INTERNATIONAL

 

Sept  01 - 07 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF


US ECONOMY EMERGES FROM THE DOLDRUMS

The US economy emerged from the doldrums, growing at a solid annual rate of 3.1% between April and June the strongest rate seen since the same period last year. The Commerce Department said it had raised its estimate of gross domestic product (GDP) growth from 2.4% following stronger consumer, business and federal defence spending data.Consumers were a major force, boosting spending by 3.8%, up from an earlier estimate of 3.3% and compared with 2% in the previous three months.

 

 

 

The war in Iraq also provided a huge lift with defence spending posting the biggest rise seen since the Korean war in 1951. Meanwhile, the report hinted that businesses, whose reluctance to spend in previous quarters was a main factor in the economy's listlessness, may be coming around.

Spending on equipment and software rose at a rate of 8.2%, up from 7.5% in the January to March period. The rise in GDP surprised economists who had forecast a revision to just 2.9%.

The rebound came after two straight quarters of meagre economic growth. GDP - which measures the value of all goods and services produced within the US increased at a rate of just 1.4% in the final quarter of 2002 and the first three months of this year. Jim Glassman, senior economist at JP Morgan in New York said the economy had probably been strengthening before the Federal Reserve Bank cut rates in a bid to stimulate the economy.

MIXED SIGNALS FOR JAPANESE ECONOMY

Japan's factories boosted their output in July by a greater margin than expected, delivering a shot in the arm to Japanese shares. But the figures contrasted sharply with evidence that much of Japan's economy remains in trouble, with unemployment still stubbornly high and household spending failing to show any signs of an upturn.

The industrial output gain, of 0.5% in July, was put down to the apparent improvement in the US economy by observers. Production of electronic goods including mobile phones and digital cameras was sharply higher, and vendors such as Sony are speaking of continuing their push for bigger market share in areas such as flat-screen TVs. The gain in output reflects recent figures showing the economy has now expanded for six straight quarters, and a IMF report leaked this week which boosted predictions of growth to above 1% for 2003.

But the worry remains that domestic spending Japan's Achilles heel throughout the past decade of unerperformance has yet to break out of the doldrums.Unemployment in July was stuck at 5.3%, unchanged from the previous month and not far off the all-time high of 5.5%. And household spending sank 6% over the year to July, reflecting worries about job security and undermining the chances of a domestic upturn. Retail sales figures accentuated the situation, showing a 3% year-on-year fall and a 28th straight month of decline. Economists noted that an unusually cool and wet summer may have been largely to blame.

PRESSURE MOUNTS ON CHINA'S YUAN

Concern is mounting that the Chinese currency, the yuan, may be misaligned, threatening the stability of the global economy. US Treasury Secretary John Snow is to travel to Beijing next week to express his government's concern that the yuan may be dangerously undervalued. The US National Association of Manufacturers (NAM) argued that the dollar was 15% overvalued, and particularly blamed the cheap yuan for causing job losses in American factories. The yuan is pegged at about 8.3 in the dollar, a rate the NAM said was up to 40% undervalued, giving China's exporters an unfair advantage and making its imports expensive.

 

 

JAPAN'S TRADE SURPLUS GROWS

Japan's annual trade surplus grew by 7.3% in July, official figures showed, as brisk exports to Asia offset sluggish demand in the United States. Overall, exports recovered enough to slightly outstrip the growth in imports, boosting hopes of a recovery in the world's second largest economy.

But the 799.2bn yen (4.32bn; $6.8bn) surplus figure was smaller than expected by many economists. And the markets gave a muted reaction to the news, with the recent strength of the yen against the dollar continuing to take its toll on exporters.

IRAQ WAR ADDS TO US BUDGET TROUBLE

The US will be in the red by almost half a trillion dollars next year thanks largely to the spiralling cost of involvement in Iraq, a non-partisan government report says. In its twice-yearly Budget Outlook, the Congressional Budget Office says the US will run up a deficit of $480bn in 2004, following a $401bn deficit this year.

The figures a new record in dollar terms are markedly worse than the CBO predicted in March this year, when the 2003 number was seen at $246bn. They suggest a near-$1.4 trillion deficit in the 10 years to 2013 where they had previously foreseen a surplus of $891bn.

BLAIR'S 'SHAMEFUL' TREATMENT OF KELLY

Tony Blair's evidence at the Hutton inquiry has failed to defuse criticism of the government's treatment of arms expert Dr David Kelly. Conservative leader Iain Duncan Smith accused the prime minister of "underhand" and "shameful" treatment of Dr Kelly, who killed himself days after giving evidence to a government committee.

Liberal Democrat leader Charles Kennedy said he was not sure if "knowing what we know now" MPs would back war with Iraq. The prime minister was giving evidence to the inquiry into the death of government scientist Dr David Kelly, the source for the BBC report about intelligence in last September's dossier being exaggerated to make the case for war.

SWISS RE PROFITS SOAR

Profits at Swiss Re, the world's second biggest reinsurer, have surged more than five-fold on the back of the stock market recovery and rising premiums. The company said it made 691m Swiss francs ($489m; 310m) in the first six months of this year, up from 118m in the same period of 2002.

