April 18, 2021

Shrinking Stockpiles Hint at Future Economic Growth

WASHINGTON — Wholesalers cut back on restocking in May even as sales rose, indicating that economic growth could pick up later this year as they rebuild their stockpiles.

The Commerce Department said on Wednesday that wholesale stockpiles shrank 0.5 percent in May, the most in 20 months. That followed a 0.1 percent decline in April, which was revised lower.

Sales at the wholesale level increased 1.6 percent in May and 0.7 percent in April.

A reduction in stockpiles may prompt economists to cut their growth forecasts for the April-June quarter. But the steady gain in sales suggests companies may have to order more goods in the coming months to keep up with demand. That could bolster factory production and drive more economic growth in the second half of the year.

Auto sales jumped 3 percent in May, yet stockpiles were unchanged. And sales of durable goods, items meant to last at least three years, rose 0.3 percent, while inventories of those goods fell by the same amount.

Sales of nondurable goods rose 2.8 percent, the most in more than two years. The gain was caused by large increases in sales of clothing, groceries and pharmaceuticals. Stockpiles of those goods declined 0.8 percent.

Stockpiles of farm goods fell sharply for the second straight month, dropping 6 percent. That most likely reflected the impact of a severe drought last year, which has resulted in lower stockpiles this spring.

Overall wholesale stockpiles totaled $500.9 billion in May, 3.3 percent higher than a year ago.

Much of the recent data suggest the second half of the year could be stronger, helped by steady job growth, a resilient consumer and a sustained recovery in housing.

Employers have added 202,000 jobs a month through the first six months of the year. That is up from 180,000 in the previous six months.

More Americans are earning paychecks, which increases overall income and supports more spending.

Article source: http://www.nytimes.com/2013/07/11/business/economy/shrinking-stockpiles-hint-at-future-economic-growth.html?partner=rss&emc=rss

I.M.F. Warns of ‘Middle-Income Trap’ in Asia

SINGAPORE — Asia needs to guard against asset bubbles, and its emerging economies must improve government institutions and liberalize rigid labor and product markets to encourage development, the International Monetary Fund said Monday.

“Emerging Asia is potentially susceptible to the ‘middle-income trap,’ a phenomenon whereby economies risk stagnation at middle-income levels and fail to graduate into the ranks of advanced economies,” the I.M.F. said in its Regional Economic Outlook report for Asia and the Pacific.

Economies in Asia “are less exposed to the risk of a sustained growth slowdown” than those in other regions, the international funding agency added. “However, their relative performance is weaker on institutions.”

The I.M.F.’s warning comes at time when Asia looks set to lead a global economic recovery.

“While the external risk of severe economic fallout from an acute euro area crisis has diminished, regional risks are coming into clearer focus,” the I.M.F. said. “These include some ongoing buildup of financial imbalances and rising asset prices.”

The I.M.F. is monitoring credit ratios and output levels in Asia closely, as conditions cold worsen very quickly, Anoop Singh, the fund’s director for the Asia-Pacific region, said at a news briefing in Singapore. He said the regional authorities needed to respond early and decisively to potential overheating.

The I.M.F., which recently cut its 2013 and 2014 growth forecasts for greater China, India, Singapore and South Korea but raised its outlooks for Malaysia and the Philippines, sounded generally positive about near-term prospects.

“Growth in Asia is likely pick up gradually in the course of 2013, to about 5.75 percent, on strengthening external demand and continued robust domestic demand,” the report said.

China, Indonesia, India and the Philippines need to improve their economic institutions, while India, the Philippines and Thailand are also exposed to a larger risk of a growth slowdown stemming from subpar infrastructure, the report said.

China and Malaysia are the highest-ranked developing Asian countries on an I.M.F. chart measuring institutional strength, while India, Indonesia and the Philippines are at the bottom. The I.M.F. defined institutional strength as demonstrating higher political stability, better bureaucratic capability, fewer conflicts and less corruption.

For many developing Asian economies, there remains ample room for easing stringent regulations on products and in some cases labor markets, the fund said.

