September 17, 2019

Off the Charts: Now It’s the Developed Nations’ Turn to Grow

During and after the Great Recession, developed economies tended to fare worse than emerging ones, and that was shown in the amount of business going to manufacturers and service companies in various countries around the globe. But in the last few months, that tide has turned. Companies in developed countries are more likely to be reporting growing business than are companies in emerging markets.

The accompanying charts look at trends in the most prominent developing countries — Brazil, Russia, India and China, the so-called BRICS — and four major developed regions, the United States, Britain, the euro zone and Japan.

They are based on the monthly surveys of companies taken by the Institute for Supply Management in the United States and by Markit in many other countries around the world. The surveys ask whether business is improving or getting worse, both over all and in a number of specific areas. The charts focus on the question of whether new orders are increasing or decreasing.

In each case, a figure above 50 shows that more companies are reporting rising orders than are reporting falling orders, and the higher the number, the broader the rising order trend. Similarly, figures below 50 indicate that a plurality of companies sees orders declining. Figures above 60 show widespread growth in orders.

For the first time in more than two years, the four developed regions shown in the graphic all reported rising orders for both manufacturing and service economies in August. There was still growth in some emerging markets, but Indian and Brazilian manufacturers reported falling orders in both July and August. The last period when both of those countries reported declines was March 2009, at the bottom of the worldwide credit crisis.

A simple way to compare the two groups is to average the four reported figures for developed countries and compare it to the average for the four emerging markets, which is done in the bottom chart. The developed-area advantage is the highest it has been since the Great Recession began in the United States in December 2007.

It is worth emphasizing that the figures are intended to show change, not the level of new orders. A company with booming business would presumably report a decline if the boom eased a little, while a struggling company could see a small gain from a low level.

Nonetheless, it is impressive that of the eight euro zone countries where surveys are taken of manufacturing companies, only France registered a figure under the neutral number of 50 in August, and that figure, at 49.8, was the best French manufacturers had posted in more than two years. Even Greece posted a positive figure, that first time that had happened in four years. Germany’s manufacturers, which reported order declines earlier this year, are again reporting increases.

Both the United States and Britain had figures above 60 for new manufacturing orders. That had not happened since the spring of 2010, when order books were still rebounding from the credit crisis. Similarly, the slip in new business has extended to many other emerging markets. While Chinese manufacturers reported a rise in new orders in August, the first such report in four months, the countries registering declines included Taiwan, South Korea, Indonesia and Vietnam. Their manufacturing exports run the gamut, from inexpensive clothes in Vietnam to cars and electronic products in Korea.

Floyd Norris comments on finance and the economy at

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Off the Charts: Stimulus Lets Developing Economies Recover More Quickly

THIS has not been a good recovery for the wealthy countries. Growth has lagged, in part, because government spending has been far more restrained than in past recoveries from major recessions.

But developing economies have been free to increase government spending, and their economies are generally growing more rapidly than they did after past recessions.

The accompanying charts, based on data released this week by the International Monetary Fund in the semiannual World Economic Outlook, show the stark differences in performance.

At the top are charts comparing changes in real gross domestic product per capita in developing countries and advanced economies since 2008, including the fund’s forecasts for 2013 and 2014. In every year, the developed countries have lower growth. The monetary fund forecasts that this year the increase in the United States will be a paltry 1 percent, which at least is better than the forecast for the euro zone and Britain, where declines are expected.

A major reason for the slow recoveries is the absence of fiscal stimulus in much of the developed world. The middle charts show trends in government spending in advanced economies and in developing ones, comparing the trend during the current recovery to an average of the recoveries after three previous world downturns — in 1975, 1982 and 1991. In each case, the figures treat the year before the downturn as zero, and show how earlier and later years differed from that year.

In emerging markets, spending this time has been much stronger than in previous recoveries. But the opposite is true for developed countries, both as a group and for each of the four major regions — the United States, the euro zone, Britain and Japan — that are shown in separate charts.

Those changes reflect the determination to follow a path of austerity in much of the developed world. Many developing countries, having built up foreign exchange reserves in the years before the recession, do not need to follow that course.

The Great Recession brought a drop in world trade volumes that exceeded any decline since the Depression. But as the charts show, the percentage declines were a little less in developing countries than they were in developed countries. And since then, the recoveries have been far more impressive in the less developed countries.

In the euro zone, the total level of imports has still not recovered to 2007 levels, although the International Monetary Fund says it thinks that will happen in 2014. The same is true of exports from Japan, a country whose export prowess once seemed unmatched but lately has been running trade deficits.

