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Optimism on European Economy Continues to Rise

August 30, 2013 by

BRUSSELS — Optimism about the euro zone’s economy improved sharply in August, but stubbornly high unemployment, in particular in the bloc’s weaker countries, highlighted the fissure separating the recovering north from the struggling south, according to official data released Friday.

The confidence of business managers polled by the European Commission rose for its fourth successive month in the euro zone, the commission, the executive agency of the European Union, said. The positive trend was particularly strong in Germany and the Netherlands but was also evident in Italy, France and Spain.

The measure of sentiment across the bloc in August, based on business orders, industrial confidence and other factors such as companies’ hiring plans, increased by 2.7 points to 95.2.

Signs of rising confidence have inspired some analysts to predict that the 17 countries using the euro have overcome a crisis that was triggered by banks’ investment in risky mortgage debt and later drove some nations to the brink of bankruptcy.

“The most acute phase of the crisis and the toughest period of belt-tightening is behind us,” said Dirk Schumacher, an economist with Goldman Sachs.

In a separate release, Eurostat, the European Union’s statistics agency, said annual consumer price inflation in August would be 1.3 percent, down from 1.6 percent in the previous month mainly because of a drop in energy prices.

A lack of price pressures is a potential boon to the economy because households have a little more spending power and the European Central Bank can stick to its low-interest-rate policy.

But while morale improved, unemployment in the euro zone in July remained at a record high of 12.1 percent, with a sharp contrast between countries such as Germany — — just over 5 percent and Spain, more than 26 percent, showing that the improvement is not being felt everywhere.

Although there were 15,000 fewer people in the euro zone without a job compared with the previous month, , according to Eurostat3.5 million people under 25 remain unemployed.

“We haven’t broken the negative dynamic in the south of Europe,” said Guntram B. Wolff of Bruegel, a research concern. “Banking fragility, weak growth and high unemployment still present a threat.”

Article source: http://www.nytimes.com/2013/08/31/business/global/optimism-on-european-economy-continues-to-rise.html?partner=rss&emc=rss

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Text of the Federal Reserve’s Monetary Policy Statement

March 20, 2013 by Leave a Comment

Information received since the Federal Open Market Committee met in January suggests a return to moderate economic growth following a pause late last year. Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive. Inflation has been running somewhat below the committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the committee seeks to foster maximum employment and price stability. The committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the committee judges consistent with its dual mandate. The committee continues to see downside risks to the economic outlook. The committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The committee will closely monitor incoming information on economic and financial developments in coming months. The committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. In determining the size, pace, and composition of its asset purchases, the committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

To support continued progress toward maximum employment and price stability, the committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the committee decided to keep the target range for the federal rate at 0 to ¼ percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6 ½ percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

In determining how long to maintain a highly accommodative stance of monetary policy, the committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

Voting for the F.O.M.C. monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

Article source: http://www.nytimes.com/2013/03/21/business/economy/text-of-the-federal-reserves-monetary-policy-statement.html?partner=rss&emc=rss

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Davos 2013: On Russia’s To-Do List at Davos: Buff Image

January 24, 2013 by Leave a Comment

There is a House of Russia near a main hotel and a media center for Russia at the opposite end of this ski village. And then there is the bevy of Russian politicians, business folk and cultural figures on hand trying to encourage more foreign investment and correct what many of them privately concede is a poor image abroad.

Even Dmitri A. Medvedev, the former president and now prime minister, whose political standing in Russia was tarnished by a swap of offices with Vladimir V. Putin announced in September 2011, subjected himself to a highly unusual spectacle here.

Scores of Russian experts had worked with the World Economic Forum, as the conference here is known, on a presentation they called Scenarios for Russia.

The session on Wednesday, with Mr. Medvedev gamely sitting through the judgment before speaking himself, sketched out three ways that Russia, whose economy is heavily dependent on oil and gas extraction, could develop in the near future.