The I.M.F. also said that various statistical approaches indicated that growth rates had slowed in China and India. For China, growth appears to have peaked at about 11 percent in 2006-7, while India’s growth is now about 6 percent to 7 percent, compared with about 8 percent before the financial crisis. “By contrast, trend growth for most Asean countries seems to have remained stable or to have increased somewhat, with the notable exception of Vietnam,” the fund said. Asean is the acronym for the 10-member Association of Southeast Asian Nations.

Mr. Singh, the fund’s regional director, said that the I.M.F. appreciated Japanese efforts to stimulate its economy, and that quantitative easing — in which a central bank buys assets like bonds with newly created money to help growth — was just part of a package of measures that included cutting debt and structural overhauls like increasing women’s participation in the work force.

“In Japan, we have welcomed the measures taken,” he said. “It’s because they are focused on addressing the deflation that has affected Japan for the last 10 to 15 years. As Japan moves back to sustainable positive growth, it’s going to help the region and the global economy, and that is the most important.”

Article source: http://www.nytimes.com/2013/04/30/business/global/30iht-asiaecon30.html?partner=rss&emc=rss

Bank of Japan Sets Deflation Turnaround Target Date

HONG KONG — Deflation remains firmly entrenched in Japan, figures showed Friday, as the central bank projected that its targeted level for inflation was still some years off, underscoring that there are no quick fixes for one of the world’s largest economies.

Prime Minister Shinzo Abe, who took office last December, has made the fight against deflation — the damaging fall in prices, profits and wages that has dogged Japan for most of the past 15 years — a main part of his economic policy. He pressed the central bank to commit to a target of 2 percent annual inflation, considered by many economists a healthy level.

On Friday, the central bank, the Bank of Japan, under the leadership of its new governor, Haruhiko Kuroda, put a date on that target: 2015 or early 2016.

“Various indicators are showing signs that inflation expectations are heightening as a trend,” Mr. Kuroda said in a news conference Friday, Reuters reported. “Business and household sentiment is improving.”

On Friday, the central bank raised its growth forecasts for this year and next. The bank said the economy would gradually accelerate to 1.6 percent growth in the fiscal year that ends in March 2016. That is up from the bank’s projection of 1 percent growth in the year that ended in March 2013.

“Japan’s economy has stopped weakening and has shown some signs of picking up,” the Bank of Japan said in its economic report. “Looking ahead, it is expected to return to a moderate recovery path around mid-2013.” The bank cited a likely improvement in domestic demand as the increased money supply and other economic measures announced so far take effect.

However, worse-than-expected inflation data for March, released by the statistics bureau Friday, underlined the challenges ahead. Core consumer prices, which exclude food, fell 0.5 percent compared with March 2012, the fifth consecutive month of year-on-year declines.

The figure “offered another reminder that deflationary pressures remain strong,” Izumi Devalier, Japan economist at HSBC, wrote in a research note. Although a gradual escape from deflation is expected, thanks in part to higher energy prices, “the pace of inflation is unlikely to match” the Bank of Japan’s “optimistic projections,” Ms. Devalier added.

Although various factors will ultimately cause inflation to pick up, the hurdle for reaching the inflation target is “getting higher,” Miwako Nakamura, an economist at J.P. Morgan, wrote in a research note.

Under Mr. Kuroda, the central bank announced unexpectedly bold steps this month aimed at reinvigorating economic and price growth.

These included plans for the central bank to buy longer-term bonds aggressively and double its holdings of government bonds in two years. Mr. Kuroda described the program as “monetary easing in an entirely new dimension” that would make a change from incremental steps of the kind that had been pursued by his predecessors.

The financial markets have welcomed Mr. Abe’s and Mr. Kuroda’s joint efforts: The Nikkei 225-stock index has risen 30 percent since the start of the year, while the yen has fallen 14 percent against the U.S. dollar — much to the relief of Japanese exporters, for whom a weaker yen is welcome as it makes their goods cheaper for consumers abroad.

Several Japanese corporate giants, including Honda, Toyota and Canon, have cited the weaker yen as a reason for improved earnings and outlooks in recent days.

On Friday, Honda said its net profit for the financial year that ended in March was up 73.6 percent at ¥367.15 billion, or $3.72 billion, according to Reuters. Mazda made a yearly net profit of ¥34.3 billion, after a ¥107.7 billion loss in the previous year.

