February 7, 2023

Off the Charts: New-Car Salesmen Are Lonely in Europe

The European Automobile Manufacturers’ Association reported this week that new-car registrations in the European Union were down 6 percent in June compared with those in the month a year earlier and were running at their slowest pace since 1996.

Even in Germany, whose economy has been stronger than those of most of its European brethren, sales were the lowest for any June since the country was unified in 1990.

The lone bright spot was Britain, where June sales were up 13 percent from a year earlier. Retail sales in general have been surprisingly strong in Britain in recent months, and, as can be seen from the accompanying charts, in the last 12 months its new-car registrations were 9 percent higher than in the previous 12 months, making it one of only three European countries shown to have posted an increase.

At the same time, auto sales have been on the rise in the United States and were higher in the last 12 months than at any time since 2008.

New-car sales have long been a reliable economic indicator, one that falls sharply when recessions start and then rises rapidly when economies recover. That is largely because car purchases can often be postponed if buyers are worried, creating pent-up demand when recessions end.

In some of the European countries struggling the most, where an end to the recession appears to be far-off, new-car sales have been falling steadily for years as those who absolutely must buy a car choose a used one instead. In some countries, there is an active business importing used cars from more prosperous nations.

The charts show the level of sales in the last 12 months compared with those for the calendar year 2006, before the credit crisis led to the Great Recession. In a handful of countries, sales are higher now, and in the United States the decline is only 5 percent.

But in the euro zone as a whole, sales are 28 percent below the 2006 level. In Spain, Greece, Portugal and Ireland, sales are down by at least 50 percent, and in most of those countries there is no sign of recovery. Outside the euro zone, sales in Romania and Hungary are also far below the 2006 level.

In the early days of the credit crisis, new-car sales held up better in Europe than in the United States, and more generous “cash for clunkers” incentives ignited a rebound in 2010. But since then, weakening European economies have led to new declines that show no sign of ending.

One of the sharpest declines is in the Netherlands, which has fallen into a new recession amid rising unemployment and falling consumer confidence. June new-car registrations were less than half the level of the previous June, and sales in the last 12 months are down nearly a third compared with those in the period a year earlier.

The charts reflect sales of passenger cars only, excluding sales of light trucks, a category that includes sport utility vehicles and minivans, vehicles that are less likely to be used for business in the United States than in Europe. If those vehicles were included, the performance of both the European and American markets would appear to be a little worse, but the trends would be similar.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/07/20/business/economy/new-car-salesmen-are-lonely-in-europe.html?partner=rss&emc=rss

Off the Charts: Predictions on Fed Strategy That Did Not Come to Pass

While the first such program started at the height of the credit crisis in 2008, the new program came when the economy was growing, and it was subjected to immediate and withering criticism, particularly from conservatives fearful it would set off inflation and unimpressed by the Fed’s belief that action was needed to spur job growth.

A group of 43 economists, including former aides to Republican presidents and presidential candidates, published an open letter to the Fed’s chairman, Ben Bernanke, saying the program should be “reconsidered and discontinued.” The planned bond purchases “risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment,” the economists wrote.

The Fed did not back down, and Republican efforts to pass legislation removing the Fed’s mandate to seek full employment were not successful. The next year, the Fed moved on to what became known as Q.E.3, also known as Operation Twist, an effort to bring down long-term interest rates by purchasing longer-term Treasuries. That move was criticized by Republican leaders even before it was announced. “We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy,” the Congressional leadership said in a letter sent to Mr. Bernanke while the Fed was meeting.

Now, the Fed is again under attack, as officials discuss the possibility of slowing the pace of bond purchases later this year, and of possibly ending the program as early as 2014. That talk has caused interest rates to rise and led to warnings of large losses for bond investors, amid complaints that it is still too early to proclaim that the recovery has gathered strength.