Based on assumptions like falling energy prices, regional inequalities and even an open split among Russian elites, none of the three possibilities was particularly optimistic. In addition, when the audience was asked to vote on the most needed development for Russia’s near future, it overwhelmingly chose the need to improve governance and overhaul government.

Given recent developments in Moscow, that may come as no surprise. Many political analysts see moves like the recent clampdown on demonstrations and the banning of American adoptions of Russian children as signals that the government is digging in, rather than opening up to change.

Mr. Medvedev’s response, though, was more tepid than many in the audience presumably hoped to hear. He simply repeated past promises, so far unrealized, that Russia will respond positively to demographic, political and economic shifts that could change the status quo.

Sergey Guriyev, a Russian economist, presented perhaps the gloomiest situation: A schism in the Russian elite that could force eventual, possibly sudden, change, in a country still haunted by memories of the 1917 Bolshevik Revolution and all that followed.

The status quo “is not sustainable simply because the Russian middle class will grow and demand reforms,” Mr. Guriyev said.

Over the past 10 years, oil and gas riches trickled down to a new middle class, he argued. “Now, more income doesn’t make people happy,” he said, adding that this Russian class “is unprecedentedly educated and rich for a country with such outdated political institutions.”

Unlike Prime Minister David Cameron of Britain, whose experience on the hustings of British politics lend him an ability to think on his feet and deliver punchy lines, Mr. Medvedev barely opened up to questioning from an audience that was about half the size of the one that packed the hall to hear Mr. Cameron on Thursday, a day after his gamble on European Union membership.

In private conversation, Russian businessmen deplored what they saw as a missed opportunity for Mr. Medvedev to give a forceful speech to the Davos crowd. But foreign investors invited to private sessions with the prime minister later Wednesday and earlier Thursday were much less inclined to criticize him.

Like the Russian business community, these investors are reluctant to speak on the record, citing the uncertainty of doing business in the country. What they also do not speak much about is the healthy return on their money.

While Russian business and the state accounted for most of the estimated $400 billion said by officials to have been invested in 2012, foreign investors get a good return on their money — some in high double digits, one banker said.

Russians often particularly cite China as a rival for foreign attention and money. Reuben Vardanian, a financier now at Russia’s giant Sberbank, said that while many businesspeople, domestic and foreign, saw that their activities “are much more profitable in Russia than in China,” the Chinese gave a greater sense of certainty.

While the circle of foreigners now interested in Russia is widening, Mr. Vardanian told a meeting of mostly Russian reporters, foreigners still often lament that “we can’t understand the rules of the game.”

“They don’t want to deal with, say, Mr. Vardanian, who is then replaced by Mr. Ivanov, and then by Mr. X,” he said. “They want to deal with rules.”

Article source: http://www.nytimes.com/2013/01/25/business/global/on-russias-to-do-list-at-davos-buff-image.html?partner=rss&emc=rss

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Voestalpine Plans to Invest in North America

December 19, 2012 by Leave a Comment

LONDON — Voestalpine, the Austrian maker of steel and components, said Wednesday that it would build a new plant in either the United States or Canada, hoping to take advantage of low North American energy prices to compete with rivals.

The plant will use natural gas to turn iron ore into iron sponge or iron briquettes. This intermediate material made through this direct reduction method will then be used as a substitute for iron ore pellets in Voestalpine’s European steel plants to bring down their costs, according to Wolfgang Eder, the chairman of the company’s management board and chief executive.

Mr. Eder said by telephone from Vienna that Voestalpine was operating “in a high-cost region in a high-cost country in Austria” and was in danger of losing its competitive position to rivals in Turkey, Ukraine and Russia. He said taking advantage of less expensive North American natural gas was one of the few options open to address the situation.

“We have to do it in one of the cheap shale-gas areas around the world,” he said of building the new plant.

European industrialists have long complained about the high costs of environmental and employment legislation, but high energy prices are now emerging as another drag on European economic activity.

“This is a really serious issue, not just for the steel industry but also for a lot of other industries,” Mr. Eder said. In Europe, he said, “the cost of oil and gas and electricity is structurally higher than in all other parts of the world.”

