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Old Economies Rise as Emerging Markets’ Growth Falters

August 14, 2013 by

The gross domestic product of the 17-nation euro zone grew at an annualized rate of about 1.2 percent in the second quarter. It is certainly not clear, based on only three months of data, that Europe’s recession has ended. But it is further evidence that the older engines of growth are revving into gear as the most recent sources of growth have been slowing down.

“The general proposition for much of the last generation has been that emerging markets grow faster. That’s what’s changed,” said Neal Soss, the chief economist at Credit Suisse.

“The acceleration such as it is happening is in the first-world economy rather than the emerging markets.”

The growth of the BRIC countries — Brazil, Russia, India and China — has raised living standards in those nations and in others in Southeast Asia, Latin America and Eastern Europe. Those four nations had an even broader global impact by also providing new markets for American products while its citizens made the electronics and other products wanted by consumers in the United States and other developed economies.

So a decline in their growth rate should be worrisome to the United States. But Jim O’Neill, the Goldman Sachs economist who coined the term BRIC more than a decade ago, thinks one of the new beneficiaries of the shift in the global economy is most likely to be the United States. “I find myself thinking the U.S. is going to be one of the biggest winners,” said Mr. O’Neill.

It could gain from the Chinese government’s stated intention to shift from big government investment projects to a more consumer-driven economy. That could create demand for American products, while making commodities cheaper for American companies. Rising wages in China could also encourage manufacturing in the United States.

There were signs in recent trade statistics that this shift may already be under way. Exports from the United States to China grew in June while imports from China declined. The overall United States trade deficit dropped to its lowest level since 2009. China’s newfound restraint is at the fulcrum of the shift. Its government is trying to temper the economy, the largest among the developing nations. In doing so, it shoulders much of the blame for the slowdown elsewhere in Asia and in Latin America. The price of commodities like iron and copper, which previously buoyed the developing countries producing them, are now sinking as Chinese leaders are reining in the grand developments that needed metals.

Brazil was growing largely because of commodities like iron ore and soybeans, which it was exporting to China. Two years ago, the Brazilian economy grew 7.6 percent. This year, however, economists predict the number will be around 2.3 percent.

“After years of strong growth, many Brazilians grew optimistic, but for many people who improved their lot, there is now a sense that their potential to rise further is limited,” said Samuel Pessoa, a researcher with the Brazilian Institute of Economics at the Fundação Getúlio Vargas, an elite university in Rio de Janeiro. “People are worried.”

There is little prospect that the BRIC economies will ever return to the roaring growth that had come to seem normal.

“Many superficial observers just assumed that the BRIC countries would keep growing at the rate they did in the first decade, which was very unlikely,” said Mr. O’Neill, who recently retired from Goldman.

Mr. O’Neill said that as China moved to a more consumer-based economy, “the winners and losers of the new China are probably going to be quite different than the winners and losers of the old China.”

Dan Horch contributed reporting.

Article source: http://www.nytimes.com/2013/08/15/business/global/old-economies-rise-as-emerging-markets-growth-falters.html?partner=rss&emc=rss

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I.M.F. Trims Global Forecast as Emerging Markets Lag

July 9, 2013 by Leave a Comment

WASHINGTON — Many major emerging economies have weakened since the spring, the International Monetary Fund said on Tuesday in the latest update to its economic forecasts, while advanced economies, including the United States and Europe, continue to trudge along with subpar growth and the euro area remains mired in recession.

The fund now expects the global economy to grow about 3.1 percent in 2013, the same rate as in 2012 and down from growth of 3.9 percent in 2011. That is 0.2 percentage points lower than the Washington-based fund forecast in April.

Olivier Blanchard, the fund’s chief economist, said in the periodic update that emerging economies were experiencing a “slowdown in underlying growth,” and the fund lowered its forecasts for China, India, Brazil, Mexico, South Africa and Russia, among other countries. “It’s clear that these countries are not going to grow at the same rate as they did before the crisis,” he said.

Given that emerging economies have in no small part powered the global recovery, their slowdown has a significant effect on the rest of the world, the fund said. For instance, Mr. Blanchard said, if growth in the so-called BRICS — Brazil, Russia, India, China and South Africa — were 2 percentage points slower than expected, a half-percentage point would be knocked off the United States’ growth rate. “It matters,” he said.

The fund said that the recession in the euro area had proved deeper than expected in recent months because of the persistent combination of tight credit conditions, low demand and government budget cutting. Next year, the fund’s forecasters expect growth to pick up in the 17 countries of the euro zone, but to a slower rate than previously thought — just 0.9 percent, down from about 1 percent as forecast in April.

The fund warned, as it has before, that the United States’ tax and spending policies were slowing its recovery. Private demand is improving as the turnaround in the housing market helps to repair households’ balance sheets and as the Federal Reserve continues its campaign to encourage investors to invest with accommodative monetary policy, the fund said. But tax increases and budget cuts were weighing on growth, it warned.

The fund cut its estimate of United States growth by 0.2 percentage points for both 2013 and 2014. It now sees the country’s economy growing 1.7 percent this year and 2.7 percent next year.

Japan is one bright spot in the global economy, the I.M.F. said. The country has been mired in stagnation and deflation for a decade. But since the beginning of the year, the government has been engaged in an athletic effort to spur the economy with aggressive asset purchases by the central bank and a jolt of government spending. The I.M.F. raised its estimate of the country’s current-year growth to 2 percent, up 0.5 percentage points from its April forecast.