Losses for bond holders are sure to happen at some point, assuming interest rates return to more normal levels, and this week’s downward revision of first-quarter economic growth may provide a warning that the Fed’s growth expectations, which are more robust than those of many economists, may be too rosy. Navigating an end to quantitative easing, whenever that becomes necessary, may yet prove to be tricky.

But as the accompanying charts indicate, the Fed’s critics of 2010 and 2011 have not proved to be prescient. Far from bringing disaster, Q.E.2 appears to have helped the economy.

It is remarkable how close many markets are now to where they were when the Fed announced the program on Nov. 3, 2010. The recent rise in 10-year Treasury bond rates has left the yield just a little lower than when the program began. The price of gold spiked to record highs in 2011 but is now down about 8 percent from its pre-Q.E.2 level.

In 2010, there were complaints from developing countries that the Fed was trying to drive down the value of the dollar, something Fed officials denied while conceding that the program could temporarily have that effect. Now the dollar index — based on the value of the American currency against six foreign currencies — has recovered all the lost ground.

Inflation has been quiet, and perhaps more important from a central bank perspective, inflationary expectations remain subdued. Such expectations can be inferred by comparing yields of inflation-protected Treasury securities to ordinary Treasuries of the same maturity. The chart shows what the markets expect inflation will be in five years.

For a time last year, the markets were expecting deflation — a far cry from the runaway inflation feared by Fed critics in 2010. Now, the expectation is for inflation of a little over 1 percent — or less than the expectation when the Q.E.2 program was begun.

The decline in unemployment since the Fed began Q.E.2 has been steady but hardly inspiring, and there are still fewer people working than there were before the credit crisis began in 2008. But consumer confidence has been rising recently and the stock market, despite some recent Fed-induced jitters, remains more than 30 percent above its level when the program began.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/06/29/business/economy/dire-warnings-about-fed-strategy-did-not-come-to-pass.html?partner=rss&emc=rss

High & Low Finance: Court Case Offers a Peek Into Mortgage Security Pricing

The private mortgage-backed securities market grew to be a virtually inscrutable giant. Each securitization contained thousands of mortgages and as many as dozens of different securities, some of which could emerge unscathed even if others produced total losses for investors.

Five years after it began to blow up, that market can be seen as having failed twice — once before the housing crisis began and again when the crisis was at its peak. Investors put money into deals that never should have been financed, then they panicked when the credit crisis arrived and dumped securities that really were likely to pay off. A market that had been full of foolish buyers had no buyers. The banks loudly proclaimed that prices were irrationally low, but few if any of them were willing to buy.

It was the government that stepped in and saved the market, in a program — called PPIP, for Legacy Securities Public-Private Investment Program — that has turned out to be a success. The government put up most of the money to enable money managers to buy distressed merchandise. This week the Treasury Department reported that it had recovered all of the money it invested, with much more likely to come.

That report came a couple of days after the Justice Department and the Securities and Exchange Commission filed criminal and civil charges against a former securities salesman who was accused of defrauding the institutional investors who invested their own and the government’s money in the PPIP program. He did that, the government said, by lying to them.

Mortgage-backed securities “are generally illiquid and discovering a market price for them is difficult,” the S.E.C. said in its civil case against the broker, Jesse Litvak, who formerly worked for Jefferies Company. “Participants trading in the M.B.S. market must rely on informal sources, including their broker, for this information.”

How, I wondered, can that be? The corporate bond market used to be like that. But after Arthur Levitt, the S.E.C. chairman in the 1990s, complained, steps were taken to rectify the situation. Now you can learn from the Trace system operated by Finra, the Financial Industry Regulatory Authority, about trades in any bond.

But no one at Finra seems to have given the mortgage-backed securities market even a moment’s worth of attention until 2009, when the market crashed. Even then, it was not until 2011 that Finra began to require brokers to submit every trade. Now if the S.E.C. wants to see every trade in a particular security, it can do so.

But you and I cannot.