Many analysts, however, have cautioned that structural overhauls aimed at promoting foreign direct investment and bringing more women to the country’s aging and shrinking work force are needed if the turnaround in Japan’s economic fortunes is to be sustained.

Growth strategies aimed at stimulating private investment are the most important of the policy arrows in Mr. Abe’s quiver, Kunihiko Sugio, chief investment officer at Invesco Japan, said in a recent research note.

This “arrow,” he added, “is still in Abe’s hand waiting to be fired.”

Article source: http://www.nytimes.com/2013/04/27/business/global/27iht-yen27.html?partner=rss&emc=rss

Europe Heeding International Call to Do More to Spur Growth

Yet in a change, signs suggested that European leaders were starting to agree, with more high-ranking ministers and officials talking up the need to slow the pace of budget cutting and bolster growth on the Continent.

At the outset of the gathering of finance ministers and central bankers last week, the I.M.F. lowered its global growth forecasts, again citing weakness from Europe. And Christine Lagarde, managing director of the fund, separated nations into three groups that might be described as strong, trying and laggards.

In the first group she placed the developing and emerging economies that are the engine of global growth. In the second she put countries that are gaining momentum in their recoveries, like the United States. The third group, she said, contains countries that continue to struggle with their policy response to the crisis — not growing, and hindering global growth. That group includes many countries in high-income Europe, including Britain, Germany and Italy.

At a news conference during the meetings, Ms. Lagarde said such countries should try “anything that works” to create jobs. That starts “with growth and a good policy mix, which relies on not just one policy but a set of policies that will include fiscal consolidation at the right pace,” she said, also citing structural changes and loose monetary policy as necessary.

The debate at the meetings focused on helping to identify that right mix of policies, with officials from the fund and countries including the United States arguing that austerity had sapped too much demand, too soon, from the Continent. In the past, European officials tended to brush off such advice. And some powerful officials continued to do so last week, instead emphasizing budget cutting to soothe financial markets.

“Fiscal and financial sector adjustments remain crucial to regain lost credibility and strengthen confidence,” said Wolfgang Schäuble, the finance minister of Germany and a powerful voice promoting austerity in Europe. “At the current juncture, it is in particular the responsibility of the advanced economies, including Japan and the U.S., to follow through with ambitious fiscal consolidation over the medium term.”

George Osborne, the British chancellor of the Exchequer, echoed that sentiment, even as high-level officials at the fund repeatedly criticized the government of Prime Minister David Cameron for its campaign of budget cuts.

“The priority for most advanced economies is still to restore fiscal sustainability,” Mr. Osborne said in a statement. “Continued consolidation is needed over the medium term, supported by highly accommodative monetary policy.”

But the fund downgraded its growth estimates for several large European economies, including those of France and Germany, last week. Many have re-entered a period of economic contraction, with their unemployment rates continuing to rise. In light of that, other European officials said a renewed focus on growth — by slowing budget cuts, changing deficit targets or taking other measures — might be appropriate.

“They are preaching to the converted,” Olli Rehn, the European commissioner for economic and monetary affairs, was quoted by Reuters.

“In the early phase of the crisis, it was essential to restore the credibility of fiscal policy in Europe because that was fundamentally questioned by market forces,” Mr. Rehn added. “Now, as we have restored the credibility in the short term, that gives us the possibility of having a smoother path of fiscal adjustment in the medium term.”

In a communiqué, the finance ministers and central bank governors of the Group of 20 large economies said: “We have agreed that while progress has been made, further actions are required to make growth strong, sustainable and balanced.”

They urged a closer banking union in the euro zone and for “large surplus economies” to take “further steps to boost domestic sources of growth.”

In her opening remarks, Ms. Lagarde also cited Japan as having continued to struggle with slow growth. But at the spring meetings, Tokyo won plaudits for its ambitious new campaign of fiscal and monetary stimulus to bolster demand and end the deflation that has plagued the economy for more than a decade.

Some finance ministers had questioned the Bank of Japan’s aggressive easing of monetary policy, arguing that it was aimed at pushing down the value of the yen and as a result unfairly favoring Japanese exports. If other countries followed suit to try to devalue their currencies, it could set off a round of “currency wars,” some warned.

