Deflation retained its hold over the economy, with
retail prices falling for the 37th month in row.
"This clearly illustrates that the domestic
economy is falling into a deep deflationary phase," said Shinichi
Sato, fixed income strategist at Mitsubishi Securities.
"(The industrial output) results were far worse
than our expectation of plus 0.5% and also much lower than the original
(government) forecast of plus 1.2%," he said.
September fall in industrial output had been the
first drop for three months, and most analysts had expected output to
recover in October.
Output has suffered from the sluggish growth in the
US, Japan's biggest export market.
While exports rose by 8.5% in October from the
previous month, analysts said the jump was down to one-off factors.
The Ministry of Economy Trade and Industry (METI)
lowered its outlook for industrial output saying it would remain flat.
METI said manufacturers' output would fall by 1% this
month, but rise 0.6% in December.
EU SET TO REFORM BUDGET RULES (2ND LEAD)
The European Commission has suggested major changes
to the Growth and Stability Pact which underpins the euro, after members
were given "early warnings" over breaches.
The global economic slowdown has led countries to
push the limits of the pact, which even Commission president Romano
Prodi has described as "stupid".
The key proposal involves allowing countries in a
sound overall financial position to run deficits to fund long-term
spending, but also introduces new disciplinary measures.
So far, Commission warnings have only been applicable
to countries who do not keep their public deficit below 3% of GDP.
Germany has been ticked off because its deficit is
expected to be above 3% this year, while France was given an "early
warning" because of fears it might breach the limit too.
Economic and Monetary Affairs Commissioner Pedro
Solbes said the reforms were not serious enough to warrant renegotiating
The Commission hopes the proposals will be agreed by
EU leaders at a Brussels summit in March.
The proposals would give more leeway to countries
that have low debt to borrow to finance investment or reforms.
But there would also stricter action, with fines as
the ultimate sanction, against countries which do not make enough
progress in cutting debt.
Fines have so far only been applied to budget
While Italy and Greece are the biggest concern, both
countries have committed themselves to debt reduction, the Commission
US ECONOMIC RECOVERY CONTINUES (BOX)
The US economy has shown signs of renewed strength,
with the number of jobless falling, consumer spending outstripping
earnings and strong demand for manufactured goods.
The deluge of figures pushed US share prices higher,
in anticipation of an economic rebound.
Total jobless claims dropped for the second
consecutive week to 364,000, their lowest level in nearly two years, the
Labor Department said.
Personal spending was higher than income growth for
the first time since the summer, the Commerce Department said.
Durable goods orders — typically cars, fridges,
washing machines and other such items surged 2.8% in October from
September, the government added, the first rise in three months.
UK GROWTH 'STRONGER THAN EXPECTED'
The UK economy grew faster than originally thought
between July and September, lifted by a buoyant service sector.
The Office for National Statistics said it had
revised its estimate of economic expansion during the period from 0.7%
to 0.8%, the UK's fastest quarterly growth rate in more than two years.
The higher quarterly figure pushed annual growth for
the three months to September to 1.8%, up from an initial reading of
The upwards revision took forecasters by surprise,
with most City analysts predicting no change.
IMF WARNS EUROPE AND JAPAN ON GROWTH
The US economic recovery is not as strong as expected
but it is Europe and Japan that need to do more to boost world economic
growth, according to the International Monetary Fund.
The IMF's first deputy managing director Anne Krueger
made the comments in India during a meeting of finance ministers and
central bankers from the Group of 20 rich and poor countries.
Ms Krueger said the US upswing was "not quite as
strong as people had expected".
But she reserved her sternest words of warning for
Europe and Japan.
The prospects for Europe were "not that
good" and economic forecasts were falling almost monthly "as
numbers come in", she said.
JAPAN STOCKS SURGE
The Japanese stock market has soared to its highest
level in two months ahead of the government's planned announcement of
The Nikkei index of leading Japanese shares gained
3.4% to close up 300.90 points at 9,176.78 points.
US shares gained sharply. The Dow Jones index of
leading US shares gained 2.9% to close up 255.26 points at 8,931.68
while the technology weighted Nasdaq index rose 3%, or 43.51 points, to
close at 1,487.94.
WTO STAFF CLAIM TRADE EXPLOITATION
Industrial action by staff over pay and resources at
the World Trade Organisation (WTO) has begun to affect its activities
and could threaten the next round of talks.
"I don't think the organisation will grind to a
halt, but the level output to which people are accustomed is severely
reduced," Keith Rockwell, WTO spokesman told.
The 145 staff have not had a substantive wage rise in
12 years, and have only had an 8% increase in operational funding
despite a 30% increase in their work load.
APPLE PRICES 'SET TO SOAR'
A global apple shortage is looming after bad weather
has decimated orchards in the US, Australia and New Zealand, according
to a report in the South African newspaper Business Day.
"Consumers are going to be paying noticeably
more for apples next year," Kobus du Preez, pack-house manager at
Maluti Fruit Cooperative in Free State in South Africa told the paper.
The shortage should send South African apple exports
soaring in 2003, Mr du Preez predicted.
"It is almost certain that South Africa will see
exports rise markedly, perhaps as much as 20%," Mr du Preez was
quoted as saying.