Among emerging economies, different countries were suffering from different problems, the fund said. In some cases, infrastructure bottlenecks and other capacity constraints were stifling economic activity. In other cases, among big exporters like Russia, lower commodity prices were hurting growth.

Demand is weakening for goods from countries like Nigeria and South Africa, weighing down the whole sub-Saharan region, the fund said. And countries in the Middle East and North Africa continue to see disruptive political transitions, including violent ones.

The prospect of the Federal Reserve tapering its extraordinary asset-buying program — essentially taking its foot off the accelerator, if not putting it on the brakes — is sending shudders through the global economy, too. Financial markets have become more volatile and yields have increased in part because of uncertainty about the Fed’s policies, the fund said.

The rising yields “largely reflect a one-time repricing of risk,” it said. “However, if underlying vulnerabilities lead to additional portfolio shifts, further yield increases and continued higher volatility, the result could be sustained capital flow reversals and lower growth in emerging economies.”

The World Bank, the I.M.F.’s sister institution, has noted that businesses and governments in many lower-income developing economies have engaged in huge infrastructure projects financed with rates pushed down by the Fed. As interest rates rise, it has warned, some of those projects might fail — revealing financial bubbles and causing economic turbulence in the coming months.

Article source: http://www.nytimes.com/2013/07/10/business/economy/imf-trims-global-forecast-as-emerging-markets-lag.html?partner=rss&emc=rss

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Economic Outlook: Conflicting Signals for End of One-Way Policy Traffic

June 9, 2013 by Leave a Comment

LONDON — Financial markets have become convinced in the past two weeks that two years of one-way policy traffic from the developed world’s central banks is coming to an end.

The difficulty, on the evidence of the last few days, is the mass of conflicting signals on how shaky things still are, or how much better they will get — and as a result, getting from here to actual changes in policy will probably take months.

Since the euro zone’s sovereign debt crisis administered another jolt to the global economy three years ago, central bank decisions on more monetary easing have not so much been a question of if, but when. The same has largely gone for a fragile U.S. recovery.

That is not the case in 2013, even if global growth looks likely to disappoint again this year.

Faced with fewer immediate threats but still under pressure to nurse the world economy back to more convincing health, central bankers have been grasping at a disparate and volatile set of economic indicators for a guide on policy.

“That’s a fairly difficult challenge at the best of times, and we’re hardly in the best of times,” said Craig Wright, chief economist at Royal Bank of Canada in Toronto.

Data from the United States last week summed up the problem.

Depending on the indicator, there was a case for the Federal Reserve maintaining support for the economy by pressing on with its $85 billion-a-month bond purchase program for a long time, or scaling it back soon.

U.S. manufacturing activity unexpectedly fell to the lowest level in four years, economists said — a sign that the Fed will refrain from winding down its program anytime soon.

On the other hand, the news Friday that U.S. employers had stepped up hiring was interpreted as a sign of economic resilience, suggesting that the Fed could begin to scale back its stimulus this year.

The Fed’s officials are split, too, meaning it could be months until a consensus emerges. But most economists expect a scaling back of bond purchases by the end of the year, and a sizeable number expect reduced buying as early as September. Of course, central bankers have to take into account developments in economies other than their own, and the economic data from the rest of the world has been similarly volatile.

“The indicators are mixed across the globe, some countries look a little more convincing than others. I’d put the U.S. and Canada as looking like a recovery is taking hold,” said Mr. Wright, contrasting that with a situation in Britain and the euro zone that “is still hit and miss.”

While a fairly quiet week for economic data lies ahead, central bankers and top officials from the World Bank, the Organization for Economic Cooperation and Development and the Asian Development Bank are expected to give their views on the world economy Monday at the 2013 Conference of Montreal.

For Europe and Japan, the question is whether more still needs to be done.

Early doubts about the effectiveness of a growth strategy outlined by Prime Minister Shinzo Abe of Japan, dubbed Abenomics, pushed Japanese stocks to two-month lows Friday after their worst week in two years.

This week will provide a better idea of whether that was a blip in the aftermath of the Bank of Japan’s announcement of $1.4 trillion in monetary stimulus, or a sign that it might not be enough to right the Japanese economy.

“Recent weakness in the market represents a little bit of a disappointment for Abenomics,” said Kenji Shiomura, an analyst at Daiwa Securities.

“But it would be too extreme to say that hopes for Abenomics have faded completely because the biggest impact Abenomics gave the market was monetary easing, and it is still continuing.”

Perhaps the biggest worry for Japanese officials is the yen’s spike to its strongest in two months against the dollar. While the government showed little concern about the Friday surge, the calm response masks a lack of solid policy options should the yen strengthen further and stamp on the country’s ability to export.

European policy makers, like their U.S. counterparts, have had a hodgepodge of numbers to deal with.

Economic confidence figures have surprised on the upside in the euro zone over the last month, but harder data like business surveys still point to a dearth of demand. And like the Fed, the lack of a clear guide for the economy means the European Central Bank is sitting on the fence when it comes to the question of stimulus.

“There was a common assessment that the changes that have taken place are not sufficiently one-directional as to grant action now,” the E.C.B. president, Mario Draghi, said after leaving policy unchanged last Thursday.

Britain has been leading the way in Europe of late, according to the latest business surveys. But like the United States, there is little certainty about whether Britain will keep up the momentum.

