It certainly looks like their recovery is going much slower than anticipated and a little shock might do them good.
a little shock?
as in a rate cut?
you've been predicting "inflation" and the requisite rate hikes since last spring....think again...
higher fuel costs are disinflationary
all it serves to do is take away already constrained (by debt) spending power, thus inhibiting any pricing power as more sectors of the economy compete for an ever shrinking slice of the pie
if my corporation's fixed expenses (fuel) goes higher and i don't have pricing power because of competitive influences, all i can do is look to more downsizing, efficiency and cost-cutting to make up that deficit in profits that higher fuel costs dictate.
the ECB has been stubbornly holding out reducing rates in anticipation of "inflation"...i do give them credit for holding the line as the monetary policy of the u.s (pushing on a string)has done nothing to change the supply/demand equation....
(oh gee, let's make money "cheap" so biz can borrow more to build more stuff nobody really needs at a cheaper price ....it's not happening)
enter china...
the only thing that's changed is the ad interim "demand" of china as it sucks up more commodities than expected as it gears up for yet more manufacturing ("intravenous" supply) feeding a debt-laden "patient" ..(the u.s. consumer)....temporarily running up certain commodity prices...
locally we had a contractor walk away from a $25M contract on a sports stadium rather than take a loss due to rising steel prices....yep, more job losses because of spiraling steel prices...how inflationary.
ksdk.com
and it ain't gonna last
china is in a race against other competing asian economies to build more supply capacity for a diminishing demand....
even the profligate spending americans sooner or later do what is in their financial best interest....and in a debt regime and that is.... "quit buying so much freakin' stuff"
....american consumers appeared to have spent less despite higher net income (tax relief)..a trend? how very japanese of them
cbs.marketwatch.com
and back to european rate cuts on the horizon...
news.bbc.co.uk
Germany's Ifo asks for rate cut
Influential German think-tank Ifo is calling for a cut in eurozone interest rates following indications that the country's recovery is in trouble.
Ifo's business climate index, closely watched as a barometer of the health of German businesses, fell for the second straight month in March.
This, Ifo president Hans-Werner Sinn said, showed that Germany's recovery was "clearly at risk".
"The time has come to cut interest rates in Europe," he said.
The board of the European Central Bank - which sets rates for the 12-nation eurozone - meets next on 1 April, amid speculation that it might finally drop rates below the current 2% set last June.
Joerg Kramer of Investco Asset Management said the risk of Germany falling back into stagnation or recession was 30% - as was the chance of a rate cut.
Gloom
Mr Sinn's comments accompanied news that the Ifo survey of 7,000 firms showed a drop in the main climate index to 95.4 from 96.4.
The expectations index - which means businesses' confidence about the future - fell to a six-month low of 98.9.
Similarly, the measure of firms' assessment of current conditions fell for the first time in six months.
The data was collected both before and after the Madrid bombing, which made little difference to the general gloom, Mr Sinn said.
"These numbers are certainly a serious signal that something is not right," said Ralph Solveen at Commerzbank.
The Ifo survey follows hard on the heels of the ZEW survey, which showed a sharp fall in business confidence.
Growth in Germany was just 0.2% in the final three months of 2003, a figure which could be merely the result of statistical error. |