Starting in July, more information about trading in mortgage securities guaranteed by Fannie Mae and Freddie Mac will become available, which is good but not nearly as important. We already have a pretty good idea of how those securities trade. But private-label securities — backed only by the mortgages in each securitization — are different from one another, and it is not as easy to estimate the value of one based on trading in a different one.

Had trading data on such securities been public, institutional investors such as the ones that the government claims were defrauded would have been able to see the trades Jefferies made when it acquired the bonds it marked up and sold to them. Any lies, like those Mr. Litvak is accused of telling, would have been unmasked immediately.

The Dodd-Frank law, by the way, requires more disclosure of trades in all kinds of swaps, including swaps based on mortgage-backed securities, and those disclosures are starting to appear as the Commodity Futures Trading Commission writes rules. But that law completely ignored the mortgage-backed securities themselves, so trading in them remains secret.

Now that the S.E.C. and the Justice Department have officially asserted that investors in such securities are at the mercy of their brokers, perhaps they will press Finra to require release of the information.

Doing so would be almost costless, since the data is already being gathered.

But such a move would be fiercely resisted both by Wall Street and by some of the institutional investors that would be protected. The opposition from brokers is easy to understand: profit margins always fall when the customers have better information. The brokers have also persuaded some money managers to oppose release, on the ground that their strategies would be revealed if everyone could see that there was more activity in a particular type of security.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/02/01/business/court-case-offers-a-peek-into-mortgage-security-pricing.html?partner=rss&emc=rss

DealBook: Profit Drops 63% at Bank of America After Mortgage Settlements

A Bank of America branch in New York.Richard Drew/Associated PressA Bank of America branch in New York.

10:12 a.m. | Updated

More than four years after the credit crisis, bad mortgages continue to weigh on Bank of America.

On Thursday, the bank reported a widely expected 63 percent drop in fourth-quarter profit after making huge payments to settle legal claims over its mortgage business. The bank’s earnings, a slim $732 million, amounted to 3 cents a share. That figure narrowly beat estimates of 2 cents a share, based on a survey of analysts by Thomson Reuters.

Bank of America’s quarterly revenue fell about 25 percent, to $18.7 billion, a drop that stems from the steep charges tied to mortgage settlements with the government. The figures underscored the extent of the bank’s mortgage woes, which it largely inherited from Countrywide Financial, the subprime lending giant it bought in 2008. Without the various charges, fourth-quarter revenue would have totaled $22.6 billion.

But the results also point to signs of a recovery for Bank of America. For the entire year, profit jumped to $4.2 billion from $1.4 billion in 2011. Delinquent loans declined in the quarter, another sign of health, and the bank’s wealth management unit continued to report huge gains.

Bank of America also noted that the one-time legal charges, which skewed the bank’s true performance, helped it to continue shedding the legacy of the crisis.

“We enter 2013 strong and well-positioned for further growth,” the bank’s chief executive, Brian T. Moynihan, said in a statement.

The bank’s stock was down more than 3 percent, to $11.34 a share, in morning trading.

Still, for investors, Bank of America’s bleak quarterly profit numbers come as no surprise. The bank previously announced that it incurred a $700 million charge on the perceived improvement in its debt, an accounting-related cost that actually indicated greater public confidence in the stability of the bank. (The charges were offset because of a one-time $1.3 billion gain from foreign tax credits.)

The bank’s recent legal settlements also weighed on its results. Bank of America had warned investors that it deducted $2.5 billion to settle with regulators over claims of foreclosure abuses.

The bank last week also struck an $11 billion agreement to resolve claims that it sold troubled mortgages to the government-controlled housing finance giant Fannie Mae, which experienced deep losses from the loans. As part of the announcement, Bank of America disclosed that its fourth-quarter pretax income took a $2.7 billion hit to cover part of the deal.

All told, the expenses wiped out $5.9 billion, or 34 cents a share, from fourth-quarter earnings.

“Litigation expenses have taken a huge toll,” said James Sinegal, an analyst with the research firm Morningstar.