“I think when you look at turning points in the cycle, which is hopefully where we are in Europe, you do get these mixed signals. And that’s what we’re seeing,” said Mr. Wright.

Article source: http://www.nytimes.com/2013/06/10/business/global/10iht-econ10.html?partner=rss&emc=rss

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Rising Travel Industry Attracts Young Careerists

May 1, 2013 by Leave a Comment

Hotels, restaurants and other travel-related businesses are adding more positions, attracting people like Matthew Bryant, a hospitality studies student at the Tisch Center for Hospitality, Tourism and Sports Management at New York University.

“The hospitality industry is beginning to recover, and I decided to switch careers because I saw a professional future in it,” said Mr. Bryant, 26, who worked for five years as a federal government consultant in Washington after college. “I wanted to combine the skills I had learned as a consultant in a customer service industry, and this seemed a great fit.”

While job recovery nationally has been lagging, the travel industry has been faring much better. About 8 percent, or 7,000, of the total of 88,000 jobs added by employers in March were in the travel industry, according to the U.S. Travel Association, a trade group.

The growth is being spurred, in part, by a modest rise in business travel spending. As the economy improves, such spending is predicted to climb 5.1 percent this year, to $268.5 billion, according to the Global Business Travel Association, a trade group. Its forecast, released in April, is up substantially from the 1.8 percent rise in industry spending in 2012, and higher than the group’s previous prediction for growth of 4.6 percent.

“Companies feel the need to compete, and the global economy is driving companies to invest in business travel,” said Michael W. McCormick, the association’s executive director.

Shored up by strong corporate profits, companies are sending more employees to conventions, meetings and industry events — gatherings that were more strictly circumscribed when the economy sank.

“Events are being planned farther in advance,” said Eric Eden, vice president for marketing at Cvent, a meeting and event management technology company. “And there are more national meetings instead of small, regional ones, and higher numbers of people attending each event.”

As a result, hotels are seeing more bookings for meetings, and rates are increasing, he said. Spending on group events, Mr. Eden added, is expected to increase 6 percent this year, to almost $116 million, compared with an earlier prediction of 5.2 percent growth in 2013.

And hotel occupancy rates are moving up steadily, said Jan Freitag, senior vice president for global development at Smith Travel Research, which tracks the hotel industry.

“Occupancy rates, which are a bellwether for business travel, rose over the last three years to 64.3 percent,” he said.

Over all, about 7.7 million people worked in the travel sector, according to figures for the last three months of 2012 provided by the Bureau of Economic Analysis, part of the Commerce Department. Although spending declined in air and other transportation, outlays rose for traveler accommodation and for food services and drinking places, by 9.4 percent and 8.6 percent respectively, according to the federal figures released in March.

The data covers a range of jobs, from the minimum-wage, no-benefit slots to well-paid hotel analyst positions, but some 53 percent of travel industry workers are paid $25,000 to $69,000, according to a U.S. Travel Association analysis of the federal jobs data done in conjunction with Oxford Economics, an economics forecasting firm.

According to the analysis of Bureau of Labor Statistics data, the travel industry is one of the top 10 largest employers of middle-class wage earners, with a maximum average salary of $81,900. Two of every five workers who start their careers in the travel industry go on to earn more than $100,000 a year, according to the association analysis.

Those prospects persuaded Mr. Bryant to enroll in hospitality studies. After graduating with a political science degree in 2008 from American University, Mr. Bryant landed a job at a management consulting firm. But after five years, he said, “I wanted a change and be involved in a customer service industry.”

Article source: http://www.nytimes.com/2013/05/01/business/rising-travel-industry-attracts-young-careerists.html?partner=rss&emc=rss

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Monetary Fund Chief Warns Against ‘3-Speed’ Recovery

April 19, 2013 by Leave a Comment

Ms. Lagarde, echoing an earlier warning, expressed concern about what she called a “three-speed” global economy, with developing nations growing rapidly, the United States healing faster than most other advanced industrial countries, but Europe continuing to suffer from insufficient demand and incomplete government policies.

“It’s not the healthiest recovery,” Ms. Lagarde said. But “we believe that we have avoided the worst, and the economic world no longer looks quite as dangerous as it did.”

She added: “The pickup in financial conditions, financial markets, is clearly not translating into a sustained pickup in growth and jobs.”

The news conference came shortly after news broke that a French court had ordered Ms. Lagarde to appear at a hearing on her handling of a financial scandal during her time as finance minister in Paris.

Asked about the affair at the news conference, Ms. Lagarde said that she had known of the possibility of being interviewed by the investigative commission for years. “There is nothing new under the sun,” Ms. Lagarde said, dismissing any concerns that the inquiry would affect her position as the head of the I.M.F. “I will be very happy to travel for a couple of days to Paris. I look forward to it.”

The investigation, which led to a police raid of Ms. Lagarde’s apartment in Paris last month, concerns her decision in 2007 to refer to an arbitration panel a decades-old dispute between Bernard Tapie, a wealthy friend of France’s president at the time, Nicolas Sarkozy, and the state-owned bank Crédit Lyonnais. The panel ultimately brokered a settlement that awarded Mr. Tapie, the flamboyant former owner of the Olympique Marseille soccer team, about $580 million, including interest.