But the Group of 20 communiqué stated that “Japan’s recent policy actions are intended to stop deflation and support domestic demand,” a tacit nod to the recent round of easing. And the I.M.F. raised its estimates of Japan’s growth on the back of the government’s new policy moves.

At the meetings, Dr. Jim Yong Kim, the new president of the World Bank, also outlined his policy goals: the effective eradication of extreme poverty in a generation. The world has achieved the Millennium Development Goal of halving extreme poverty by 2015. To cut the rate to 3 percent by 2030, Dr. Kim said, would require strong, inclusive growth.

Article source: http://www.nytimes.com/2013/04/22/business/global/europe-heeding-international-call-to-do-more-to-spur-growth.html?partner=rss&emc=rss

Off the Charts: Numbers Down, but German Mood Is Up

This month, the German central bank reduced its 2013 growth forecasts for the country. “Germany, given its high degree of openness and specialization, cannot prosper alone,” the bank said in its monthly report. “It has a particular interest in the welfare of its partners.”

But optimism seems to be returning to Germany as the New Year approaches.

The Ifo survey of more than 7,000 businesses, released this week, showed that optimism about the next six months rose this month, as it had in November after a long slide. And the German stock market is ending the year on a sharply positive note.

In part, that is because of rising hopes that the peripheral countries have made it through the worst of the crisis, with the willingness of the European Central Bank to assure access to money and of Germany to pay the bills.

Nonetheless, as can be seen from the accompanying charts, many economic indicators have yet to turn around. German job growth slowed appreciably during the summer, and hours worked declined.

Industrial production in the manufacturing industries was lower during the summer than it had been a year earlier, and the decline appears to be increasing, at least according to the figures through October. Over all, exports have continued to grow, although at a slower pace than earlier in the year, but the value of exports to other countries in the euro zone has been declining. While there is nothing new in weakness in the peripheral countries, exports to France have turned soft as well.

Whether the optimism can persist may depend on whether the soft economic statistics of the summer and fall can grow more robust as the weather gets colder.

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

Article source: http://www.nytimes.com/2012/12/22/business/numbers-down-but-german-mood-is-up.html?partner=rss&emc=rss

China’s Boom Beginning to Show Cracks, Analysts Say

Several economists in China have recently lowered their growth forecasts for this year and next year to about 8.5 percent, down from earlier forecasts of 9 to 10 percent, while also warning about the possibility of a sharp rise in nonperforming loans at the nation’s big state-owned banks.

On Monday, for instance, Credit Suisse said data recently released by the Chinese central bank showed that credit in China had expanded at “alarming levels,” far more than previous government estimates suggested. Credit Suisse downgraded its profit forecasts for Chinese companies and state-owned banks, as it warned of slowing growth for the overall economy.

The reports come at a time of heightened concern about slower growth in other parts of the world, including the United States, Europe and Japan.

Since the financial crisis, China has been the world’s leading growth engine. But for much of the past year, China has been trying to rein in overly aggressive bank lending as way to tame soaring inflation and property prices.

Those tightening measures have not only weakened growth in China, analysts say, but have also begun to expose a host of other problems in the nation’s financial system.

While few analysts expect China’s growth to slow to below 8 percent in the next year, they still paint a troubling picture. The Chinese stock market has been in a slump for much of the last two years, the property market looks weaker and inflation is running at a 34-month high.

Analysts said exports have begun to show signs of weakness in recent weeks. Credit Suisse said Monday that China’s export growth could be flat in the coming months, partly because of weaker demand in the United States and Europe.

Credit Suisse’s new figures also indicate that off-balance-sheet lending, much of which took place outside the banking system, pumped a large amount of additional credit into the financial system last year. As a result, Credit Suisse downgraded its ratings of Chinese companies and the big state-controlled banks, and warned of a possible rise in bad loans.

Vincent Chan, the head of China research at Credit Suisse, said that the nation’s economy might avoid a “hard landing” but that growth over the next year was likely to be less robust.

“The market consensus is for a soft landing and two or three quarters of slowing down, then a growth rebound,” Mr. Chan said in a telephone interview Monday. But, he said, “we’re saying that after that, the growth may not re-accelerate and the indebtedness may be more serious.”