Natural gas prices in the United States are one-third those in Europe, and electric power prices in some parts of the United States are also much lower. Energy prices in Canada are closely linked to those in the United States.

“In my mind, this announcement reinforces the view that the European steel industry faces difficult growth prospects in its traditional market,” said Jeff Largey, an analyst at Macquarie Securities in London. “In order to grow, European steel makers will need to look outside Europe, and in the case of Voestalpine, look” to increase the size of their steel processing and engineering business.

He added that Voestalpine’s move was similar to a recent decision by another European steel maker, ThyssenKrupp, to focus more on its engineering divisions.

Like other European steel makers, Voestalpine has felt the pinch of the European economic slowdown, though Mr. Largey said the company remained relatively well positioned as a supplier of premium quality components to high-end automakers like Audi and BMW. It also has access to low-cost iron ore pellets from Ukraine, Mr. Largey said.

Mr. Eder said the raw iron produced in North America would be substituted for 10 percent to 15 percent of the pellets used in Voestalpine’s blast furnaces.

Over the longer term, he said, Voestalpine will consider building mini-mills, which use electric arc furnaces to make steel either from scrap or iron briquettes. In a research note, Michelle Applebaum of Steel Market Intelligence said availability of the new inputs would greatly improve the economics of mini-mills, in contrast to integrated mills, which make their steel from iron ore.

Voestalpine said that the European financial crisis had “left its marks” on the company but that it was “using this difficult phase to refashion the group.”

For the six months through September the company reported a 22 percent decline in profit, to €270 million, or $356 million, on €5.9 billion in sales.

The company said it planned to increase the size of its special steel, metal engineering and metal forming divisions, which produce more stable revenue streams than basic steel making. Ten years ago, steel making accounted for 55 percent of revenue; it now amounts to 30 percent.

The company also said it planned to triple the amount of its non-European revenue to €9 billion by 2020. It intends to increase activities in China, Southeast Asia, South America and “niche segments” in the United States and Canada. More than 70 percent of its revenue currently comes from Europe.

This article has been revised to reflect the following correction:

Correction: December 19, 2012

An earlier version of this article gave an incorrect conversion for the company’s decline in profit. The decline was 270 million euros, or $356 million, not $356 billion.

Article source: http://www.nytimes.com/2012/12/20/business/global/20iht-steel20.html?partner=rss&emc=rss

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Consumer Inflation Declines

December 14, 2012 by Leave a Comment

Consumer prices in the United States fell in November for the first time in six months, pointing to muted inflation pressures that should allow the Federal Reserve to stay on its ultra-easy monetary policy path as it tries to nurse the economy back to health.

The Labor Department said on Friday its Consumer Price Index dropped 0.3 percent last month as a sharp decline in gasoline prices offset increases in other areas. It was the largest drop since May and followed a 0.1 percent gain in October.

Economists polled by Reuters had expected consumer prices to fall 0.2 percent.

The so-called core C.P.I., which excludes food and energy prices, edged up 0.1 percent after rising 0.2 percent in October. Although food prices rose 0.2 percent in a lagged response to the summer drought, price pressures remain tame.

“The inflation data continues to be benign and there is very little in the way of price pressures in the economy,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. “That therefore justifies the Federal Reserve’s action to keep a very accommodative monetary policy.”

The Fed said on Wednesday it expected to hold interest rates near zero until unemployment falls to at least 6.5 percent and as long as inflation does not threaten to break above 2.5 percent.

The central bank also replaced an expiring stimulus program with a fresh round of Treasury debt purchases, to help speed up economic growth in the near term. The slack labor market is a major factor in dampening inflation pressures.

In the 12 months that ended in November, overall consumer prices increased 1.8 percent, the smallest increase since August. That compared to October’s 2.2 percent rise.

The Labor Department said inflation-adjusted average weekly earnings rose 0.5 percent last month, reversing October’s 0.5 percent fall.

Last month, gasoline prices tumbled 7.4 percent, the largest drop since December 2008, after falling 0.6 percent In October. That offset a 0.2 percent gain in food prices.