The court’s summons of Ms. Lagarde could lead to the opening of a formal investigation of her role in the affair. But in France, being placed under formal investigation does not necessarily lead to charges and does not imply a presumption of guilt. Ms. Lagarde has repeatedly denied any wrongdoing in the Tapie matter.

At the news conference, Ms. Lagarde gave her blessing to recent actions taken by the Bank of Japan to help bolster growth. She also said that the European Central Bank had more room to aid the recovery in Europe, where many countries are still undergoing economic contraction, unemployment is still rising and the credit markets remain broken.

“Of all the major central banks in the world, the E.C.B. is the only one who clearly still has room to maneuver,” Ms. Lagarde said.

Asked if Spain needed more time for fiscal adjustment, Ms. Lagarde replied that it did. She added that the country needed to put a budget-tightening plan in motion, but that it need not be “upfront, heavy duty” fiscal consolidation.

At a separate news conference, Jim Yong Kim, the head of the World Bank, which focuses on economic development, laid out his vision for a “two-pronged approach for a world free of poverty.”

Dr. Kim has called for eradicating extreme poverty by 2030 and for fostering income growth for the bottom 40 percent in every country. “For that second goal,” he said, “we also mean sharing prosperity across generations, and that calls for bold action on climate change.”

Nicola Clark contributed reporting from Paris.

Article source: http://www.nytimes.com/2013/04/19/business/economy/imf-warns-against-three-speed-recovery.html?partner=rss&emc=rss

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Euro Watch: Euro Zone Economy Shrank at Year-End

March 6, 2013 by Leave a Comment

PARIS — The euro zone economy ended the year on a sour note, official data confirmed Wednesday, with major indicators shrinking across the 17-country currency zone.

Investors nevertheless pushed European stock indexes to their highest levels in more than four years, following on a rally Tuesday on Wall Street that sent the Dow Jones industrial average to its highest-ever level.

Gross domestic product in the euro zone shrank 0.6 percent in the October-December quarter from the prior three months, Eurostat, the statistical agency of the European Union, reported from Luxembourg. The figure, the same as the initial estimate made Feb. 14, confirmed the gloom surrounding the region’s economic prospects.

Analysts do not expect the data Wednesday to have much influence on the European Central Bank’s governing council, which meets Thursday to set interest rates. While central bank policy makers may judge that there is sufficient economic justification to take new measures, including cutting their main interest rate target from the current 0.75 percent, the inconclusive election last month in Italy will likely lead to a cautious stance in Frankfurt, they said.

All of the major euro area economies shrank in the fourth quarter, with Germany contracting 0.6 percent, France down 0.3 percent, Spain down 0.8 percent and Italy down 0.9 percent.

Household spending fell by 0.4 percent from the third quarter, while investment fell 1.1 percent and exports fell 0.9 percent.

For all of 2012, G.D.P. in the euro zone shrank by 0.9 percent from a year earlier, Eurostat said.

“The euro zone is clearly the main weak link in the global economy,” Andrew Kenningham, an economist in London with Capital Economics, said. “And it’s more likely that it will get worse than better.”

He forecast the euro zone would contract by 2 percent in 2013 from 2012, as Spain, Italy and France struggled.

By contrast, Japan, where G.D.P. fell 0.1 percent in the fourth quarter from the third, will probably manage growth of about 1 percent this year, he said, while the United States, which posted a scant 0.1 percent fourth-quarter gain, will probably grow by about 2 percent in 2013.

The sovereign debt crisis that has forced Greece, Ireland and Portual to seek bailouts and raised borrowing costs to dangerous levels for Spain and Italy has been treated with the medicine of tax increases and government spending, restoring market confidence at the cost of social pain. Just Friday, Eurostat reported that euro zone unemployment had risen in January to a record 11.9 percent from 11.8 percent in December.

Despite that, investors remain bullish on European equities, pushing the Euro Stoxx 50, a barometer of euro zone blue chips, to its highest since September 2008, when the collapse of Lehman Brothers touched off the worst period of the financial crisis. On Tuesday, the Dow Jones industrial average rose to an all-time high, a performance that analysts attributed to investors’ fears about the economic future beginning to recede.

Gary Jenkins, managing director of Swordfish Research in London, said the stock market gains could be explained partly by European finance ministers this week taking a somewhat more “dovish” tone on the need for austerity measures in the euro zone.

Liquidity poured by central banks into the financial system, led by the U.S. Federal Reserve, has also contributed, he said.

“We’ve had a tremendous amount of monetary stimulus thrown at this market,” he said.

Mr. Jenkins said he expected the rally to last for as long as the economic data continued to show some improvement, or at least not to get substantially worse.

Paradoxically, he said, very strong data could slow the gains, since real economic growth would lead central banks to begin thinking about an end their easing policies.

Mr. Jenkins said he expected the European Central Bank to stand pat on Thursday. “If they moved to cut rates now, it might seem fairly panicky,” he said, adding that such a move would be unnecessary, since borrowing costs in Italy and Spain have come down from the levels last year that fueled worries about bailouts.

But investors will be keenly watching the press conference after the announcement with Mario Draghi, the E.C.B. president, he said, for clues about the central bank’s future direction.

In particular, he said, Mr. Draghi would be quizzed about his thoughts on outright monetary transactions — secondary market purchases of sovereign bonds — that the E.C.B. proposed as a means of aiding embattled governments, and how the bank could help Italy if it became necessary.

