The trade deficit is not improving. It is getting worse
despite the dollar depreciation," said Wells Fargo Banks chief
economist Sung Won Sohn. In recent months the dollar has fallen sharply
against major currencies which, in theory, should benefit the US trade
balance in two ways.
Firstly, it should make US exports cheaper and thus
more competitive in overseas markets. Secondly, it should make imports
more expensive, reducing demand for imported goods.
However, analysts noted there were some one-off factors
behind the worse-then-expected figures. Imported oil prices during January
were at their highest level since March 2003, which led to a 10% rise in
the US's petroleum deficit.
Also, exports were hit by restrictions on meat exports
following outbreaks of mad cow disease and bird flu. The trade deficit
with China rose after imports from the country grew by 6.6%.
The US government has been placing pressure on China to
revalue its currency against the dollar. The yuan is currently pegged at
8.28 yuan to the dollar, but US manufacturers have complained the currency
is undervalued by as much as 40% giving Chinese exporters an unfair
JAPANESE GROWTH AT 13-YEAR HIGH
Japan has unexpectedly cut its output estimate for the
last three months of 2003, but economic growth remains at its fastest pace
in 13 years.
Gross domestic product was up 6.4% year on year in the
last quarter of 2003, a sharp cut from the earlier 7% estimate.
Analysts said the revision did nothing to dent the
overall picture of a broad- based and vigorous recovery.
Most analysts had expected the GDP figure to be revised
upwards, calculating that reports of stronger corporate investment should
be starting to pay dividends.
In fact, the latest data showed that companies were
running down their inventories, rather than investing in new equipment and
Morgan Stanley economist Takehiro Sato said, however,
that the inventory drawdown was a positive signal for the future, clearing
the way for a fresh surge of corporate demand.
When companies start spending seriously once more, the
current rapid pace of growth should accelerate, economists believe.
The key to sustaining the recovery, the Japanese
authorities say, is to focus on exports.
These are the traditional bedrock of the modern
Japanese economy, but have suffered in recent months from the weakness of
But figures released separately showed that Japan's
current-account surplus, the broadest measure of trade in goods and
services, had more than doubled year on year in January to 1.1 trillion
yen (£5.4bn; $9.4bn).
Exports were up 11.3% on the same period of 2003, way
outpacing modest import growth.
The Finance Ministry sold 20 trillion yen last year to
prop up the dollar exchange rate, and has already spent 10 trillion this
FRANCE'S GROWTH TO TOP FORECASTS
France's budget minister Alain Lambert said he expects
economic growth to top forecasts this year, helping boost tax revenue and
narrow the budget deficit.
Speaking on local radio, Mr Lambert also promised that
France would limit spending to bring the budget closer to European Union
limits. France wants outgoings to be less than 3% of gross domestic
product in 2005.
That may ease tensions in the EU, which last year had
to suspend budget rules to avoid punishing France and Germany. Mr Lambert
said that there is no doubt economic growth will be more than the 1.7%
expected this year.
"The recovery is confirmed, it has started in
France and Europe," he explained. "The return of growth is more
marked in France than it is in Europe."
Earlier, France said its 2003 budget deficit was 4.1%
of gross domestic product, more than the EU's 3% limit.
KOIZUMI AD ASKS FOR FOREIGN CASH
Japanese Prime Minister Junichiro Koizumi has launched
a personal appeal for extra foreign investment. Mr Koizumi urges investors
to back Japan in a television advertisement airing soon in Europe and the
"We have all you need for success, and we welcome
your business. Why don't you join us?
Invest in Japan!" the prime minister says. The
advertisement comes amid signs that the Japanese economy is on the mend
after ten years of stagnation.
Recent figures showed that Japan grew at an annualised
rate of 7% in the final quarter of 2003, while corporate profits and
business sentiment are up sharply.
The improvement stems partly from Japan's policy of
weakening the yen against the dollar and euro, which has triggered a surge
in export demand.
UK TRADE DEFICIT HITS RECORD HIGH
Britain's trade deficit with the rest of the world hit
a record high during January, official figures have shown.
The Office for National Statistics (ONS) said the
deficit in goods and services reached £4.6bn, compared with a £3.1bn
deficit in December.
Exports to the US fell sharply, which experts said
could be due to the pound's strength against the dollar. Separate figures
from the ONS showed manufacturing production rose by a
weaker-than-expected 0.2% in January
The ONS figures showed the trade gap in goods alone was
£5.6bn in January — also a record high.
ARGENTINA SET FOR FRESH IMF CASH
Argentina has received the green light from the
International Monetary Fund for fresh funding of $3.1bn (£1.7bn).
It will be the latest disbursement under a $13.3bn
rescue package agreed with the US-based lender last year.
It was made possible after Argentina met a 9 March
deadline for repayment to the IMF of arrears totalling $3.15bn.
Argentina's president had threatened to default on the
arrears unless the IMF cleared the way for a fresh disbursement from the
IMF acting managing director Anne Krueger said she was
making recommendations to the IMF's executive board that would lead to
disbursement of the funds.
GROWING US TRADE GAP HITS STOCKS
US stocks nosedived on Wednesday after the Commerce
Department revealed the trade deficit hit an all time high of $43.1bn
(£24bn) in January.
The Dow Jones and Nasdaq closed down 1.5% on March 10,
triggering a falls in Japanese stocks.
The record US trade deficit dashed that the recent fall
in the dollar would stimulate exports. The politically sensitive trade
deficit with China rose to $11.5bn in January, up from $9.9bn in December.