NIGERIA STRIVES TO SOLVE DEBT CRISIS
Nigeria is seeking to buy back some of its commercial
debts, in an attempt to reduce its overall debt burden.
The country has debts of more than $28bn ($18.02bn)
owed to foreign governments grouped together in the Paris Club.
Talks with these lenders to try and reduce the amount
owing have stalled over concerns of economic mismanagement.
But Nigeria is now attempting to buy back about $2bn
of freely-traded debt owed to commercial investors.
As the commercial debt is trading at well below its
original value, the government will only have to pay $470m.
FIJI TO PRIVATISE SUGAR MILLS
The Fijian government has announced a radical
restructuring of its 120-year-old, state-controlled sugar industry,
transferring its sugar mills into private hands and predicting job cuts.
TURKEY SET FOR SWEEPING REFORMS
The leader of Turkey's largest political party, Recep
Tayyip Erdogan, has said that the government is planning a major
revision of the constitution to bring it into line with European Union
Mr Erdogan said that the laws regulating the
electoral system governing political parties and regulating freedom of
expression would be changed.
He spoke from Paris, which was part of his second
tour of European capitals since his party swept to power just under a
CHANCELLOR HITS BACK AT BUDGET CRITICS
Chancellor Gordon Brown is to launch a defence of his
handling of the economy — after critics attacked plans to borrow more
than £100bn over the next five years.
Mr Brown will go on the offensive in an effort to
rebuff claims the proposals endanger his reputation of caution and
NEW BOSS FOR BANK OF ENGLAND
The next governor of the Bank of England is to be
Mervyn King, the current deputy governor, who will step into the job
The announcement was made by the Chancellor of the
Exchequer Gordon Brown in his pre-Budget report.
AUSTRALIAN GROWTH HIT BY DROUGHT
The drought devastating crops across Australia is
going to cut into the country's recent stellar economic performance, the
government's finance chief has told parliament.
In his annual mid-year review, Treasurer Peter
Costello said growth in 2002-3 was likely to be 3%, not the 3.75%
predicted in May.
LABOUR BLAMED AFTER SONY QUITS INDONESIA
The Indonesian government has blamed the country's
labour laws for pushing Sony to shut down its audio equipment factory in
the country, according to a report in Bisnis Indonesia.
According to the newspaper, Industry and Trade
Minister Rini Suwandi believed the country's employment legislation
allowed workers too much freedom hold demonstrations and voice protests.
Ms Suwandi believed the government's challenge now
would be to change the laws to prevent other international firms from
pulling out of the country.
ECUADOR LOOKS TO RENEW IMF TIES
Ecuador's president-elect Lucio Gutierrez and
incumbent Gustavo Noboa have agreed to restart talks with the
International Monetary Fund for a stand-by loan.
Two months ago, the Noboa administration broke off
negotiations with the IMF, complaining the loan conditions were too
CZECH TELECOM PRIVATISATION COLLAPSES
Eastern Europe's largest privatisation this year, the
1.82bn euro (£1.16bn; $1.8bn) sale of the Czech Republic's fixed-line
telecoms operator, has collapsed.
GERMAN CONFIDENCE FALLS AGAIN
German business confidence has slipped for the sixth
consecutive month in November as the government plans to raise taxes and
The Ifo economic institute said western German index
fell to 87.3 from 87.7 in October, which was above analysts forecasts of
a decline to 86.8.
The continuing fall in sentiment comes as the German
government, facing weak growth and a widening budget deficit, has
proposed increasing taxes and social contributions, as well as cutting
FRENCH PRIVATISATION ROW EXPLODES
France has been brought to a standstill by public
sector strikes opposing the new government's privatisation plans, which
could cause mass redundancies and the loss of employee benefits.
The government wants to use the money from
privatisation to cuts taxes and reduce spending, something promised by
the conservative Jean-Pierre Raffarin, before being elected prime
minister in June.
US CALLS FOR TARIFF-FREE WORLD
The US government has called for the elimination of
all tariffs on manufactured goods under World Trade Organisation (WTO)
The plan would lead to the elimination of all tariffs
on industrial and consumer goods by 2015 in an attempt to jump-start
global trade talks.
The proposal, unveiled by US Trade Representative
Robert Zoellick and Commerce Secretary Donald Evans, would eliminate
tariffs on $6 trillion (£3,870bn) worth of non-farm goods.
But some developing countries, like India and Brazil,
are worried that the plans could put severe pressure on their own
manufacturing sector, before it was ready to face the force of full
FORD BOSS CALLS FOR EURO REFERENDUM
One of the Ford Motor Company's senior bosses has
called on the British government to hold a euro referendum.
Sir Nicholas Scheele, Ford's president and chief
operating officer warned that companies were being damaged by the UK's
failure to sign up to the single currency.
SRI LANKA APPEALS FOR ECONOMIC SUPPORT
The Sri Lankan Government and opposition Tamil Tigers
have appealed for investment as donors gather in Norway for peace talks
to end nearly two decades of civil war.
In an unprecedented move, the two sides issued a joint statement
calling for international help as more than 20 countries — including
the US and Britain — prepared to meet in Oslo.