The transactions were conceived as aid to be granted when a government requested assistance, Mr. Jenkins noted, but the mechanism “doesn’t fit the bill when you don’t have a government.”

In mid-afternoon trading in Europe the Euro Stoxx 50 was up 0.5 percent, and the FTSE 100-share index in London was up 0.29 percent.

Asian indexes were higher, following on the performance of the Dow the day before. The Nikkei 225-stock index in Tokyo closed up 2.13 percent, and the Hang Seng index in Hong Kong finished up 0.96 percent.

The euro was at $1.3038, up slightly from $1.3020 late Tuesday in New York.

Article source: http://www.nytimes.com/2013/03/07/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss

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Talk: ‘You Can Actually Make a Lot of Money and Do a Lot of Good in the World’

February 21, 2013 by Leave a Comment

The Financial Times said that you’re the perfect dean for N.Y.U.’s Stern School of Business because M.B.A. students are “clamoring” for coursework to help in “reducing world poverty.” I thought people got M.B.A.’s to make themselves boatloads of money.

You can actually make a lot of money and do a lot of good in the world. I don’t see those things as being in opposition to one another. I never have.

Then can you name a Stern graduate who is making a ton of money and also saving the world?

With 90,000 alums, I won’t point to any one person. I love all my children equally.

Has the financial crisis made Wall Street less attractive for students?

Finance is not going anywhere. Emerging markets are driving global growth, and 3.5 billion people are moving to cities. That’s $20 trillion of infrastructure to lay down. It’s either a big problem or an opportunity.

Your family left Jamaica for Chicago when you were 8. Have you held on to any traditions?

Saturday afternoons in Jamaica are soup day. If you came to our house then, you’d smell pumpkin soup and patties from a place like Golden Krust in the oven as well.

What surprised you as an 8-year-old immigrant?

In Jamaica, you’re never very far away from people who don’t have very much, and in Wilmette, pretty much everybody had a lot.

You write that more than half the world economy is coming from emerging markets. What should this country be doing to assist their growth?

Giving emerging markets a say in the I.M.F. and the World Bank that’s commensurate with their contributions to the global economy would help reduce what I call the trust deficit, which, in some ways, is more important than the fiscal deficit.

You became well known in the economics world after you published a paper, in 2009, that disputed the findings of M.I.T.’s Daron Acemoglu, a much more prominent economist. He argued that former British colonies have been much more economically successful than their former French or Spanish counterparts. Did you intend to make a name for yourself by taking on the biggest kid in the schoolyard?

I’m never a person to pick a fight for the sake of picking a fight. And Daron and I are friends. But his hypothesis didn’t ring true to me. If it’s really true that the key to life is being colonized by the British, then how do Jamaica and Barbados, which started off life almost as twins, end up in such different places?

It was considered a big fight in the academic world. Was there ever an ugly showdown?

You know, having been colonized by the British, I wouldn’t find that a very civilized way to go about doing things. There’s an advantage to having a grandmother who was an Anglican schoolteacher.

You played football at the University of North Carolina, and then you were awarded a Rhodes scholarship. Are there people you’ve encountered who loathe you for being perfect?

I think my wife would take objection to any characterization of me as perfect.

At U.N.C., you were also a finalist in its slam-dunk contest. I imagine you’re the only M.I.T. economist who can dunk a basketball.

It’s probably indicative that I was destined for an academic career that I’m 6-5 and I lost the slam-dunk championship to somebody 5-8. I was a lot better at math.

INTERVIEW HAS BEEN CONDENSED AND EDITED.

Article source: http://www.nytimes.com/2013/02/24/magazine/you-can-actually-make-a-lot-of-money-and-do-a-lot-of-good-in-the-world.html?partner=rss&emc=rss

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In Europe, a Risk-Filled Choice for Britain

February 12, 2013 by Leave a Comment

LONDON — BM Catalysts, a British producer of catalytic converters and other car-exhaust parts, is an example of the kind of successful exporter that might seem to validate the historic gamble that Prime Minister David Cameron has taken by raising the prospect of Britain’s leaving the European Union if sufficient changes from Brussels are not forthcoming.

Buoyed by the falling value of the pound and a work force with fewer of the labor restrictions found in many parts of Europe, Britain’s industrial exports, led by companies like BM and better-known names like Land Rover and Mini, could find growth markets in the dynamic economies of Asia and Latin America, rather than continuing to rely on the rules-bound common market of Europe.

And yet: The idea that Britain might be better off outside the 27-member European Union, a notion embraced with a near religious fervor by a small but influential faction of Mr. Cameron’s Conservative party, is by no means widely accepted by the majority of voters here, according to opinion polls.

Nor is it the belief of top executives at BM Catalysts. They worry that Britain’s withdrawal from the Union would make it harder to do business in Europe.

Britain, simply put, is already having enough trouble competing in the regional and global economy without making things more difficult by risking its open access to trade with the Continent, to which 58 percent of the country’s exports now go.

A British withdrawal from the European Union “would be a big problem for us,” said Mark Blinston, commercial director at BM, which depends on the Union for a third of its sales, which totaled £22 million, or $34 million, last year.

In fact, BM, based in Mansfield in the north of England, has already started having trouble in Europe — not because of the Brussels bureaucracy, but because of the harsh realities of competitive trade.

BM has been losing market share recently to a leading rival, AS, which is based in Spain, which has one of Europe’s most troubled economies.

