INTERNATIONAL

 

Feb 24 - Mar 02, 2003 

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

RECORD US TRADE DEFICIT

The US trade gap has surged to a record $44.2bn, as Americans choose to buy foreign goods rather than stimulate their own economy.The figures called the "grand canyon of trade deficits" by one analyst came as separate data hinted at the possible return of inflation, which has been hovering close to zero.

 

 

 

The gloomy data compounded by continuing worries about a possible war in Iraq depressed hopes of an early economic recovery.

They also weighed heavily on stock prices, with the Dow Jones industrial average dropping 86 points, or 1.1%, to close at 7,915.

Tim Anderson, a senior trader at Salomon Smith Barney in New York said: "People aren't terribly convinced about the economic recovery or the extent to which the Bush economic stimulus plan will be passed, on top of dealing with a lot of uncertainty about Iraq."

The Commerce Department's final monthly trade tally for 2002 The new $435.2bn imbalance beat the previous record of $378.6bn in 2000.

The deficit with Germany set a record and the gulf with Japan was the highest since October 2000.

Imports from China, the largest US import partner, surged to $125.2bn.

Meanwhile, wholesale inflation, which has been virtually non-existent, jumped by 1.6% in January, its biggest increase in 13 years, according to figures from the Labour department.

Many analysts dismissed the wholesale price figures as a temporary blip, reflecting a surge in energy prices and the ending of certain car sales discounts.

And the increases seem unlikely to be passed on to consumers, with the leaders of some of America's biggest companies warning on Thursday there would be little scope for price rises over the coming year.

BLEAK OUTLOOK FOR JAPAN'S ECONOMY

The sluggish Japanese economy is unlikely to recover for some time, the Bank of Japan has said.

The central bank maintained a gloomy outlook in its report on the state of the Japanese economy in February.

"Economic activity remains flat amid substantial uncertainty about the outlook for the economy," the Bank of Japan said.

A separate research showed that corporate bankruptcies fell in January for the first time in two months, but the debts of such companies increased to the highest for any January in the post-war era.

Independent research firm Teikoku Databank said 1,436 companies collapsed in January, a drop of 11% from a year earlier and a 7.8% fall from December.

But the number of bankruptcies is expected to remain high towards the March end of the fiscal year, with limited financial support from the government.

In its monthly report, the Bank of Japan left its overall view of the economy unchanged for the third straight month running.

The report said net exports exports minus imports - and industrial production were flat in February.

The Bank said that due to a slowing US economy and weakness in European economies, it expected little growth in exports while industrial production would also stay flat.

The report said rising oil prices and a planned increase in medical costs from April would slow the pace of a decline in consumer prices.

Last November, the Bank of Japan downgraded its assessment of the state of the economy for the first time in almost a year, citing the effects of a weak US economy on Japan's exports and production.

 

 

The February report said the economy could show signs of recovery later in the year, provided overseas economies showed a modest improvement.

US ECONOMY HITS THE BRAKES

The US economy slowed alarmingly in the final quarter of 2002, growing at an annual rate of just 0.7% due to uncertainty caused by talk of war.

The preliminary result was below analysts' expectations of 1% growth, after the economy grew by 4% in the third quarter.

It will be unwelcome news for President George W Bush who is threatening a unilateral attack on Iraq after he proposed $674bn in tax cuts to stimulate the economy ahead of his re-election campaign in 2004.

The US Federal Reserve last week left its key interest rate at a 41-year low of 1.25%.

The central bank has cut interest rates 12 times since January 2001, with the last reduction coming in November 2002, to kick-start the troubled economy.

SRI LANKA MOVES TO PROTECT TEA INDUSTRY

The government in Sri Lanka is acting to protect the country's $700m tea industry in the event of war in Iraq.

Sri Lanka is the world's biggest tea exporter last year it exported 291 million kilograms with more than half of it going to the Middle East and North Africa.

The prospect of a war in Iraq is causing panic among small-scale Sri Lankan tea growers, who are asking the government to bail them out.

The last two auctions in Colombo have seen tea prices drop, and there are fears about shipping lines to the Middle East becoming disrupted.

US WAVERS ON EU TRADE SPAT

Washington has decided to hold off hauling the European Union before international trade officials for refusing to allow the sale of genetically modified produce.

The US embassy's official for agricultural affairs in London, Peter Kurz, told the BBC's Radio 4 Farming Today programme that a complaint would not be made to the World Trade Organisation for the time being.

Mr Kurz denied the concession was designed to curry favour among EU nations over a war against Iraq.

"I wouldn't dream of speculating about any connection between this issue and any... broader urgent issue in the world today," he said.

"I happen to think that this decision is probably made on the merits of the issue itself."

LONDON ECONOMY TO DEFY CITY DOOM

London's economic growth will keep outstripping the UK average despite the financial gloom in the City, a report has said.

London Chamber of Commerce predicted the capital's economy would grow by 2.8% in 2003, compared with an estimated 2.4% last year.

London was faring better than the rest of the UK despite job losses at City institutions.

The main cause of the growth was the ongoing construction boom, as builders cashed in on strong house prices, the chamber said.

London's construction industry grew by 7.6% last year, as the capital addressed its critical housing shortage.

The recession in the manufacturing sector, meanwhile, has not had such a dramatic impact in London as in other parts of the UK.

But Justine Lovatt, the chamber's economist, warned that London's healthy outlook was not as rosy as it appeared.

