"The US had a smaller trade deficit with every
region including China. Perhaps that is in part reflecting the dollar's
decline against the euro." The dollar has fallen heavily against the
euro and other currencies over the last six months, pressured by concerns
that the soaring trade gap and a hefty US budget deficit could destabilise
the economy. The shrinking trade deficit will fuel hopes of an orderly
adjustment, and raises the prospect of an export-led boost to US economic
The positive trade figures pushed the dollar slightly
higher against the euro in New York. They also brightened the mood on Wall
Street, where the benchmark Dow Jones share index was up 64 points at
10,492 by about 1820 GMT. The US economy received another vote of
confidence in the Federal Reserve's so-called beige book, a snapshot of
economic conditions released eight times a year.
GERMAN ECONOMY SHRANK DURING 2003
Germany, the biggest economy in Europe, shrank by 0.1%
in 2003, official statistics have shown. It was the German economy's
weakest full-year performance since the 1993 recession when it shrank
1.1%. Germany's economic woes and inability to keep its budget deficit
within European Union limits have triggered a legal challenge from the EU.
But economists believe that Germany's recession is over the worst and
expect to see growth of about 1.5% in 2004. Shoppers' reluctance to spend
during 2003 sapped domestic growth, which was too feeble to make up for a
slow-down in exports, the Federal Statistics Office said.
Economy Minister Wolfgang Clement predicted a brighter
future with shoppers taking to the stores again and industry investing to
satisfy "pent-up demand". Exports rose by a sickly 1.1% in 2003,
while consumer spending shrank 0.2% and investment in German industry
contracted 3.3%. "Overall, the economic development was disappointing
in Germany in 2003, like in the previous two years," said Johann
Hahlen, President of the Federal Statistics Office.
"There were signs of a weak recovery in the second
half of the year but one can't yet speak of a sustained revival," he
said. Germany's centre-left government is expecting consumers to start
spending more once they get their hands on tax cuts totalling worth 7.8bn
euros (£5.5bn; $9.5bn) — it pushed through parliament last autumn.
US REPORTS POINT TO FASTER GROWTH
US economic figures released last week provided further
evidence that the world's largest economy is on course for a sustainable
recovery. Retail sales climbed for a second month in December, while
unemployment claims dropped and inflation stayed in check. That will give
the US Federal Reserve, the country's central bank, the room it needs to
keep interest rates at their lowest levels in almost 50 years. Some
economists have lifted growth forecasts as a result.According to Commerce
Department figures, retail sales climbed 0.5% in December, compared with a
revised increase of 1.2% in November.
US TO FIGHT EU SANCTION REQUEST (BOX)
The US will fight European Union plans to impose
sanctions on it for failing to scrap illegal trade rules. At issue is the
Byrd Amendment, under which US companies get part of the fines levied
against rivals who sell products at artificially low prices. The World
Trade Organisation (WTO) found that the payments were illegal. John
Veroneau, general counsel in the US Trade Representative's office, said
the US would seek arbitration as the law does not hurt European exporters.
EU Trade Commissioner Pascal Lamy said the US must comply with the WTO's
decision or face the consequences. Mr Lamy said he hoped the US government
would take action to avoid the risk of sanctions, which it had earlier
asked for the right to impose.
BEIJING IMPOSES DUTIES ON STEEL
China is to impose tariffs of up to 55% on cold-rolled
steel imports from five countries, which it says are hurting its domestic
producers. The Ministry of Commerce in Beijing said that steel imports
from Russia, South Korea, Ukraine, Kazakhstan and Taiwan were being sold
below cost.The move comes against a background of bitter global steel
trade disputes. China — which is experiencing an industrial boom — is
the world's top steelmaker and user.
EU TAKES BUDGET BATTLE TO COURT
The European Commission has launched legal action to
uphold the budgetary rules underpinning the euro. The institution has
asked the European Union's highest court to annul a decision by EU finance
ministers to temporarily suspend the rules. The move ups the ante in a row
between the Commission and France and Germany, which have repeatedly
breached EU limits on government spending. If successful, it could pave
the way for penalties against both countries. The decision in November to
suspend the budgetary rules — set out in the so-called stability and
growth pact — partly reflected reluctance on the part of other EU
countries to penalise the eurozone's two most powerful members.
Italy's economy minister has questioned the failure of
the country's central bank to spot problems at scandal-hit food and dairy
IBM'S FOURTH-QUARTER PROFIT JUMPS
The world's biggest maker of computers IBM said
fourth-quarter profit doubled as clients bought more of its hardware,
software and services. Fourth-quarter profit jumped to $2.7bn (£1.5bn;
2.1bn euros) from $1bn a year earlier. Sales also improved, climbing 9% to
SAMSUNG UNVEILS SURGE IN PROFITS
South Korean consumer electronics giant Samsung has
reported a 24% rise in net profits for the last quarter of 2003. Samsung
posted net profits of 1.86 trillion won ($1.57bn; £860m), while sales
also grew by a robust 21% from a year earlier to 12.8 trillion won.