FRENCH UNEMPLOYMENT RISES

The French economy has been dealt some more bad news after official figures showed the unemployment rate rose last month. The Labour Ministry said the jobless rate had risen to 9.6% last month, from June's figure of 9.5%.

BRAZIL FALLS INTO RECESSION

Brazil's economy has fallen into recession according to the latest set of official figures.During April to June period the country's gross domestic product (GDP) contracted by 1.6% from the first quarter of the year. The figure was worse than analysts' expectations and followed a contraction of 0.6% during the January to March quarter. Industrial output in the country has been hit by high interest rates, which have been used to keep inflation under control.

BHP BILLITON PROFITS SURGE

Profits at BHP Billiton, the world's largest mining firm, surged 74% in the last three months, the firm has said. The group, one of the firm's bidding for the Drax power station near Selby in Yorkshire, said stronger prices for oil, iron ore and metals helped profits jump to $545m (340.6m) up from $313m in the same period last year.

 

 

IMF WARNS US ON DEFICIT

The International Monetary Fund has warned the United States that while speedy economic recovery there would benefit the whole world economy, the Bush administration should pay more attention to the instability threatened by its huge budget deficit.

SRI LANKA'S $180M SPENDING PLAN

The Sri Lankan government has announced a $180m package to improve transport and power as a result of the ceasefire with Tamil Tiger rebels. Government spokesman GL Peiris said the 18-month programme would strengthen the rural economy and create thousands of jobs.

HOUSES 'BETTER INVESTMENT THAN GOLD'

Owning your own home has been almost twice as profitable as investing in gold over the last-three-and-a-half years, the Nationwide has said. The building society said the cost of property had risen by 68% to an average of 129,258 but the price of gold had risen just 35% to 237 per troy ounce during the same period.

FLEXIBILITY CALL ON EURO BUDGET PACT

French Prime Minister Jean-Pierre Raffarin has called for greater flexibility in the way the eurozone's budgetary rules are applied. His comments follow reports that France's budget deficit is set to exceed the permitted limit of 3% of gross domestic product (GDP) for the third year in a row in 2004. If the deficit does stay above the 3% level for a third year France could face fines for breaking the eurozone's Stability and Growth Pact.

US CONSUMERS FEEL GOOD

There is rising optimism amongst US consumers about the state of the economy, but analysts are more cautious. The latest consumer confidence figures from the Conference Board beat analyst expectations by rising 4.3 points to 81.3 in August.

ZIMBABWE ENDS FUEL CONTROLS

Fuel prices in Zimbabwe have risen by up to 500% after the government announced that it had ended price controls. Private companies will now be allowed to import fuel in a bid to end the fuel shortages which have plagued Zimbabwe for four years. The shortages had led to a thriving black market, where prices were even higher than the new rates.

TWO KOREAS BOOST CROSSBORDER TRADE

North and South Korea have signed a landmark agreement to increase direct trade, the latest step in the slow economic thaw between the two enemies. According to the agreement, made at bilateral talks unrelated to the simultaneous discussions over nuclear capability, South Korean firms will be encouraged to set up in the North. The town of Kaesong, just north of the border, has been selected as the site of an industrial park, currently being built by South Korea's Hyundai.

AUSTRALIAN BANK MULLS AMP TIE-UP

National Australia Bank (NAB) has bought a stake in AMP, but ruled out a takeover until the troubled financial services firm gets rid of its struggling British business. NAB paid 206m Australian dollars (84m; $134m) for a 5.4% stake in AMP, confirming long-standing rumours that the firm was the subject of acquisition interest.

 

 

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 under pressure from China.

'RECOVERY ON THE WAY' FOR GERMANY

Germany should start to recover its economic health in the second half of this year, the country's premier economic survey has suggested. The latest monthly survey by the well-respected Ifo institute set the business expectations index for West Germany at 102.1, up from 100.2 the previous month. Any figure above 100 in the 7,000-firm survey indicates expectations of expansion. The business climate index, the most closely-watched segment, rose to 90.8 from 89.3, in line with expectations.

AIR FRANCE PROFIT PLUNGES

Air France has seen profits fall by more than 95% as a result of the Sars respiratory virus, strikes at home, and the weakness of the global economy. The company said that it made 4m euros ($4.4m; 2.8m) after tax in the three months to the end of June, compared with 159m euros in the same period last year.

ZIMBABWE DOUBLES BUDGET

The Zimbabwean government has unveiled an emergency supplementary budget aimed at paying state employees' wages and importing food, seeds and medicines. Finance Minister Herbert Murerwa asked parliament to approve a supplementary budget of $840m (533m), almost doubling the country's existing budget.

UK FIRMS 'GROW COOL ON EURO'

Support for the euro among British businesses has fallen off, according to a survey. A poll of 200 firms by private equity house Gresham found that just 40% were in favour of the single currency, down from 52% three years ago.

UK GROWTH HOLDS STEADY

The British economy grew by 0.3% in the three months to June, official figures have confirmed. The final growth estimate from the Office for National Statistics was unchanged from an initial reading last month, wrong-footing City expectations of a slight upwards revision. According to the latest figures, the UK economy grew by 1.8% in the year to June, again unchanged from the initial estimate. The 0.3% figure is only about half the long-term trend rate for Britain, but compares well with the recent performance of other major European economies.