US POWERS INTERNET GROWTH

America continues to be the driving force behind the global growth in internet use, new figures suggest.

About 10 million US adults hooked up to the Internet for the first time in 2002, boosting the overall number to 168.6 million, or 79% of the population, according to Nielsen Net ratings.

Spain had the highest percentage growth, jumping from 10.1 to 17 million net users, an increase of 6.9%.

Sweden, with 6.1 million users, continued to have the greatest number of home surfers per head of population, at 85%.

GHANA OPENS FORESTS TO MINERS

Ghana Africa's second biggest gold producer is to grant mining licenses in its protected forest reserves to attract new foreign investment.

"Our doors are open," Mining Minister Kwadwo Agyei-Darko told a conference in South Africa.

"The government has committed itself to measures that will enhance mining and restore it to its former glory."

Ghana produces, annually, about 2.2 million ounces of gold, representing about 45% of foreign currency revenues.

PROFITS FALL AT VOLKSWAGEN

Volkswagen, Europe's biggest car maker, has reported a 10% fall in profits as it battles with weak demand in the fiercely competitive car market.

VW said profits before tax slipped to 3.9bn euros (2.68bn) in 2002, which was roughly in line with expectations.

UK SHOPPERS SHUNNED THE SALES

Shoppers hunting for bargains in the January sales have not been as eager to spend as economists had hoped.

Retail sales in January were 1% lower than in December, figures from the Office for National Statistics (ONS) showed.

The gloomy data came as the Confederation of British Industry lowered its growth forecast for the UK economy to 2.2% in 2003.

The figure aligns the CBI with the growing number of forecasters warning that Chancellor Gordon Brown's estimate of 2.5%-3% growth this year is too optimistic.

 

 

BANK MEMBERS SPLIT OVER RATE CUT

The Bank of England's nine strong Monetary Policy Committee voted 7-2 in favour of a cut in interest rates two weeks ago.

A quarter point cut in interest rates took the city by surprise on 6 February.

But unexpectedly gloomy data about the state in the British manufacturing sector released the following day helped explain why the Bank had made the decision to reduce rates to 3.75%.

Minutes of the meeting show that deputy governor Andrew Large and bank insider Paul Tucker wanted to keep rates steady at 4.0%.

EU PREPARES FOR US NUCLEAR TRADE WAR

The European Commission is preparing to retaliate against US import duties on European uranium, raising fears of another damaging trade dispute.

Earlier this year the US Department of Commerce imposed tariffs on European producers of low enriched uranium (LEU), claiming they received unfair state subsidises.

The Commission, which values the LEU exports at $500m (320m) or one third of the US market has condemned the duties as "illegal".

An EU spokeswoman told it had failed to reach an "amicable" solution after months of talks with the US and would now seek to refer the case to the World Trade Organisation (WTO).

US FUND SNUBS EMERGING MARKETS

The world's largest pension fund, US-based Calpers, has ruled out investing in some of the world's main emerging economies, citing worries over stability and business ethics.

Among the countries rejected by Calpers are China, India, Indonesia and Russia, and the fund also dashed hopes that it might begin putting money into Malaysia and Thailand.

Calpers, which manages the retirement funds of Californian public employees, has some $133bn in assets, including some $1.8bn in emerging markets.

It has traditionally taken a lead in ethical investments, and is highly influential within the US fund management industry.

INTERNET VETERAN ALTAVISTA SOLD OFF

The Internet veteran AltaVista has been sold to marketing firm Overture for $140m.

AltaVista was once the most visited search engine on the Internet, but failed to keep up with rivals such as Yahoo and Google, which is now the web's search engine leader.

BAE SWALLOWS 750M OVERRUN

Britain's biggest defence firm has agreed with the Ministry of Defence to alter two major defence contracts.

BAE Systems has been battling with the government over delays and cost overruns to contracts for its Nimrod maritime patrol plane and Astute attack submarine.

 

 

BAE said the contract changes would lead to a 750m ($1.2bn; 1.1bn euros) charge, to be included in its latest profits statement.

SNOWSTORMS BATTER US ECONOMY

Massive snowstorms across the north-eastern US have dealt a further blow to the economy, and especially to the already ailing airline industry.

At their heaviest, the storms dumped four feet of snow on the Appalachian mountains in western Maryland, and caused havoc in Washington DC, New York and other eastern cities.

BRITONS 'BAFFLED OVER EURO RATE'

The debate over whether the UK should join the single currency has failed to teach most Britons what the euro is actually worth, according to a new survey.

Eight out of ten people did not know the value of the currency, with the average person guessing that 1 bought four euros and not the 1.49 euros they would actually get.

Some people thought 1 was worth 10 euros and in Scotland recently shown to be most in favour of joining the single currency the average person thought they would get seven euros.

Despite the poor results from a survey of 2,000 people carried out for a foreign exchange company the estimates were better than when a similar study was carried out last August.

Six months ago only 12% of people knew the value of the euro, compared to 20% now.

UK INFLATION STEADY AT 2.7%

The UK's underlying rate of inflation remains unchanged at 2.7%, official figures have revealed.

The figure, for January, means inflation has stayed above the government's 2.5% target for the third month in a row.

The headline rate, including mortgage interest payments, also remained unchanged at 2.9%, figures from the Office for National Statistics showed.

Some economists had expected underlying inflation to ease slightly to 2.6%.