Bank of America’s results are a reminder of past mistakes, including the takeover of Countrywide, a company that symbolized the reckless lending practices before the housing market crash.

The results also come in contrast to earnings from the bank’s competitors, including Wells Fargo and JPMorgan, which reported record profit in recent days on the back of a booming mortgage business. As most banks capitalize on low interest rates, Bank of America is retrenching somewhat. It recently sold about 20 percent of its loan servicing business.

But the mortgage settlements are also helping the bank close a dark chapter in its history. The deal last week put to rest a bitter battle with Fannie Mae that had lingered since the housing bubble burst.

Bank of America also reached a $2.43 billion settlement with shareholders last fall. The agreement, stemming from its takeover of Merrill Lynch, resolved accusations that the bank misled investors about Merrill’s health.

“We put a lot of risk behind us in 2012,” Bruce R. Thompson, the company’s chief financial officer, said in a conference call on Thursday. “We just feel like we’re in a much better place going into 2013.”

In another retreat from the mortgage mess, the bank reported that the number of home loans delinquent for more than 60 days in the fourth quarter fell 17 percent. The bank’s provision for credit losses declined 24 percent from the same period a year ago.

The bank is getting leaner, too, as part of the broad “New BAC” cost-cutting initiative, which Mr. Thompson declared to be “on track.”

As of the end of 2012, the company had 267,190 full-time employees, down 5,404 from the third quarter. It had 14,601 fewer employees than it had at the end of 2011.

Aside from mortgages, the bank improved on a variety of fronts. It reinforced its capital levels and increased its consumer and business banking income.

The wealth management unit, which includes Merrill Lynch’s sprawling brokerage business, notched record profit of $578 million, up 79 percent.

“We feel very good about the momentum we’ve seen,” Mr. Thompson said.

Article source: http://dealbook.nytimes.com/2013/01/17/after-mortgage-settlements-bank-of-americas-profit-drops-63/?partner=rss&emc=rss

F.H.A. Audit Is Said to Show a Shortfall in Reserves

The Federal Housing Administration’s annual report is expected to show a sharp deterioration in the agency’s financial condition, including a shortfall in reserves, the result of escalating losses on the $1.1 trillion in mortgages that it insures, according to people with knowledge of the entity’s operations.

The F.H.A., the Department of Housing and Urban Development unit that insures home mortgages, reports on its capital reserves at the end of each fiscal year and makes projections for its financial position in the coming year. If the report, due later this week, showed that the F.H.A.’s capital reserves had fallen deep into negative territory, it would be a stark reversal from projections last year that it would show a positive economic value of $9.4 billion in 2012.

Capital reserves are kept to cover future losses. Outsiders have questioned whether the agency would some day need an infusion from Treasury if its reserves are insufficient.

Alex Wohl, a spokesman for the F.H.A., said, “We’re not going to comment on it until the actuarial report comes out on Friday.”

This year, the F.H.A. has tried to improve its financial position by raising the premiums that it levies on loans and increasing its volume significantly. But those efforts may have been negated by rising loan losses, even on mortgages that it insured long after the credit crisis took hold.

More than one in six F.H.A. loans are delinquent 30 days or more, according to Edward Pinto, a resident fellow at the American Enterprise Institute who specializes in housing. Delinquencies increased by 166,000 from June 30, 2011, to September 2012, he said, a 12 percent increase. Loans insured by the F.H.A. often allow very small down payments of 3.5 percent of the purchase price.

“There’s a fundamental problem with the F.H.A.,” Mr. Pinto said. “Its loans are too risky and that has to be addressed. It’s not the legacy book that’s creating all the problems. It’s beyond that.”

Brian Chappelle, a former F.H.A. official who is now at Potomac Partners, a mortgage consulting firm, said that he had not seen the audit report but that he had been told some of the shortfall resulted from less optimistic projections for home prices than were in last year’s audit.

