Now, economists say that Germany is already on the
mend, and the latest monthly employment figures have started to show a
much-desired uptrend. "Our expectation is that we'll see a slight
improvement in the second half," said Rainer Guntermann of Dresdner
Kleinwort Wasserstein bank. "On the whole, we expect zero growth this
year." Economic growth has weak this year across the eurozone's biggest
Italy also fell into recession in the first half of
2003, while France is expected to reveal weak economic growth figures next
week amid an unemployment rate of nearly 10%. The European Commission,
however, insists that economic growth will pick up at the end of the year
and during 2004 — although it has cut its economic growth forecast for the
whole of the eurozone to just 0.7% in 2003.
Growth would be helped if the European Central Bank
were to cut interest rates further, after finally reducing rates to 2.5%
earlier in the year. In Germany, the main reason for medium-term optimism
is the series of reforms put in place by the government of Chancellor
Gerhard Schroeder, who has staked his career on reinvigorating the
FED POINTS TO SIGNS OF
The US Federal Reserve has explained it delivered a
smaller-than-expected cut in interest rates in June because it believed
the US economy was on the mend. The Fed cut the cost of borrowing to a
45-year low of 1% at its 25 June meeting by 11 votes to one. Many
economists had expected a deeper half-point cut to 0.75%.
The Fed's policy making panel took into account "the
emergence of firmer signs of a possible upturn in economic activity",
according to the minutes of the 25 June meeting released. Publication of
the Fed's thinking coincided with healthy figures on trade, jobs and
wholesale prices that seemed to support its gamble. New claims for
unemployment benefits stayed below 400,000 for the fourth week in a row,
US Labor Department data showed.
There were 2,000 new claims in the last week, taking
the total to 398,000. The US trade balance was $39.5bn in June, helped by
exports climbing to their highest level in two years thanks to stronger
economic growth abroad, the Commerce Department said. Imports held steady.
Wholesale prices rose by 0.1% in July, a separate Labor Department report
showed. The Fed has been worried that falling prices could hurt the
fragile economic recovery by making shoppers reluctant to spend, favouring
a wait-and-see attitude instead. The latest wholesale price data appeared
to provide reassurance against this threat.
FRENCH HEAT DEATHS 'UP TO
The French health ministry has said the deaths of up to
3,000 people in recent weeks could be attributed to the European heat
wave. The announcement came as the government extended throughout the
country an emergency hospital plan originally introduced in the Paris
region to deal with the medical crisis.The move was ordered by Prime
Minister Jean-Pierre Raffarin, who cut short his holiday to head a crisis
meeting of his cabinet in Paris.
The "Plan Blanc", which is normally reserved for
epidemics, disasters or terrorist attacks, provides for the recall of
doctors from holiday and making available extra staff, hospital beds and
UK SHARES HIT 12-MONTH HIGH
The FTSE 100 index of leading UK shares has closed at
4,238 — a high not seen since August last year. Analysts attributed the
latest rise to investors' general mood of optimism about corporate
earnings and the economy. The top gainers during August 14 trading
included Intercontinental Hotels, Standard Chartered Bank and chemicals
firm ICI. All rose by about 4% while the index of the top 100 companies
was up 1.4%. The bluechip FTSE 100 has risen steadily in recent months and
is now up 29% from its 2003 low of 3,287 touched on 12 March.
BLACKOUTS CAUSE NORTH AMERICA
Work has been going on through the night to restore
power after massive blackouts hit major cities in the eastern United
States and Canada. The power failures caused chaos as they spread from New
York to Detroit, and Toronto to Ottawa.
Traffic lights failed, underground railways were
evacuated and people were trapped in lifts in offices and apartments.
Canadian officials said a fire at a power plant near the upstate New York
town of Niagara caused the outage — at about 1610 local time (2110 GMT) —
which then cascaded across the country. The US Department of Homeland
Security said it was investigating the cause of the blackouts but US
officials — who dispute the Niagara theory — have said there is no
evidence terrorism is to blame. Power is slowly returning to the affected
areas — thought to encompass more than 50m people — but full restoration
will take much longer, officials say.
EU-US STRIKE FARM TALKS DEAL
The European Union and the US have agreed a joint
position from which to negotiate with developing countries over
controversial agricultural subsidies. The subsidy of agriculture has been
a key area of difference between the two biggest trading blocs in the
world, as well as a source of ire from developing countries who say they
are shut out of Western markets.
The new framework — a "common vision" rather than a
detailed plan, as an EU spokesman put it — will be used as a base for
negotiations at the summit of World Trade Organisation (WTO) members in
Cancun, Mexico in September. But it has already been rejected by India,
the biggest WTO member bar China and the loudest voice among developing
GO-AHEAD FOR GIANT OIL MERGER
Russia's mergers and monopolies regulators have
approved a deal between the oil giant Yukos and its rival Sibneft which
will create the world's fourth-largest oil producer. The deal, announced
four months ago, has been hanging in the balance ever since Yukos became
the focus of a high-profile criminal investigation, believed by many to be
PENSION SCHEME CLOSURES SLOW
The rate at which firms are closing their employees'
final salary pension schemes has slowed, according to a new survey from
consultancy firm Watson Wyatt. A study of 290 companies with final salary
schemes found that while half had reviewed their pension provisions during
the past year, only a third of these had shut their schemes to new
members. The figure is down sharply from a 55% closure rate this time last
UK UNEMPLOYMENT FALLS AGAIN
UK unemployment rate has fallen to a fresh two-year low
as the service sector remains buoyant.