Among the four developed regions shown, only the United States has experienced an export revival that is comparable to that of the average emerging market.

Floyd Norris comments on finance and the economy at

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DealBook: Facing Legal Costs, Citigroup Disappoints in 4th Quarter

A 'Citi' sign near the bank's headquarters in Manhattan.Mario Tama/Getty ImagesA ‘Citi’ sign near the bank’s headquarters in Manhattan.

Citigroup, which has been working to cut costs and unload troubled assets, continues to struggle under the weight of its mortgage woes.

The bank reported fourth-quarter profit of $1.2 billion, or 38 cents a share, significantly below analysts’ estimates. Excluding one-time items, earnings amounted to 69 cents a share.

Ahead of the bank’s quarterly earnings, analysts estimated earnings at 96 cents a share, according to a survey by Thomson Reuters. In the period a year earlier, the bank posted profit of $956 million, or 31 cents a share.

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The disappointing quarter relates to continuing legal problems, as the bank works to clean up the mortgage mess stemming from the financial crisis. In the fourth quarter, Citigroup had $1.3 billion of legal costs and related expenses.

Citigroup has also faced increasing pressure from shareholders to buoy its returns. As part of that effort, the bank has been working through a glut of soured loans and unloading less-profitable business lines while systematically reducing costs. In December, the bank announced that it would eliminate 11,000 jobs worldwide, part of a much larger contraction.

“Our bottom line earnings reflect an environment that remains challenging,” Michael L. Corbat, the bank’s chief executive, said in a statement. “It will take some time to work through the challenges of the current environment but realizing our core earnings potential, as well as improving our returns on assets and tangible equity, are critical goals going forward.”

Beneath the headline numbers, Citigroup did experience gains in some of its businesses.

The bank has been focusing on developing countries, where there are comparatively more growth opportunities than in the United States. Within the global consumer banking group, revenue increased 4 percent, to $4.9 billion, in the fourth quarter. Revenue in North America rose 3 percent, to $5.3 billion.

Citigroup’s securities and banking group also improved, on the strength of investment banking, equities and fixed income. The unit reported net income of $629 million for the quarter, compared with a $158 million loss in the period a year earlier.

Emphasizing improvements in the bank, John C. Gerspach, the bank’s chief financial officer, said on a conference call on Thursday that the bank had gained “client wallet share” in its investment banking business.

The fourth-quarter earnings are the first under Mr. Corbat’s leadership.

In October, the bank’s powerful chairman, Michael E. O’Neill, abruptly ousted Vikram S. Pandit as chief executive. Since taking the reins of the bank, Mr. Corbat has vowed to continue to revamp the bank, focusing on its core businesses and exiting less profitable areas.

Such efforts have weighed on the bank’s bottom line in the short term. In the fourth quarter, Citigroup’s operating expenses rose 5 percent, to $13.8 billion.

Along with its strategic moves, Citigroup also paid for its legal problems. Like rivals, the bank faces claims that it used shoddy documents in foreclosure proceedings that might have led to wrongful evictions.

Citigroup, along with nine other banks, agreed this month to sign on to an $8.5 billion settlement with the Federal Reserve and the Office of the Comptroller of the Currency. The settlement will allow Citigroup to move beyond an expensive review of loans mandated by regulators in 2011.

On the earnings call, Mr. Gerspach hinted that the banking industry’s legal woes were not over. “I think that the entire industry is still looking at some additional settlements that are still yet to appear,” he said.

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Record U.S. Exports Shrink April Trade Deficit

The Department of Commerce report said that exports of goods were $126.4 billion and services $49.1 billion, while total imports were $219.2 billion, resulting in a trade deficit of $43.7 billion, the lowest since December. The deficit in March was revised down to $46.8 billion from $48.2 billion, the department said.

The gap had been forecast by some economists to widen to $48.8 billion.

In recent months, a weaker dollar has made goods from the United States less expensive overseas, while exports have also climbed in price as demand rose in developing countries.

The department said the March-to-April increase in exports of goods reflected greater sales of industrial supplies and materials, capital goods and consumer goods. The decline in imports was caused, in part, by a decrease in automotive parts, vehicles and industrial supplies and materials, the department said.

The data was the first to reflect the impact of the supply chain disruptions from the natural disasters in Japan, as well as the impact of commodity prices in April, when the average price per barrel of crude oil was $103.18. That was the highest since September 2008, when it was $107.30.