Because recession and high unemployment have driven down Spanish labor costs, AS has been able to undercut BM on price in the crucial German automotive market, as well as in BM’s home turf in Britain.

“We are worried,” Mr. Blinston said. “Economic changes in another market can really have an effect on you.”

In a poll after Mr. Cameron’s speech on Jan. 23 that called for a referendum on his country’s continued membership in the Europe Union, 40 percent of Britons said they would vote to opt out. But nearly as many, 38 percent, said they would oppose withdrawal.

Highlighting the stark trade reality this month was the incoming Bank of England governor, Mark J. Carney. In his first public remarks before Parliament, Mr. Carney pointed out that since 2000, Britain’s share of global exports had decreased about 50 percent — the steepest decline among the world’s 20 biggest economies.

That decline is all the more startling if one considers that it has occurred during a time when the pound has lost up to a third of its value against other major currencies, one of the largest currency devaluations in the country’s history.

All other things being equal, a cheaper pound should make British assets, whether exports sent abroad or construction of factories at home, more of a bargain for foreign buyers and investors.

But a growing number of economists and policy experts here and in Europe now say that a cheap currency alone is not enough to keep Britain competitive.

They make the case that the painful adjustments undertaken by government and industry in Spain, Ireland, Portugal and Greece have halted the decade-long loss of competitiveness that was at the root of Europe’s sovereign debt crisis.

Unable to devalue their currencies as Britain has, these euro zone nations have cut spending, raised taxes and laid off millions of employees. The resulting gains in competitiveness, painful and hard won as they have been, are now apparent. All of those countries are reporting smaller budget gaps and improved trade deficits that in some cases have swung to a surplus.

Indeed, by these crucial yardsticks, Britain is emerging less as an economic dynamo poised to become a main trading partner with China than as the surprising economic sick man of a Europe committed to putting its financial house in order.

According to the European Commission, on the purest measure of how much more a government spends than it takes in via taxes, Britain’s primary deficit of 3.9 percent of gross domestic product will be the largest in the European Union this year.

And on the trade front, Austria and France are the only other European countries that, like Britain, have experienced a widening trade deficit since the onset of the financial crisis in 2007. Through January of this year, new export orders by British industry have fallen for 13 consecutive months, according to official statistics.

Article source: http://www.nytimes.com/2013/02/13/business/global/britains-risk-filled-choice.html?partner=rss&emc=rss

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You’re the Boss Blog: This Week in Small Business: Nothing Magical?

January 14, 2013 by Leave a Comment
Dashboard

A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

The Debt Ceiling: Spare Change Anyone?

As the debt ceiling deadline approaches, a new solution to the problem is floated: letting the Treasury Department mint a trillion-dollar coin. A Republican congressman tries to thwart the idea, but the White House didn’t rule it out. Felix Salmon explains why it won’t happen: “What we’re talking about here has a kind of cold war mutually-assured-destruction mentality.” Neil Irwin says the coin idea is “idiotic,” but says, “The fact that it is idiotic is kind of the point.” Edward D. Kleinbard thinks that issuing scrip could be another workaround.

Outlook: Nothing Magical

A popular small-business sentiment index continues to register low readings, and a Staples study finds that many small-business owners are feeling overworked. But according to another study, most small-business owners are excited about the year’s prospects. A new survey from Visa finds that the top areas of concern include the cost of health insurance, attracting new customers and rising taxes. Adam Ozimek believes there is nothing magical about small businesses: “We would be better off if people would stop romanticizing small businesses and instead focused on the outcomes that really matter, like economic growth and unemployment.” Sam Barry and Kathi Kamen Goldmark say that the Soup Nazi is one of the six types of business owners.

The Economy: Shoddy Data

The global economy is starting 2013 surprisingly strong and American oil imports have fallen to their lowest in 25 years. Corporate profits are going up (in part because wages are going down). Office vacancy rates declined slightly. Matthew Yglesias complains that economists are using shoddy data. One member of the Federal Reserve Board disagrees strongly with the board’s policies. Companies are flooding the market with new debt.

Management: Get More Done

Regus offers five tips to expand your business in 2013. Eddie Yoon believes that to spur growth, you must focus on “prosumers.” In an effort to build her business, Bridget Ingebrigtsen is starting her year by building up her sources of energy. Geoffrey James offers 10 easy ways to get more done, including: “Never pick up on an unknown caller.” David Sumka predicts that monetizing data will be the holy grail of 21st-century businesses. Alyson Stanfield suggests five ways to simplify your art business in 2013. Pedro Hernandez shares three tips for small manufacturers, and Al Bredenberg explains how manufacturing leaders are beating economic volatility. Here are 10 restaurant trends for 2013, and a prankster pulls a prank on a few drive-through windows. This is the kind of message restaurant employees should be leaving on receipts. And here’s how companies win lifelong customers.

Your People: Where Are the Good Applicants?

Sharlyn Lauby explains how to hire great employees without a human resources department. If you work for a company run by a male chief executive whose wife is about to give birth — particularly a firstborn — you should hope they have a daughter. This may be the year your employees decide to quit. Catherine Rampell wonders if there really are no good job applicants out there.  The National Hockey League settles its lockout. The White House decides not to deport Piers Morgan. A photographer has a very close encounter with a polar bear.