“In and of itself, it doesn’t mean that they’re going to need a draw from the Treasury,” he said.

At the same time, “there is no question that F.H.A. was going to suffer,” he added. “The amazing thing is that F.H.A. stayed solvent for as long as it did.”

The F.H.A. is subject to a statutory capital requirement of 2 percent of loans, or about $22 billion on its $1.1 trillion portfolio. An economic value of negative $5 billion to $10 billion would leave the F.H.A. $27 billion to $32 billion short of this statutory requirement, Mr. Pinto said. This would be the fourth consecutive year that F.H.A. has failed to meet the requirement, he added.

Article source: http://www.nytimes.com/2012/11/15/business/fha-expected-to-report-declining-finances.html?partner=rss&emc=rss

High & Low Finance: U.S. Manufacturing Is a Bright Spot for the Economy

When the Labor Department reports December employment numbers on Friday, it is expected that manufacturing companies will have added jobs in two consecutive years. Until last year, there had not been a single year when manufacturing employment rose since 1997.

And this week the Institute for Supply Management, which has been surveying American manufacturers since 1948, reported that its employment index for December was 55.1, the highest reading since June. Any number above 50 indicates that more companies say they are hiring than say they are reducing employment.

There were new signs Thursday that the overall jobs climate was improving, as the Labor Department reported that new claims for unemployment benefits fell last week and a payroll company’s report showed strong growth in private-sector jobs in December.

As stores have filled with inexpensive imports from China and other Asian countries, the perception has risen that the United States no longer makes much of anything. Certainly there has been a long decline in manufacturing employment, which peaked in 1979 at 19.6 million workers. Now even with hiring over the last two years, the figure is 11.8 million, a decline of 40 percent from the high.

But those numbers obscure the fact that the United States remains a manufacturing power, albeit one that has been forced to specialize in higher-value items because its labor costs are far above those in Asia. The value of American manufactured exports over a 12-month period peaked at $1.095 trillion in the summer of 2008, just before the credit crisis caused world trade volumes to plunge. At the low, the 12-month figure fell below $800 billion, but it has since climbed back to $1.074 trillion. Those figures are not adjusted for inflation.

In total exports, including manufactured goods as well as other commodities like agricultural products, the United States ranked second in the world in 2010, behind China but just ahead of Germany. For the first 10 months of 2011, Germany is slightly ahead of the United States.

The United States is particularly strong in machinery, chemicals and transportation equipment, which together make up nearly half of the exports. Exports of computers and electronic products are growing, but are well below their precrisis levels. Production of cheaper computers and parts shifted to Asia long ago.

Just how long the rise in manufactured exports can last depends, in part, on the health of other economies. The euro zone no longer takes as large a share of American exports as it once did, but it is still a major customer. A recession there this year, as has been widely forecast, would hurt all major exporters, including the United States.

Similarly, the strong exports provide a stark reminder of how vulnerable this country could be to protectionist trade wars. The Doha round of world trade talks, which was supposed to result in the lowering of more trade barriers, has stalled. And last month China imposed punitive duties on imports of American large cars and sport utility vehicles, which total about $4 billion a year.

That move was seen as retaliation for United States requests that the World Trade Organization rule that Chinese subsidies for its solar and poultry industries violated international law. The Chinese denounced those requests as protectionist.

The American government denies that, of course. “Part of a foundation of a rules-based system is dispute settlement,” said Ron Kirk, the United States trade representative, in an interview with Reuters after the Chinese announced the new tariffs. “That’s what we think is so important about the W.T.O. How China reacts to that is up to China. But I just cannot buy into the argument that our standing and protecting the rights of our exporters and workers is somehow igniting a trade war or being protectionist.”

Since employment in the United States hit its recent low, in February 2010, the economy has added 2.4 million jobs through November, of which 302,000 were in manufacturing. With government payrolls shrinking, and financial services jobs also lower, manufacturing employment has played an important role in keeping the economy growing. It also is helping that construction employment appears to have hit bottom. In the first 11 months of 2011, it is up a small amount.

