the ECA began reporting these figures. It is reflecting the reality of the demand picture in Europe," said Javier Almela, head of cocoa purchasing at Spanish cocoa processor Natra Cacao.In Spain, where unemployment is high and consumers are feeling the pinch, chocolate consumption is expected to suffer.According to market research firm Mintel's June chocolate confectionary report, only 44% of Spaniards agree that chocolate is value for money, while 43% claim that they will cut back on purchasing chocolate if the value of their favourite bars rises."Given these responses it is not unreasonable to assume that consumers are likely to be cutting back on purchasing some forms of chocolate," said Marcia Mogelonsky, global food and drink analyst at Mintel.Cocoa demand growth typically tracks GDP growth, and with many European countries in recession plus cocoa processing margins being squeezed, analysts had expected a negative grind number - just not of this magnitude.Some are adjusting their global supply and demand balance sheet accordingly."This transforms a flat supply and demand picture into looking like a meaningful surplus for the year. We are now looking at a 2011/12 surplus of over 100,000 tonnes," said Jonathan Parkman, joint head of agriculture at broker Marex Spectron.In May, the International Cocoa Organization (ICCO) forecast a 2011/12 global cocoa deficit of 43,000 tonnes.Until now, growing global demand was attributed to strong cocoa powder demand from emerging markets including Brazil and China, but Parkman said the weak grind data throws this into question.When cocoa beans are ground, they produce roughly equal parts of butter, which makes chocolate melt in the mouth, and powder, used to flavour products including cakes and biscuits."Everyone is aware that powder demand has been holding grindings up and yes margins were negative, and that's what caused this slowdown in grindings, but the European grind also suggests the powder demand story has been exaggerated. Powder demand certainly doesn't seem to be growing," said Parkman.

 

China's economic growth slows

 

China's economy expanded at its slowest pace since the depths of the global financial crisis more than three years ago, official data showed on Friday, fuelling expectations of more stimulus moves.The world's second-largest economy grew 7.6% from April to June year-on-year, the National Bureau of Statistics said, the worst performance since 6.6% in the first quarter of 2009.The slowdown "was mainly due to the continued deterioration in the international environment, which further dampened foreign demand," statistics bureau spokesperson Sheng Laiyun told reporters."Domestic demand eased also as macro-economic tightening, particularly controls on the real estate sector, continued."The weak second-quarter expansion dragged down growth to 7.8% for the first half of the year.Sheng expressed confidence that the economy would stabilise and China would meet its full-year growth target of 7.5%."I believe China's economy will continue moderate and steady growth in the second half of the year," he said, citing the potential for investment, consumption and exports to propel expansion the rest of the year."We are very confident in achieving the full-year growth target."Nevertheless, the target growth rate of 7.5% is well down on the 9.2% achieved last year, and 10.4% in 2010.Market reaction in China to Friday's data was muted. Chinese stocks turned slightly into negative territory after initially rising following the release of the figures.The Shanghai Composite Index, which covers both A and B shares, was down 0.15%, or 3.30 points, to 2,182.19 in late morning.Tang Jianwei, economist at Bank of Communications in Shanghai, said the second-quarter result was in line with expectations and that China's planners would be able to speed up the economy."We expect economic conditions in the second half of the year will be slightly better than the first half," Tang said. "We've already seen stabilisation in investment from June's data thanks to government stimulus policies."The government last week took the rare step of slashing interest rates for the second time in a month. That came after three cuts since December in banks' reserve requirements, or the amount of money they must keep on hand.Such cuts are meant to free up funds for lending and thus boost the economy.Chinese leaders have vowed to take further measures. Premier Wen Jiabao this week called stabilising economic growth the government's "top priority".Slowing growth in China is also casting a further cloud over the broader global economy, which is still suffering the effects of the 2008-2009 financial crisis.Employment figures in the United States, the world's biggest economy, remain weak and Europe is struggling to overcome its sovereign debt crisis.Ren Xianfang of IHS Global Insight said in a report that China's second-quarter figure marked the sixth straight three-month period of slower growth, and highlighted that the country's economy risked losing momentum. Still, she said that the government retained ample tools - including another interest rate cut, more loosening in bank reserve requirements and exchange rate stability - to spur activity."We are expecting about 7.9% growth this year," she said.Besides the growth figures, the bureau released a slew of other economic statistics on Friday that backed up the broader slowdown.Growth in retail sales, the main gauge of consumer spending, continued to slow in June, rising 13.7% in June compared with the same period a year earlier, marginally down from growth of 13.8% in May.Output from China's millions of factories and workshops also continued to slow, growing by 9.5% year-on-year in June, the bureau said, down from 9.6% in May.However, indicating that some government measures to revive growth were starting to kick in, China's urban fixed asset investments rose 20.4% in the first half of 2012 compared with a year earlier, the bureau said.The investments for the half year compared with growth of 20.1% in the first five months of the year, signalling a slight increase in June.Fixed asset investments are a key measure of government spending on infrastructure.