Social Media: Six Small-Business Myths

Mack Collier points out the biggest mistake companies make when engaging fans through social media. David Sims debunks six small-business myths, including: “Social media is your ticket to success.” LinkedIn creates an interesting infographic to celebrate hitting 200 million members. Here’s how to get 10,000 “shares” on Facebook in 24 hours. Here are three small businesses that are successful on Facebook. This infographic analyzes whether business blogging is better than Facebook. A Canadian Internet service provider says Facebook advertising does work. But more teenagers use Tumblr than Facebook.

Marketing: Snappy Sales Presentations

Small businesses expect to increase ad spending in 2013. Jill Konrath suggests the best books for snappy sales presentations. In this video, Cilian Jansen Verplanke shares practical marketing tips. G.B. Oliver has a few examples of product copy that sells. Drew Hendricks shares five things small-business owners should keep in mind when developing a Web site, including: “Be sure to build relevant links.” Cliff Pollan believes there are seven ways to help Sales use marketing content to win buyer trust, including: “Ensure that any content you provide to Sales is easy for buyers to share, follow, or subscribe to.” Ryan Derousseau says there are content-development lessons you can learn from Doctor Who. Michael Rae believes visual content marketing will be the next big thing.

Finance: No 1099-K? You Still Must Pay

A seed-stage venture capital firm sets up shop on Harvard’s campus to catch young, entrepreneurial talent early (maybe some guys who can chug like this). Venture firm financing is at the highest since 2008. If you’re thinking of not paying taxes because you didn’t receive a 1099-K, Jennifer Escalona Dunn suggests you think again. Dawn Fotopulos explains how to manage a small-business credit line. And those crazy accountants at WithumSmith Brown are at it again.

Around the Country: Selling Out in California

Sales of small businesses hit a four-year high in California. Susan Johnston wants you to think about whether your business can be sold. Southern Maine Community College will hold a “Launch or Grow Small Business Success Conference” on Jan. 25. Starbucks rolls out a $1 reusable cup to reduce waste. Goldman Sachs extends its small-business program into Philadelphia, its 11th location. A Jersey City escalator rolls the wrong way.

Around the World: Doing Business in India

Euro zone unemployment hits another record high. Industrial output in Germany is below expectations. Greece’s deficit improves but its jobless rate soars. These charts show that China doesn’t have its old capacity to grow. Asia leads the world in the latest index of economic freedom. Gautam Chikermane says there are seven reasons you should be doing business in India. People in Sweden are screaming. What did President Vladimir Putin say to terrify this little boy?

C.E.S.: So Uncool, It’s Cool?

Here are seven standout technologies from last week’s Consumer Electronics Show, and this was the biggest news from the show’s press day. Mobility took the stage, Intel’s ultrabook triumphed quietly and Lenovo showed off a table PC. Alexia Tsotsis says C.E.S. is so uncool it may finally be cool. This was the nerdiest start-up at the show. Tech stock shares barely moved. Drew McLellan explains how to tell if your company is ready for C.E.S.: “You need to be ready for either end of the ‘oh my God’ spectrum.” Snooki unveiled her headphones and phones, and 50 Cent talked tech. Chinese electronics giants competed for American eyes.

Technology: Breaking the Internet

Chris Pirillo answers the question of whether to get a Windows Surface Pro. Tablet shipments are expected to pass notebook shipments. Here’s everything you need to know about Intel’s new chips. Mobile apps drive a rapid change in searches, and a British report says 20 percent of online sales are expected to go to mobile. Verizon announces new small-business plans for mobile users. This is what it’s like to experience technology after 25 years in jail. Aaron Pitman says that now is the best time to buy domains. Here are 13 solar start-ups to watch in 2013. And gadgets are slowly breaking the Internet. Ramon Ray sells his Small-Business Summit event. Linda Forshaw explains why customer relationship management is so important: “A C.R.M. solution enables knowledge about existing and potential customers to be shared throughout the business.” C.R.M. vendor Zoho offers new features for location and productivity. Sage’s ACT counters with social updates to help small businesses capitalize on customer insights and interests. Another C.R.M. and marketing tech company, Infusionsoft, raises $54 million.

Tweet of the Week

@colinwilson133 (National Hockey League player): Pumped I am no longer an unemployed 23 yr old living with his parents

The Week’s Best

Chris Long, who works at a Chicago-area Home Depot, lists a few things that every small-business owner should know about generators, including: “Before making a purchase, discuss your energy needs with a company representative or salesperson. A typical generator cannot harness enough wattage to power an entire commercial building. Therefore, focus on what your main priorities will be in the event of a power outage and ensure that the model you select can satisfy your needs.”

This Week’s Question: Do you think small businesses are overly romanticized?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/01/14/this-week-in-small-business-nothing-magical/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

DealBook: After I.P.O. Drought, Brazil Is More Hospitable to Investors

January 8, 2013 by Leave a Comment

A branch of Banco do Brasil in Rio de Janeiro.Ricardo Moraes/Associated PressA branch of Banco do Brasil in Rio de Janeiro.

SÃO PAULO, Brazil — The nation’s main stock exchange here forecast at the start of 2012 that 40 to 45 companies would hold initial public offerings to list their shares. Only three did.

“Very few transactions got done, and very few got done well,” said Fábio Nazari, head of equity capital markets at BTG Pactual. Many issuers encountered “very difficult conditions.”

Some of the lackluster performance can be chalked up to investors nervous about the global economy, but much also had to do with government policies in Brazil.

