Earlier this month, both Germany and Italy announced
they had fallen into recession after recording two consecutive quarters of
contraction. "We are very disappointed with this figure.... this is very
negative for France," said Irina Topa, an economist at Societe Generale.
France's Prime Minister Jean-Pierre Raffarin said last month he expected
the economy to grow 0.1% during the second quarter. And the unexpected
contraction spells trouble for the government, which desperately needs
growth to generate more tax revenues in order to try to rein in the public
"We expected better figures than this but it seems
that, despite the drop in inflation, the bad state of the job market has
weighed on consumers," said Jean-Louis Mourier, an economist at Aurel
Leven. Amongst France's economic difficulties, exports dropped by 0.6% and
consumer spending eased by 0.2%. Despite the first half year's poor
performance, Mr Raffarin still predicts an expansion of 0.8-1.5% for the
year as a whole. "The second quarter was exceptional owing to the
consequences of the war in Iraq, the poor international economic climate
and recession affecting several of our partners. It does not represent a
trend," a ministry statement said.
UK'S MANUFACTURING ORDERS PICK UP
An increase in orders has provided manufacturers with a
"glimmer of hope", the Confederation of British Industry (CBI) has said.
The CBI's latest industrial trends survey revealed order books reached a
nine-month high in August, due to higher demand at home. But the CBI did
say that total orders in August remain well below normal levels, despite
being the highest since November 2002. Export orders remained just as far
below normal as they did in July, the CBI added.
Its monthly poll found 36% of manufacturers said their
order books were below normal, while 12% said they were above normal. That
gave a balance of minus 24%, up from minus 37% in July.Doug Godden, head
of economic analysis at the CBI, said: "Conditions facing manufacturers
have proved disappointing throughout this year. "This survey provides a
glimmer of hope for a revival in fortunes. The big question now is will
this prove another false dawn?"
Mr Godden added that manufacturers are still facing
tough conditions with weak overseas markets leaving them unable to benefit
from sterling's decline. Meanwhile, in the UK they seem to have been
missing out on domestic demand generated by consumers and the government.
Paul Dales, UK economist at Capital Economics, poured
cold water on the idea that the latest figures could signal a recovery for
manufacturers. He said: "We are doubtful that this is the first step on
the way to meaningful recovery. The negative view was compounded by Office
for National Statistics (ONS) data that showed business investment between
April and June fell 1.1% on the previous three months to stand 3.5% lower
on the same period last year.
EURO SINKS AGAINST DOLLAR
The euro has hit new four-month lows against the
dollar, as investors fret about the state of the European economy. The
euro's fall was made worse by a string of upbeat economic data coming from
the US, which helped the dollar. In late US trade the euro stood at
$1.0919, down nearly 2% on the day.
The euro has lost 8% of its value against the dollar
since June, partially reversing a sustained 33% increase since early last
year.Of the world's three major currencies, it has suffered most from the
exodus from government bond markets by traders who previously preferred
European bonds prior to the Iraq war. The euro also fell against the yen
on August 21, slumping more than 2% to 128.64 yen, its weakest level since
DOW JONES HITS 14-MONTH HIGH
US stocks raced upwards on August 18, pushing the Dow
Jones index to close at its highest level for 14 months. Investors
shrugged off worries about the economic damage inflicted by power cuts
across a huge swathe of the eastern and central US to focus instead on
signs of underlying economic recovery.
The Dow Jones Industrial average rose nearly 1% to
close at 9,412.45, its highest level since 20 June 2002. The tech-based
Nasdaq index soared 2.2% to finish at 1,739.49. The broader Standard and
Poor's 500 index also put on almost 1% to 999.74.
In the last few weeks, US firms have published details
of their earnings during the second quarter of 2003 and overall the
picture has been better than expected.
UK BUYERS PUT BRAKE ON CAR IMPORTS
Britons have put the brake on importing cars, largely
because they can get better deals in the UK.
A total of 44,000 cars were brought into the UK by
individuals in the first six months of the year, figures from the Society
of Motor Manufacturers and Traders (SMMT) have shown.
In the same period last year 72,000 vehicles were
imported. Economists say the fall is partly due to the falling cost of new
cars, and partly down to the increasing strength of the euro against the
pound which has made importing cars from the eurozone less profitable.
JAPAN'S NIKKEI TOPS 10,000
The Japanese stock market has risen above the
psychologically important 10,000 level for the first time in a year. The
Tokyo Stock Exchange's Nikkei 225 index of leading shares gained 169.50
points on August 18 to end the day at 10,032.97 — the first close above
the symbolic level since August 26, 2002, when it reached 10,067.74
points. Japanese stock markets have been depressed for the last year
because of economic weakness at home and in Japan's largest export market
— the United States.
AIRBUS WINS US ORDER
European plane maker Airbus has said the US low-cost
airline Frontier Airlines has placed an order for 15 of its A319 aircraft.
The new planes will be delivered to the Denver-based carrier between 2004
and 2008. The planes have a list price of $55m (£34.7m) each but Airbus
gave no details of any discount that Frontier may have negotiated on the
TAIWAN THREAT TO CANCEL BOEING
Taipei has threatened to terminate an order its main
air carrier China Airlines (CAL) made with Boeing after the company
cancelled a visit by the Vice President Annette Lu. Ms Lu said Boeing
cancelled her visit to its headquarters in Seattle scheduled for August 18
under pressure from China.
