late november

Slowing Global Demand Widens Trade Deficit

The Commerce Department said on Tuesday the trade gap increased 4.9 percent to $42.2 billion. In a sign of weak domestic demand, imports hit the lowest level in one and a half years.

“The report tells a tale of weakening economic growth momentum both domestically and globally,” said Millan Mulraine, a senior economist at TD Securities in New York.

Economists, who had expected the trade deficit to widen to $42.6 billion in October, said Hurricane Sandy could have disrupted trade flows. The storm, which struck the East Coast in late October, shut ports in New York and New Jersey.

However, the Commerce Department did not indicate that Sandy was a factor. The wider trade gap in October reflected a 3.6 percent decline in exports of goods and services to $180.5 billion. That was the biggest percentage drop in exports since January 2009.

Exports have been one of the pillars supporting the economy since the 2007-9 recession ended. The slide in October’s export growth was telegraphed by weak manufacturing surveys and reflected slowing global demand.

Imports of goods and services fell 2.1 percent, to $222.8 billion, in October, the lowest since April 2011. Economists said the decline in imports was hardly surprising, given a weakening in consumer demand in recent months.

In October, the inflation-adjusted trade deficit narrowed to $46.2 billion from $46.6 billion in September. While that implied trade would make another small contribution to gross domestic product in the fourth quarter, economists said the size of the decline in exports raised the bar high for that.

In addition, a strike by West Coast dock workers in late November and early December most likely reduced trade last month.

A third report showed confidence among small-business owners fell in November; economists pinned that on the fears of deep government spending cuts and higher taxes, which could drain about $600 billion from the economy early next year.

The National Federation of Independent Business said on Tuesday that its optimism index fell 5.6 points to 87.5 last month, the weakest reading since March 2010.

While exports to the 27-nation European Union rose 1.4 percent in October, there were substantial declines in goods shipped to France, Germany, Italy and Britain. Exports to the European Union in the first 10 months of 2012 were down 0.7 percent compared to same period in 2011.

American exports to Latin America also fell in October, and shipments to Japan were down 8 percent.

Although exports to China, which have been growing more slowly than in recent years, surged 23.1 percent in October, imports rose to a record. That pushed the United States’ trade deficit with China to a record $29.5 billion.

Article source: http://www.nytimes.com/2012/12/12/business/economy/decline-in-exports-hurts-us-trade-deficit.html?partner=rss&emc=rss

Italy’s Borrowing Costs Drop Sharply at Auction

The sale of €9 billion, or $11.8 billion, of six-month Treasury bills was seen as the first post-holiday pointer to the continuing woes of the euro zone.

The debt sold at 3.251 percent, sharply down from 6.504 percent at a previous auction in late November. Demand was 1.7 times the amount on offer, compared with 1.47 times previously.

The lower borrowing costs appeared to reflect the impact of a new austerity package in Italy, as well as a massive infusion of cheap, long-term liquidity into euro zone banks by the European Central Bank last week.

Italy plans a sale of long-term debt on Thursday, which analysts said would be a more significant indicator of market sentiment.

In a positive sign, the yields on Italian 10-year bonds were down about 20 basis points Wednesday, to 6.7 percent. That was still uncomfortably close, however, to the 7 percent level that is regarded by economists and analysts as unsustainable.

The auction came as the E.C.B. reported banks in the euro zone had deposited a record amount of overnight funds for the second day in a row. Banks parked €452.03 billion for 24 hours, beating a previous record of €411.8 billion set on Tuesday.

The heavy use of the deposit facility is seen as evidence that banks in the euro zone remain wary about lending to each other, although analysts note that market activity has been muted because of the end of the year holidays, and there is more cash in the system following the E.C.B.’s action.

Reaction on European stock markets was muted, with most major indices up less than 1 percent, while the euro was stable at just under $1.31.

Italy has been in the spotlight as a result of slow growth combined with escalating borrowing costs and a huge debt equal to 120 percent of gross domestic product. The country needs to raise €450 billion during 2012.

Mario Monti, a technocrat prime minister who replaced Silvio Berlusconi last month, has confronted the crisis with an austerity program that includes tax increases and pension cuts.

Ahead of the auction, the Italian business daily Il Sole 24 Ore commented that the sale would have “the task of closing with a positive note a horrible year for Italian bonds.”

Spain’s long-term borrowing costs also fell about 20 points, to 5 percent, Wednesday, while benchmark German Bunds were steady at 1.9 percent.

Article source: http://www.nytimes.com/2011/12/29/business/global/italys-borrowing-costs-drop-sharply-at-auction.html?partner=rss&emc=rss

Slowing Global Demand Widens Trade Deficit

Italy’s Borrowing Costs Drop Sharply at Auction

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