The United States imported 8.41 million barrels of crude per day on average in April, the lowest amount since last October.

Imports from Japan dropped by $3 billion, shrinking the American trade deficit with that country to $3.5 billion in April from $6 billion the month before.

The data also showed that the United States trade deficit with China continued to widen, to $21.6 billion in April from $18 billion in March, but still below January’s $23 billion. The trade deficit with China was $273 billion in 2010.

Meanwhile, the Labor Department said Thursday that the number of Americans who filed initial claims for unemployment edged higher in the week ending June 3, to 427,000, up by 1,000. Economists usually interpret any level above 400,000 to mean a lack of job growth.

Economists say that domestic demand in the United States is still weak. And while the rise in exports of goods was helping to offset that weakness, exports compose only about 9.6 percent of the country’s gross domestic product.

Thursday’s report was the first to reflect trade statistics for the second quarter, and economists gave a range of effects from the data on their estimates for gross domestic product.

Gregory Daco, the United States economist for IHS Global Insight, said the trade numbers helped raise the company’s estimate for real gross domestic product growth to slightly above 2 percent.

“Over all, this report was a good one for the U.S. economy,” he said.

Kevin Logan, the chief United States economist for HSBC, said forecasts should take into account that the deficit declined mostly because of a drop in oil imports of $3.7 billion, while the non-oil trade balance actually worsened.

“Normally, an improvement in the trade balance leads to an increase in estimates of G.D.P. growth in the quarter,” he said in a research note. “But if the trade balance is improving because of an across-the-board drop in demand for oil products, there should be little impact on G.D.P. growth.”

Economists from Capital Economics said that they expected little contribution to second-quarter growth.

“Pretty much all of the sharp fall in the trade deficit in April will eventually be reversed as the temporary effects caused by disruptions from Japan’s earthquake fade,” the economists said in a research note.

“Nonetheless, a modest positive contribution to second-quarter G.D.P. growth may at least offset part of the slowdown in other parts of the economy.”

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U.S. Trade Deficit Widens in March on Pricier Oil

The trade deficit rose 6 percent to $48.2 billion, the Commerce Department said Wednesday. That’s the highest level since June 2010 and up from $45.4 billion in February.

Exports increased to $172.7 billion, the most on records dating back to 1993. A weaker dollar has made U.S. goods cheaper overseas. Exports have also risen because of rapid growth in developing countries. U.S. companies exported more autos, chemicals, and agricultural goods in March.

However, oil imports soared to $39.3 billion, an 18 percent rise from the previous month. It was the highest level since August 2008 and reflects steep price increases, as well as greater demand. Excluding oil imports, the deficit narrowed.

The average price for a barrel of imported crude oil was $93.76 in March, up nearly 7.6 percent from February. Oil prices have risen even further since then, despite declines in recent weeks. Oil closed at about $104 per barrel on Tuesday.

The trade deficit is currently running at a $562.8 billion annual pace. That’s above last year’s total of $495.7 billion. Economic growth generally slows when imports outpace exports because more jobs go to foreign workers.

Economists expect the fast rise in exports to boost growth in the April-June quarter, even with high oil prices widening the deficit. That’s because the government adjusts for inflation when calculating the nation’s gross domestic product.

“The details in the report are encouraging for economic momentum,” said Joseph LaVorgna, an economist at Deutsche Bank, in a note to clients. “Strong external demand fueled by a near-record low … dollar is lifting exports, while the rise in imports is evidence of burgeoning domestic demand.”

The trade deficit with China, meanwhile, decreased to $18.1 billion. That’s down slightly from February.

But it is expected to rise in the coming months. On Tuesday, China reported a big increase in its April trade surplus. Its imports fell while exports jumped 30 percent. That’s likely to raise pressure on China to let its currency rise.

The trade gap between the two countries was a top issue in high-level meetings between U.S. and Chinese officials earlier this week, though little progress was made on the currency issue.

The devastating earthquake and tsunami in Japan on March 11 didn’t impact U.S. trade figures. Imports from Japan rose by $1.3 billion and U.S. exports to that country also increased. But disruptions to Japan’s auto production are likely to reduce U.S. imports in coming months, economists say. That could narrow the trade gap.

U.S. companies sold more autos, industrial materials, and food and consumer goods in March. Auto and auto part exports rose to $11.6 billion from just below $10 billion in February.

In addition to oil, imports of computers, autos and auto parts, and aircraft rose in March.

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