Away from gasoline and food, the cost of apparel fell 0.6 percent after increasing 0.7 percent in October. New motor vehicle prices rose 0.2 percent after slipping 0.1 percent the prior month.

Housing costs edged up, with owners’ equivalent rent rising 0.2 percent after climbing by a similar margin in October. Rents have been advancing in recent months, largely driven by a decline in homeownership.

In the 12 months ended in November, core C.P.I. increased 1.9 percent after rising 2.0 percent in October.

Article source: http://www.nytimes.com/2012/12/15/business/economy/consumer-inflation-declines.html?partner=rss&emc=rss

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Special Report: Energy: A White-Hot Future for Oil and Gas

October 11, 2011 by Leave a Comment

Some of the most promising new fields are in deep water off the coast of Brazil. Experts say they could yield as much oil as the North Sea. There have been significant strikes off the coast of French Guiana, north of Brazil, and off Ghana in West Africa.

Iraq is opening up after years of sanctions and war. It could be a second Saudi Arabia.

Russia is increasing production in its Arctic regions, while Canada is steadily producing more oil from its abundant tar sands.

In the United States, the vast deposits of natural gas found in shale rock could transform the country into a major energy exporter.

Those prospects “will certainly have significant impacts on the energy map,” said Maria van der Hoeven, the newly appointed executive director of the International Energy Agency, which advises member countries, including Germany, Japan and the United States, on energy policy.

The prospects are coming into view as revolution and instability threaten new investments in resource-rich countries like Libya and Iraq and after a nuclear disaster at the Fukushima Daiichi power plant in Japan that prompted Germany to declare it would phase out nuclear technology.

Fewer reactors should drastically increase demand for electricity from natural gas, while lower-than-expected growth in energy exports from the Middle East and North Africa could “radically alter the global energy balance,” Ms. van der Hoeven said.

Yet the new opportunities also present companies and investors with a dizzying array of risks — including the high cost of development and exploitation and the possibility that energy prices could fall, especially if the global economy slows drastically and energy demand slackens.

“Quite a few bets are off, if prices drop too far,” said Herman T. Franssen, a senior director at Energy Intelligence, a research company that organizes the annual Oil Money conference with the International Herald Tribune.

Mr. Franssen said oil and natural gas prices would need to remain at relatively high levels to pay for exploration and production in increasingly demanding environments, which produce their own technological risks.

Petrobras, the state-run company leading the deepwater venture in Brazil, is “adding a major challenge on top of a major challenge” by drilling through 2 kilometers, or 1.2 miles, of salt to gain access to oil, said Mark Moody-Stuart, a former chairman of Royal Dutch Shell.

“Salt moves, dissolves and shears away, and it’s highly corrosive,” Mr. Moody-Stuart said. “That kind of drilling worried me in the past, and it worries me now as we head ever deeper.”

Those factors make wells more time-consuming and expensive to complete, but they are no more likely to lead to accidents than conditions at other deepwater drilling sites, Mr. Moody-Stuart said.

Of course, since a well blowout destroyed a rig operated by BP last year, spilling huge amounts of crude oil into the Gulf of Mexico, concerns have grown about whether companies take enough precautions in increasingly extreme conditions.

It was months before BP devised a way to stanch the leak, and the ability of the U.S. government to manage its oil industry was questioned.

“How do we consider similar scenarios, as operators push increasingly complex projects in West Africa, Brazil and the Arctic?” asked Paul Sheng, the director for oil and natural gas at McKinsey, a consulting firm, referring to the Gulf of Mexico accident.

By comparison, he said, the “resources and technology were available readily in the U.S. to respond.”

Stricter safety controls and higher caps on liability making it harder to obtain insurance could drive smaller companies out of the market. But large international oil companies would be affected too.

Article source: http://www.nytimes.com/2011/10/11/business/energy-environment/a-white-hot-future-for-oil-and-gas.html?partner=rss&emc=rss

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Retail Sales and Producer Prices Unchanged in August

September 14, 2011 by Leave a Comment

Consumers spent less on autos, clothing and furniture in August, leaving retail sales unchanged, the government reported.