To be sure, the gains in manufacturing employment and exports have come after sharp declines during the recession and credit crisis. There are still 6 percent fewer manufacturing jobs than there were when President Obama took office at the beginning of 2009, and it seems very unlikely that he will be the first president since Bill Clinton, in his first term, to preside over growing manufacturing employment during a four-year term.

During George W. Bush’s two terms, the number of manufacturing jobs fell by 17 percent in the first four years and by 12 percent in the following four years. The number declined by 1 percent in Mr. Clinton’s second term.

The Institute for Supply Management survey of manufacturers has shown more companies planning to hire than to fire in every month since October 2009. That string of 27 months is the longest such string since 1972, but remains well behind the longest one, 36 months, which ended in December 1966.

Over all, that survey has indicated that a plurality of companies has believed business is getting better for 29 consecutive months, and December’s reading of 53.9 was the strongest since June.

This summer, one widely watched part of the I.S.M. survey showed that a small plurality of companies reported new orders were falling, a fact that helped to stimulate talk of a double-dip recession. But the latest reading, of 57.6, indicates widespread strength in new orders.

In an economy where there is widespread concern over consumer spending, and in which government spending and payrolls are under heavy pressure, manufacturing has become a bright spot. It is not enough to produce a strong rebound, and it remains vulnerable to weakness overseas. But it has helped to keep a weak economic recovery from turning into a new recession.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://feeds.nytimes.com/click.phdo?i=581034500cf32a949cf21f99b3f77d43

Economix Blog: Pay for Our Mistakes? Not Us

It is nice to have the power to never have to pay for your errors. To get that kind of clout, you have to have a credible threat to make the rest of the world miserable if you are inconvenienced.



Notions on high and low finance.

Financial markets have that power, as we learned in 2008. The decision to allow Lehman Brothers to fail stunned Wall Street, and a credit crisis took down the world economy. In the aftermath, lenders to other banks, even those that failed, were not forced to suffer losses.

The decision to allow Lehman to fail seems to have had at least some ideological component. It isn’t capitalism if you can’t fail. But practicality prevailed thereafter.

This year, the decision to force private lenders to take 50 percent haircuts on loans to Greece was promptly followed by plunging prices on Spanish and Italian bonds. It was Angela Merkel, the German chancellor, who led the charge for making the banks pay, for similar reasons to the ones heard when Lehman went down. Now Europe is contemplating huge capital shortfalls for its banks, and Ms. Merkel has backed down.

Bloomberg reports:

“As regards private-sector involvement, we have made a major change in our doctrine: from now on we will strictly adhere to the I.M.F. principles and doctrines,” EU President Herman Van Rompuy told reporters at a briefing. “Or, to put it more bluntly, our first approach to P.S.I., which had a very negative effect on debt markets, is now officially over.”

The I.M.F. — the International Monetary Fund — tells me that those policies and doctrines provide for no automatic losses for the private sector, but do not rule them out either. Instead, there is to be a case-by-case analysis. William Murray, the I.M.F. spokesman, says this 2010 program for Jamaica is the most recent one, other than Greece, where private lenders did take haircuts.

So you could say that there really is no promise to spare the banks. But I suspect the reality is that the recent experience has traumatized Europe enough that it will be a very long time before anyone suggests that banks should suffer for foolish lending to a member of the European Union.

Article source: http://feeds.nytimes.com/click.phdo?i=fb605f7c6e080c5d239647b8a6d21f46

Economix Blog: Weekend Business Podcast: Europe’s Financial Crisis, the Guggenheims and Online Privacy

The European financial crisis has already roiled markets around the world, but it’s likely that worse is yet to come.

That’s the view of Gretchen Morgenson, who analyzes the effects of the European crisis on the United States financial system and economy in the new Weekend Business podcast, and in her column in Sunday Business.