AUSTRALIA CLEARS PATH FOR TELSTRA SALE
The Australian parliament has passed legislation to
enable the controversial privatisation of the national phone company
Telstra. But the bill could still, however, fail to win approval in the
Senate where the Liberal-led coalition government is in a minority. The
sale of the government's 50.1% stake in Telstra — which would be
Australia's biggest ever privatisation — is expected to raise about A$35bn
($23bn; £14.5bn) .
UK RETAIL SALES WILT IN JULY
UK High Street sales fell by less than expected in July
after the previous month's heat-induced surge, official figures showed.
The Office for National Statistics (ONS) said retail sales fell by 0.4%
during July, leaving them 4.4% higher than a year earlier. The latest fall
is the largest seen since the beginning of the year.
US BLACKOUT SPOTLIGHTS WARNING SYSTEMS
Investigations into North America's worst ever power
failure are focusing on an early warning system of telephone hotlines. But
US Homeland Security Secretary Tom Ridge has said the power cuts showed
that emergency response procedures put in place since 11 September 2001
"worked pretty well".
Regional power firms said they were checking their
records of conversations with Ohio-based FirstEnergy about problems in the
hours ahead of the blackout. The head of the US Federal Energy Regulatory
Commission (FERC) has said it would take "days and weeks" to establish the
cause of the power cuts.
MOZAMBIQUE AIMS FOR TITANIUM WEALTH
Mozambique could become a major producer of the rare
metal titanium as the result of a mining project that has just won $20m
backing from the World Bank. For Mozambique to take its place among the
world's key world mineral producers would be a massive step forward given
that it is one of the poorest countries in Africa.
An Irish mining company, Kenmare Resources, is putting
the finishing touches to a $200m mineral sands project in one of its
poorest regions, Nampula Province in the north-east of the country.
Mineral sands comprise mainly rare rutile, from which titanium is derived,
All three metals are in demand in many industries, but
especially in electronics.
CHAVEZ FOES PUSH FOR EARLY POLL
Tens of thousands of people march last week in the
Venezuelan capital, Caracas, in support of a referendum to force President
Hugo Chavez out of office. Opposition groups delivered a petition to the
electoral authorities — signed by more than 2.5 million people — to demand
the early vote.
ARNOLD TO SWING BUDGET AXE
California governor hopeful Arnold Schwarzenegger has
given the first indication of how he would attempt to ease the state's
economic crisis if elected. The Hollywood film star said his first act as
governor would be to organise an independent audit of California's budget
to identify the problems. Mr Schwarzenegger vowed to cut spending but not
raise taxes — he did not give details about where he would make the budget
NEW ROW OVER US MEDIA CONTROL
The chief media regulator in the US is fighting back
against accusations that he wants to strengthen media giants and hamstring
local broadcasting. In a news conference at the Washington DC headquarters
of the Federal Communications Commission its Chairman, Michael Powell —
son of Secretary of State Colin Powell — set out plans to deal with what
he called a "deep-seated anxiety" about threats to local content.
DELL MAKES GRAB FOR MARKET SHARE
Dell, the computer giant known for its aggressive
pricing, has again slashed its prices in an attempt to reinforce its
global market lead. Dell's prices will now fall by up to 22%, taking its
best-selling desktop computers down as low as $550.
BRAZIL SLASHES INTEREST RATES
Brazil's central bank has slashed the cost of borrowing
money in response to falling inflation, raising hopes that the authorities
are taking seriously the fragile state of the huge country's economy. The
2.5 percentage point fall the third decrease in as many months, after
rapid increases earlier this year — still leaves interest rates at 22%,
high by developed country standards.
DEUTSCHE BANK FINED OVER HP VOTE
A unit of Deutsche Bank has agreed to pay $750,000
(£472,000) to settle charges that it failed to disclose its conflict of
interest when advising on the merger of Hewlett Packard and Compaq.
Deutsche Asset Management recommended its customers should vote in favour
of last year's merger of the computer giants. But the US financial
watchdog claims the bank neglected to tell its clients that one of its
investment divisions was working for Hewlett Packard (HP) at the time.
HP paid Deutsche Bank $1m for "market intelligence"
during the takeover, with another $1m to be awarded on the deals'
success.Deutsche Asset Management's vote eventually helped HP succeed in
its $18bn takeover of Compaq, despite the best efforts of the HP family to
block the deal.
BRITISH FAILURE HITS AUSTRALIAN INSURER
Australian insurer AMP has reported one of the largest
losses in the country's corporate history after a disastrous investment
into the UK's life insurance market took its toll. AMP lost 2.16bn
Australian dollars ($1.4bn; £880m) in the first six months of the year, a
radically different story from the A$303m profit made in the same period a
ZURICH PROFITS MARK SHARP RECOVERY
The Swiss insurance giant Zurich Financial Services
made net profits of $701m (£442m) during the first six months of this
BANK UNITED ON RATE FREEZE
The Bank of England's monetary policy committee (MPC)
voted unanimously to keep interest rates on hold this month, according to
the official record of its meeting on 6 and 7 August. All nine members of
the panel voted to freeze rates at their current 48-year low of 3.5%, the
minutes of their meeting stated.