The Dow Jones Industrial Average had lost all its 2004 gains when US stock
markets closed on March 10, having dropped 160 points to 10,296.8 during
the day. The hi-tech Nasdaq index slipped 31 points to 1,964.1.Tokyo's
benchmark Nikkei index lost 1.2% to close at 11,297 on March 11.
REBOUND CURES HK'S BUDGET BLUES
Rapid economic growth is doing wonders for Hong Kong's
public finances, Treasury Secretary Henry Tang has said in his 2004/05
Mr Tang forecast 2004 growth for the territory at 6%,
almost double last year's rate.
The pick-up, based on mainland China's inexhaustible
thirst for imports, has allowed Mr Tang to avoid tax increases.
Last year, a troubling fiscal position led many
analysts to forecast a raft of tax rises in the territory.
CHINA SHIFTS ON PRIVATE PROPERTY
China's parliament, the National People's Congress (NPC),
is discussing an amendment to the constitution guaranteeing legal
protection for private property for the first time.
But the All China Federation of Industry and Commerce
has said that while it welcomes the move, much more needs to be done to
create a level playing field for private business.
US CARS PLAY CATCH-UP ON QUALITY
Asian carmakers are still streets ahead of their US
rivals when it comes to reliability, new figures suggest.
A survey by Consumer Reports said that on average cars
made by US firms had 18 faults per 100, against 12 per hundred for Asian
But the US numbers are improving, Consumer Reports
said, showing a reduction from 21 the previous year.
And for the first time in 25 years US models came in
ahead of European ones, which had an average of 20 faults.
HUTCHISON CLEARS 3G DEBTS EARLY
Asian conglomerate Hutchison Whampoa has announced
plans to clear debts at its third generation (3G) mobile phone operations
in the UK ahead of schedule.
The Hong Kong-based group, which owns British mobile
network '3', will repay bank loans of £1.5bn ($2.8bn).
VW CUTS JOBS AND WARNS ON PROFITS
Shares in Europe's largest carmaker Volkswagen have
fallen sharply after the company warned of weak profits and immediate job
"The operating profit for the first quarter of
2004 will be, to coin a phrase, miserable," said Volkswagen Group
chairman Bernd Pischetsrieder.
VW's automotive division's workforce is to be cut by
3.5%, or 5,000 jobs.
IMF APPROVES LOAN
The International Monetary Fund has approved a $39m
(£21.4m) loan for the Democratic Republic of the Congo.
The money is part of the IMF's Poverty Reduction and
Growth Facility, which has pledged aid worth about $858m.
The presidents of Kenya, Uganda and Tanzania have
signed a protocol to prepare the ground for a customs union.
Kenya's Mwai Kibaki, Uganda's Yoweri Museveni and
Tanzania's Benjamin Mkapa signed the document in the northern Tanzanian
town of Arusha.
REFORMERS STAY IN PUTIN CABINET
President Vladimir Putin has ditched his foreign
minister but reappointed key reformers in a cabinet named days before
Russia's presidential election.
Foreign Minister Igor Ivanov, a Yeltsin-era veteran, is
replaced by UN ambassador Sergei Lavrov.
Mr Putin sacked his entire government two weeks ago to
get rid of Yeltsin-era Prime Minister Mikhail Kasyanov.
The team will stay in place after vote, which Mr Putin
is expected to win by a landslide.
CHINA VOWS TO KEEP CURRENCY PEG
Hopes in the US that China could make its currency
stronger are doomed to disappointment, economic leaders warn.
The yuan is fixed at 8.28 to the US dollar, a low rate
which many in the US say costs US jobs. But despite the US's feverish
diplomacy and loud complaints, the peg is here to stay for "a long
time to come", China's top foreign exchange official said.
The announcement follows a shift in economic policy to
slow down growth and focus on helping the rural poor.
The low level of the yuan is widely believed to have
contributed to a blistering 9.1% growth rate last year — a rate which
the government now fears is overheating and imbalancing the economy.
A new target of 7% for 2004 was set last week by Prime
Minister Wen Jiabao, in the hope of avoiding a "boom and bust"
India's inflation rate has soared to almost 6% this
year, exceeding the government's annual target of 4.5%, officials say.
"The 4 to 4.5% forecast will be exceeded. But
there is nothing to lose sleep over," senior finance ministry
official Ashok Lahiri told reporters.
STRONG POUND CUTS FACTORY COSTS
The cost of raw materials used by UK manufacturers has
fallen thanks to sterling's rise against the dollar.
The strong pound contributed to a 0.8% fall in input
prices during February, government figures showed, by pushing down the
cost of imports. The fall meant that input prices were down 1.8% on the
same point last year. Manufacturers also managed to lift the prices of
goods leaving their factories by 0.2% in February, giving an annual rise
THAILAND'S ECONOMY GROWS BY 6.7%
Thailand's economy grew by 6.7% in 2003 — the biggest
surge since before the 1996/1997 Asian economic crisis — according to
new data. The National Economic and Social Development Board, an advisory
body, said booming exports and a healthier world economy led to the
growth. The bird flu crisis which killed 22 people in Vietnam and Thailand
had a limited impact, it added. The government expects stronger growth of
between 7 to 8% for 2004.
CENTRAL BANKS SET GOLD SALE LIMIT
Fifteen European central banks have agreed a cap on how
much gold they can sell over the next five years. The
deal commits the European Central Bank, and the banks of every European
Union nation except the UK and Denmark, to sell only 500 tonnes a year.
The agreement extends a 1999 deal till 2009,
and may help keep prices high. Gold
operates as a "safe haven" for investors in troubled times, and
is particularly in demand at the moment in the face of a weak US dollar.