While central banks and political leaders are trying to ameliorate the crisis, a default by Greece is quite probable, she says, and that is likely to be felt in the United States in two main ways. Credit default swaps insuring against a default will entangle some as-yet-unknown American counterparties, she says, and the shock could lead to another full-blown credit crisis, which would harm the markets and the economy.

The fundamental mechanism underlying world markets is the focus of Robert Frank’s new book, “The Darwin Economy,” an adaptation of which appears in Sunday Business. In a podcast conversation, he argues that Charles Darwin, the naturalist, was a greater economist than Adam Smith. Darwin’s theory of evolution explains why markets sometimes produce socially unacceptable results — and the reason, Professor Frank says, is intrinsic to competition. Unlike Smith’s “invisible hand” theory, Darwin’s theory says that group and individual interests sometimes conflict, in which case, individual interests win. Government sometimes needs to step in to correct matters, he says.

In another conversation, Graham Bowley tells David Gillen about the history of the Guggenheim family and of individuals who are accused of trying to swindle investors based on the false claim that they, too, are members of that illustrious clan. The saga of the Guggenheims and would-be Guggenheims is the subject of Mr. Bowley’s article on the cover of Sunday Business.

And, finally, Natasha Singer discusses online ID systems that, she says, may threaten individual privacy. She elaborates on this theme in the Slipstream column in Sunday Business.

You can find specific segments of the podcast at these junctures: Gretchen Morgenson (34:29); news summary (27:03); Graham Bowley (24:38); Natasha Singer (17:32); Robert Frank (10:11); and the week ahead (2:06).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=2ef447ba029f70f1b76f9c57197a6f46

Off the Charts: In Euro Zone, Effects of Trade Collapse Linger

The Census Bureau reported this week that the United States exported $1.311 trillion in goods in the 12 months through February, exceeding the old record of $1.303 trillion set in the period ending in October 2008, the month after the collapse of Lehman Brothers intensified the credit crisis.

At the lowest level, in the fall of 2009, 12-month exports were down 19.8 percent from the peak. That was the sharpest decline for American exports since the early 1950s, when there was a reduction of Marshall Plan shipments that had helped to rebuild Europe after World War II.

As is shown in the accompanying charts, American imports fell further than exports in the recession and have yet to recover to peak levels.

Japanese exports have almost recovered to their precrisis peak, at least when measured in dollars, but those of Germany and Britain remain more than 13 percent below their precrisis peaks.

The most impressive recoveries have come in the export-oriented developing nations of Asia. Chinese exports fell along with those of most other countries, but they have recovered much more rapidly. China’s exports began setting new records last summer.

China’s economy continues to boom, and its imports are rising more rapidly than its exports, which could ease some of the complaints from China’s trading partners. In both India and South Korea, however, imports have not recovered as rapidly as exports.

The cases of the most troubled economies in the euro zone demonstrate the extent to which weak economies can affect trade. Countries that are suddenly poorer may or may not be able to continue exports, but their imports are likely to decline sharply.

In Ireland, imports were still falling as this year began, though there are signs they are stabilizing. Greek exports began to recover last summer, but import volumes continue to plunge and are nearly a third lower than they were at the peak in 2008. Despite that decline, however, Greece still exports only about a third as much as it imports. That is a measure of the lack of competitiveness of its economy.

All the charts are based on dollar volumes of trade, which improves comparability among countries but can paint a picture different from the one seen within a country. In Britain, exports measured in pounds are well above previous highs, but volumes measured in dollars are still lower because of the weakness of the pound. German exports, however, are still below record levels when measured in euros, as are those of the other euro zone countries shown. In Japan, where the yen’s strength may have hurt Japanese competitiveness, exports measured in yen are off more than 20 percent from record levels.

Floyd Norris comments on finance and the economy in his blog at nytimes.com/norris.

Article source: http://feeds.nytimes.com/click.phdo?i=a87c5cbdb1054d5c8c66c3e8e004ec7b