Data from the Office for National Statistics (ONS)
showed the number of people out of work in the three months to June fell
by 42,000 to 1,458,000, leaving the jobless rate at 5%.
UK SPENDS ITS WAY TO RECOVERY
The British economy is showing no signs of taking a
tumble, despite troubles among some of its main trading partners, the Bank
of England has predicted. In its quarterly inflation report, a key
platform for economic forecasting, the Bank of England said that a modest
recovery was the most likely prospect.
FED KEEPS US RATES ON HOLD
The US Fed has left interest rates unchanged at 1%
following the latest meeting of the central bank. Policymakers at the
Federal Reserve have decided to keep US interest rates unchanged as
evidence of an economic recovery gathers pace.
GERMAN CABINET BACKS REFORM
The German cabinet has approved an overhaul of the
country's welfare system in an effort to bolster Europe's largest economy.
The proposals to reorganise the jobless benefit system and reform local
business tax form part of Chancellor Gerhard Schroeder's "Agenda 2010"
reform programme. The decision follows recent government figures showing
the German labour market had deteriorated further in July, with more than
one in 10 people now looking for work.
WEAK CHIP PRICES HIT HYNIX
Weak memory chip prices have increased losses at South
Korea's struggling chipmaker, Hynix.
The financially-challenged firm racked up losses of
530.2bn won ($450m; £270m) in the three months which ended in June. That
is a 27% larger loss than suffered during the same three months a year
earlier, dashing hopes that the semiconductor industry is on the road to
GROWTH GATHERS PACE IN JAPAN
Japan's economy picked up speed between April and June
as more investment by companies and an unexpected increase in personal
spending underpinned the best growth for nine months.
Figures issued by the government showed that in the
three months to June the economy grew 0.6%, well ahead of the 0.2%
forecast by economists. Stock prices responded strongly to the news, as
investors piled into property companies and the big banks.
The two sectors are among those worst hit by Japan's
decade-long downturn, the one hit by slumping prices and the other
burdened by trillions of yen in bad debts.
FRESH BID FOR GHANA GOLD MINE
The competition to take over Ghana's biggest gold miner
hotted up as London-listed Randgold confirmed reports that it is entering
the race with an initial bid worth almost $1.5bn.
The new offer jumps well ahead of the main one
currently on the table, which sees South Africa's AngloGold — part of
Anglo American, the world's third largest mining concern — offering shares
AUSSIE RATE CUT 'OFF THE
A booming housing market and soaring business
confidence means that borrowing in Australia is unlikely to get cheaper
any time soon. The National Australia Bank's monthly survey of how
optimistic businesses are about the future hit a 15-month high in July, as
Australia's non-farm economy outpaced the sluggishness seen elsewhere in
CHINA SEES FACTORIES BOOM
China's economy is continuing to defy the gloom felt
elsewhere in the world, according to official figures, with production
soaring and foreign trade at record levels. The first month of the second
half of the year showed factory output up 16.5% on the previous year
according to the State Statistical Bureau, as China shrugged off the
after-effects of the Sars respiratory virus.
The figure for July is slightly above the total gain
for January to July, and is concentrated on electrical and machinery
products. But the breakneck performance — coming at the height of the
summer heat and the consequent upsurge in air conditioner power demand —
has heightened pressure on the electricity sector, leading to ongoing
AXA PROFITS SLUMP
The group made a profit of 209m euros ($237m; £148m) in
the six months to June, down 75% on the previous year.
US FIGHTS BACK IN STEEL WAR
The US has appealed against the World Trade
Organisation's (WTO) decision that its steel tariffs flout international
trade rules. A WTO panel decided in July that US steel tariffs were
without justification and ordered the US to either remove the tariffs or
UK TRADE GAP WIDENS
Britain's trade deficit has recorded a surprise
increase, due to a sharp slowdown in exports to countries outside the
European Union. The Office for National Statistics (ONS) said the total
value of imports exceeded the value of exports in June by £4.5bn ($7.2bn),
up from £4.1bn in May.
The figure wrong-footed City economists, who had been
expecting the trade gap to narrow to £3.8bn.
The unexpected increase partly reflected a steep drop
in the value of non-EU exports, which fell by 13.1% compared with the
previous month.The total trade deficit with non-EU countries climbed to
£2.7bn, up from £2.3bn in May.
ITALY SLIDES INTO RECESSION
Italy has officially entered recession, after
preliminary figures indicated that its economy shrank in the April to June
period. Italy's economy contracted by 0.1% over the three months,
according to the national statistics agency statement. An identical
performance in the first three months of the year means Italy has now met
the traditional definition of recession — an economy shrinking over two
successive quarters — for the first time in 11 years.
'ENCOURAGING' SIGNS FOR UK
The number of tourists visiting the UK from abroad is
showing signs of reviving, according to the latest official figures. A
total of 2.41 million people visited the UK in June this year, an 8% rise
on the same period last year, figures from the Office for National
Statistics (ONS) showed.