INDIA RELAXES FOREIGN OWNERSHIP
India is to allow foreign companies to buy up
privately-owned Indian banks and oil enterprises.The cabinet agreed last
week to raise limits on foreign investment in the petroleum and banking
sectors. Foreign companies can now invest up to 100% in oil refineries and
retail outlets, a government spokesman said.
RAC CALLS FOR £20BN ROAD SPENDING
The government must spend at least £20bn for urgent
improvements to trunk roads and motorways to avoid gridlock, according to
an RAC Foundation report. The current "ad hoc and short term"
approach to roads has caused "dire and growing congestion", it
says. The proposed improvements could be paid for out of just half of one
year's motoring taxation, the report adds. Motorways and trunk roads make
up about 4% of Britain's road network but carry around 35% of traffic and
SOUTH AFRICA FACES GRAIN SHORTAGE
At least 15 million South Africans face food shortages
after a severe drought. Director for Disaster Intervention Toffee Mokgethi
told the BBC the government would have to provide emergency food supplies
by June. Farmers' leaders say the current drought is possibly the worst to
hit the country in nearly a century. South Africa will have to use its
large food reserves to feed itself, sharply reducing its capacity to send
relief to other countries in the region.
JP MORGAN SEALS $60BN MERGER
Wall Street legend JP Morgan Chase and US retail bank
Bank One have announced plans to join forces. The deal, which requires
regulatory approval, would be the biggest financial sector merger in five
years. Worth some $60bn, the transaction would consolidate JP Morgan's
position as the world's second biggest bank after Citigroup, owner of
JOBLESS FIGURE CONTINUES TO FALL
UK unemployment fell by 29,000 to 1,460,000 in the
three months to November, the latest government figures have shown. The
drop brought the unemployment rate down to 4.9% of the workforce — a
rate last seen in early 2001, the Office for National Statistics (ONS)
CHRYSLER RECALLS 2.7 MILLION CARS
Chrysler is recalling 2.7 million cars following
concerns about the safety of their gearboxes. The US's fourth largest
carmarker says the older models could inadvertently roll out of parking
positions if the gearbox was used with "abusive force".
GERMANY UNVEILS HUGE DEFENCE CUTS
Germany has announced major cuts in military spending
as it aims to revamp its armed forces. Defence Minister Peter Struck says
up to 26 billion euros (£18bn) will be cut from the budget for arms
procurement, troops and military bases. As Germany faces major financial
restraints, Mr Struck said the plan was "about switching military
planning from unrealistic projects back to realism". Rural towns say
they will be hard hit by the possible closure of 100 bases. Mr Struck said
that on top of the closures and spending cuts, the army would be cut by
35,000 troops to about 250,000.
SETBACK IN MANUFACTURING RECOVERY
UK manufacturing fell 0.7% in November, its biggest
decline in over a year, according to figures released by the Office for
National Statistics (ONS). The slide almost reversed October's 0.9%
advance and may signal that a recovery in output is sputtering. Nine of
manufacturing's 13 subsectors fell in the month, including electrical and
optical equipment, pulp, paper, printing and publishing, and food. The GMB
and Amicus unions warned this year that manufacturing is in
BANK OF ENGLAND ACCUSED OVER BCCI
Bank of England officials "shut their eyes and
turned away" instead of clamping down on fraudulent activity at BCCI,
the High Court has been told. Liquidators of the collapsed bank are suing
the UK's central bank for about £1bn for "knowingly or
recklessly" failing in its supervisory role. They are acting on
behalf of 6,500 UK-based depositors, who lost money when the rogue bank
was shut down in 1991. The Bank of England says it plans to defend itself
RECORD NUMBERS USING UK AIRPORTS
Airports operator BAA reported its busiest ever
Christmas as the number of passengers flying out of the UK climbed to
record levels. The seven UK airports run by BAA handled more than 10
million passengers in December 2003, a 6.2% rise from the same month in
the previous year.
US BEEF EXPORTS 'TO DROP BY 90%'
US beef exports will fall by 90% in 2004 after the
discovery of the first case of mad cow disease, the US Department of
Agriculture has said. Its forecast comes after virtually all foreign
countries banned imports of US beef following the single outbreak of BSE
in Washington state last month. The department also predicts a big fall
for US cattle prices across the year.
UK FINANCE FIRMS 'BOUNCING BACK'
UK financial services companies enjoyed their fastest
profits growth for more than three years during the last quarter of 2003,
a survey says. Business volumes and optimism rose for the third quarter in
a row, according to a survey by the Confederation of British Industry and
consultants PwC. The survey also showed that financial services companies
were taking on new staff for the first time in a year.
UK SEES DROP IN PROFIT WARNINGS
The number of profit warnings issued by top UK
companies fell by 40% last year, a study has found. The Ernst & Young
survey said that companies listed on the stock exchange issued 210
warnings in 2003, down from 353 in 2002.