Earlier this month, Wang Tao, the chief economist in China at UBS, said China’s economy was still strong but warned that over the next few years, loans to local government investment companies could result in as much as $460 billion in nonperforming loans.

Although Beijing used state-run banks to bolster growth after the financial crisis hit in late 2008, the central government is ordering them to help rein in growth.

Chinese banks have already raised interest rates and set aside larger reserves. The government is expected to announced additional measures in the coming months.

While those moves could help slow inflation, they will also probably weaken growth by driving up borrowing costs in China. That could hamper private companies and property developers, which have been among China’s biggest sources of growth.

Last week, Standard Poor’s, the credit ratings agency, lowered its outlook on Chinese property developers, predicting that in some parts of the country property sales could drop sharply as a result of tighter credit and government curbs.

Another growth driver — local government investment in infrastructure projects — has also come under scrutiny from regulators because of worries that overly aggressive spending on new roads, bridges, tunnels, subways and showpiece projects could lead to a wave of nonperforming loans to municipalities.

Businesses, meanwhile, are trying to cope with rising labor costs, energy shortages and higher borrowing costs.

Those conditions could change if the government decides to loosen monetary policies and ramp up growth, the way Beijing did in early 2009. But Mr. Chan at Credit Suisse says the size of China’s debt could restrain regulators and lead to a longer period of slower growth.

Asked whether nonperforming loans — or N.P.L.’s — are set to rise, Mr. Chan said: “A rise in N.P.L.’s is a must. The question is, how much will they rise?”

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Higher Prices Eat Into Consumer Spending Gains

Consumer spending increased 0.4 percent in April for a 10th consecutive month of gains, the Commerce Department said on Friday, after rising 0.5 percent in March.

But prices rose 0.3 percent, leaving spending up just 0.1 percent and incomes stagnant when adjusted for inflation.

Tornadoes and floods, which lashed parts of the country last month, were blamed in part for an 11.6 percent decline in contracts to buy previously owned homes last month.

“We see the soft patch of the first quarter bleeding, at least, into the first half of the second quarter,” said Robert Dye, senior economist at PNC Financial Services in Pittsburgh.

“We will see again a consumer that can keep pace with the economy, but cannot drive the economy forward.”

Recent data including retail sales and industrial output have been soft, prompting economists to lower their growth forecasts for the second quarter. Further cuts are likely next week should May auto sales come in very weak.

Second-quarter forecasts for the rate of growth in gross domestic product are ranging from 2.5 to 3 percent.

The government reported on Thursday that consumer spending — which accounts for about 70 percent of the nation’s economic activity — grew at a 2.2 percent annual rate in the first quarter, slowing from a 4 percent clip in the final three months of 2010.

That contributed to holding back overall economic growth to a 1.8 percent rate during the quarter after a 3.1 percent rate in the October-December period.

With much of the slowdown attributed to what United States policy makers see as temporary factors, like high commodity prices and supply chain disruptions because of the earthquake in Japan, the Federal Reserve is not expected to worry too much about the rate of recovery.

The central bank is expected to keep interest rates low after it wraps up its $600 billion government bond-buying program in June before it starts looking at ways to withdraw some of the stimulus it has lent the economy.

The high gasoline prices swallowed almost all the increase in incomes from tax cuts enacted in December.

Economists worry that stagnant incomes, which have failed to keep up with inflation, will continue to impede spending even though fuel prices are starting to fall.

So far, consumers have resorted to saving less, and some are tapping into their savings to maintain spending. Incomes rose 0.4 percent last month, but disposable incomes adjusted for inflation were flat for a second consecutive month.

Real incomes have not grown this year and the saving rate stayed at a two-and-a-half-year low of 4.9 percent in April. According to the Commerce Department’s chief economist, Mark Doms, Americans saved $82 less over the last four months.

The retreating price for gasoline helped to lift consumer spirits this month and lower their inflation expectations.

The final version of the Thomson Reuters/University of Michigan consumer sentiment survey showed sentiment among Americans rose this month to 74.3, from 72.4 in the preliminary May reading.

High gasoline prices pushed up the year-on-year inflation rate to 2.2 percent, the biggest rise in a year, after increasing 1.8 percent in March.

Excluding food and energy, prices increased 1 percent, the largest gain since September, after rising 0.9 percent in March.

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