Last year, the country changed regulations and applied pressure to reduce consumer prices in several sectors, including retail banks and electricity utilities. Those measures may succeed in reducing consumer costs, but investors complained about lowered profit outlooks and accused the government of changing the rules in the middle of the game.

The government also used taxes and regulatory measures to weaken the currency in the first half of 2012. The value of the country’s currency, the real, fell more than 18 percent from March 1 to June 1, increasing uncertainty for foreign investors.

In Brazil, tough economic conditions also hung over the markets last year. In the first three quarters of 2012, the country’s gross domestic product rose only 0.7 percent. The Bovespa index was up 7.4 percent in 2012 — a healthy return but not the double-digit yearly gains it often had a few years ago.

Going into 2013, however, both government agencies and the private sector are taking steps to encourage start-ups and growth industries to raise financing through the public markets. In addition, analysts say, the most disruptive policy changes are already in place, so companies will find a more hospitable climate for stock offerings.

“We don’t foresee more big moves from the government,” Mr. Nazari said. “The past has been priced into valuations, and economic growth should pick up this year.”

Brazil has only 365 publicly traded companies, and they do not fully reflect the strength and diversity of the economy, the world’s seventh-largest. Commodities producers dominate the main stock index, even though industries that serve the country’s growing middle class are growing faster. But Mr. Nazari said at least 30 companies were ready to list in the next 12 to 18 months.

Two big stock offerings are already on tap to be listed on the BMFBovespa, the main stock and futures exchange in Brazil.

Banco do Brasil, the state-controlled banking conglomerate, has announced that it intends to spin off its insurance operations into a new company, BB Seguridade, which would then hold an I.P.O. in the first half of 2013. The deal, if it goes through, could raise 5 billion reais.

And local investment banks say Votorantim Cimentos, Brazil’s largest cement producer, is preparing for an I.P.O. this year that would aim to raise 6 billion reais.

Investors may also turn to I.P.O.’s to seek better returns. After decades in which investors could buy short-term government bonds and earn double-digit returns, interest rates in Brazil have dropped. Most traditional fixed-income investments now hardly keep up with inflation.

Jean-Marc Etlin, chief executive of Itaú BBA Investment Bank, said that in an environment of relatively low interest rates, Brazilian investors had incentives to increase their stock market allocations, potentially creating demand for new companies.

Mr. Etlin also said there were thousands of Brazilian companies, mostly family owned, that could provide the basis for sustained activity.

“Brazil’s equity capital markets literally restarted just 10 years ago, with the first I.P.O. under new governance rules. We are still in the early stages,” he said.

Since Brazil’s first modern initial public offering in 2002, 70 percent of financing has come from foreign investors, so the market in the near term is dependent on global trends.

Brazil had a banner year in 2009, when companies raised nearly 46 billion reais on the public markets, according to the BMFBovepsa (that figure includes I.P.O.’s and follow-on offerings, when companies issued additional shares). That year included I.P.O.’s of the bank Santander Brasil, which raised 13.2 billion reais, and the credit card operator Visanet, which raised 8.4 billion reais.

Renato Ejnisman, managing director of Bradesco BBI, Banco Bradesco’s investment banking division, said the market this year was not likely to return to 2009 levels, but “two or three times as many deals as in 2012 is pretty doable.”

Facundo Vazquez, head of Latin America equity capital markets at Bank of America Merrill Lynch, said foreign institutional investors preferred larger deals because they were more easily traded on the public markets, while risk-averse investors were more comfortable putting money into big companies that dominated their sectors.

Conglomerates looking to spin off units will be “the sweet spot,” he predicted, as such operations are big deals with plenty of liquidity from well-known companies.

Mr. Nazari of BTG Pactual also said that bigger offerings attracted more interest. “Right now, it is easier to do a $2 billion deal than a $200 million one,” he said. “A lot of investors are sitting on cash, waiting for the new year and for opportunities.”

The government itself is taking measures to facilitate listings, although more for smaller offerings. The Comissão de Valores Mobiliários, Brazil’s main securities regulator, announced in November that it would consider, on a case-by-case basis, easing requirements for smaller I.P.O.’s.

The equity arm of the state-owned development bank BNDES has 108 billion reais invested in nearly 400 companies, some of which are publicly traded giants like Petrobras, but most of which are privately held.

The BNDES, short for Banco Nacional do Desenvolvimento (or the National Development Bank in English), said in October that it intended to encourage or even oblige its start-ups and other companies to hold I.P.O.’s or at least join the exchange’s access tier, Bovespa Mais.

The Bovespa Mais requires companies to meet the same governance requirements as public companies and to go public, with at least 25 percent of their shares listed, within seven years.

Linx, a midsize software firm in which the BNDES holds a 21.7 percent stake, filed paperwork with regulators at the end of December to hold an I.P.O. this year. Linx is expected to try to raise 500 million reais.

Both government and private sector entities are also working together to present by March a package of regulatory and tax measures to pave the way for smaller I.P.O.’s, though the measures probably would not be in place until 2014.

In general, the change in regulations and investor demand could finally help end Brazil’s drought in I.P.O.’s, analysts said.

“In 10 years or less, we could easily see the number of listed companies in Brazil double,” said Mr. Nazari of BTG Pactual.

Article source: http://dealbook.nytimes.com/2013/01/08/after-i-p-o-drought-brazil-becomes-more-hospitable-to-investors/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,
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