The Commerce Department also said retail demand in July was weaker than first thought.

Auto sales fell 0.3 percent in August. Sales at clothing stores declined 0.7 percent. Gasoline sales rose.

The flat reading for retail sales was a surprise, given private reports from retailers and auto dealers that suggested a brighter picture in August.

Major automakers reported healthy sales increases in August, largely because dealers introduced new models and offered cheaper financing. The nation’s major retailers reported solid results from the all-important back-to-school shopping.

A weak month for retail sales suggests growth may struggle to gain momentum in the second half of the year. Consumer spending accounts for 70 percent of economic activity in the United States.

Still, most categories were higher compared with a year ago. Auto sales were 6.9 percent higher than in August 2010, and clothing stores were 5.6 percent higher.

Also Wednesday, the Labor Department reported that companies paid the same amount for wholesale goods last month, as a drop in energy prices offset higher food costs.

Excluding the volatile food and energy categories, core wholesale prices edged up 0.1 percent, the smallest increase in three months. The figures indicate that inflation pressures are easing.

The Producer Price Index, which measures price changes before they reach the consumer, was unchanged in August, the Labor Department said, after a 0.2 percent rise in July.

Core prices rose 2.5 percent in the past 12 months, the same pace as July.

Food prices rose 1.1 percent in August, the largest increase since February. Wholesale gasoline prices, meanwhile, fell 1 percent in August, and home heating oil dropped 1.2 percent.

Sharp increases in the prices of oil, food and other commodities pushed up most measures of inflation earlier this year. But now that many commodities are becoming less expensive, inflation pressures are fading.

That has taken some of the pressure off the Federal Reserve to keep inflation in check by raising interest rates. Instead, the central bank can keep the short-term rate it controls at nearly zero, in an effort to support economic growth.

Article source: http://feeds.nytimes.com/click.phdo?i=9dcb506e3308f05ed17619924366e748

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Saudis Adjust Oil Production as World Demand Fluctuates

April 13, 2011 by Leave a Comment

When output from Libya declined this year, Saudi Arabia opened the spigots. And when demand fell as a result of the earthquake and tsunami in Japan, the country tightened them back down.

The Saudis raised output an average of 310,000 barrels a day in the first three months of the year, to 8.88 million barrels a day, with expectations that production would hold at more than 9 million barrels in March. But the quake and tsunami that hit north of Tokyo changed the equation, cutting Japanese demand and leading to the diversion of Japan-bound Saudi oil tankers to other countries.

“As a result, Saudi Aramco is thought to have throttled back production in mid-March,” the agency said, referring to the state-owned oil company.

The agency estimated that the effects of the earthquake would cut second-quarter demand by 270,000 barrels a day, easing upward pressure on prices.

But for the rest of the year, it said, increased Japanese oil use for power generation and reconstruction would make up the difference. The agency, therefore, left intact its 2011 demand forecast at 89.4 million barrels a day, up 1.6 percent from 2010.

Oil prices have been increasing, spurred by production lost to the conflict in Libya and unrest throughout the Middle East and North Africa. Light sweet crude, the United States benchmark, has risen about 19 percent this year, and settled Tuesday at $106.25 a barrel for June delivery.

Fears that higher energy costs will lead to a generalized rise in prices have not occurred. But economists warn that the world economy, still weighed down by banking sector problems, may be too fragile to maintain its momentum if energy prices continue to climb.

The agency said a sustained price of more than $100 a barrel could “prove incompatible with the currently expected pace of economic recovery.”

And it warned that “if global supply were to chug along at March levels for the rest of 2011,” developed world inventories could near five-year lows by the end of the year.

Global output declined by 700,000 barrels a day in March, to 88.3 million barrels, as Libyan crude production fell, the agency said.

Production in March and April fell a cumulative 100,000 barrels a day in Yemen, Oman, Gabon and Ivory Coast amid strife in those countries.

Article source: http://www.nytimes.com/2011/04/13/business/global/13oil.html?partner=rss&emc=rss

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