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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: gregor_us who wrote (993)	3/2/2004 9:30:33 AM
From: mishedlo	Respond to of 116555

UK Manufacturing a factory downturn The manufacturing sector's decreasing importance to the British economy has left it in a vicious circle of decline. By Suzy Jagger Union leaders have long cautioned that recent manufacturing data was too good to last. This morning, two announcements hinted that their warnings were well placed. GKN, the defence and car parts engineer, unveiled a restructuring which will send American and British jobs to Asia, South America and eastern Europe. A Chartered of Institute of Purchasing & Supply survey revealed that the UK manufacturing sector, which only last year emerged from recession, had shown surprisingly weak growth last month. Chris Williamson, the chief economist at NTC Research, which conducted the survey, said that the strength of the pound was central to the sector's unease. The currency's rise had rendered UK exports more expensive abroad while boosting the affordability of imports to British buyers. Mr Williamson added: "The big thing we have seen in the UK this month is that producers of intermediate goods are being priced out of a lot of markets. "They are being squeezed by high raw material prices and they are just not able to compete with cheaper goods from Asia." This morning's data was "perhaps an early warning indicator" of renewed problems within the sector. Yet any hopes of British factories gaining the conditions they desire appear limited when US authorities are so unconcerned about the weak dollar. The pound is only likely to appreciate as the Bank of England, fearing for the resilience in consumer spending, raises interest rates further. But inbcreased borrowing costs will only add to manufacturers' woes. The sector is caught in a vicious circle, whereby its decreasing economic importance means that little notice is taken of its plight, so monetary policy is tailored for other areas of the economy, to factories' cost. Prospects of a higher pound and rising interest rates mean that this circle is only likely to turn further. business.timesonline.co.uk

To: gregor_us who wrote (993)	3/2/2004 9:38:54 AM
From: mishedlo	Respond to of 116555

Strong pound predicted to keep rates on hold Sterling's strength is eating into Britain's manufacturing recovery, the latest snapshot of the sector revealed yesterday, prompting predictions that the Bank of England may spare borrowers another rate rise. Activity in the sector was at its weakest for five months, according to the Chartered Institute of Purchasing and Supply, with many firms blaming the weakness of the dollar. "Demand for goods in overseas markets is being affected by strong currencies. Competition from imported goods is also eating into order books," said Chris Williamson, chief economist at NTC Research, which compiles the CIPS index. The institute's activity index fell to 53.2 in February, from 55.5 the previous month, a weaker reading than City analysts had expected but still above the 50 level that indicates the sector is expanding. In recent months the survey has leapt ahead of official data, which is showing a rather weaker picture. "February's decline is probably best viewed as a correction from unrealistically high levels rather than a harbinger of a 'double-dip' slowdown in British industry," said Ross Walker at the Royal Bank of Scotland. Consumers are still stacking up debt at record rates, according to separate figures published by the Bank, despite two rate rises since November. But analysts said the Bank's monetary policy committee, which meets this week, was unlikely to hit borrowers with another rise this month. "We believe the MPC will be content to hold fire on rates this week, especially given the appreciation in sterling," said Ciaran Barr, UK economist at Deutsche Bank in London. Consumer credit surged by nearly £2bn in January, the strongest rise in eight months. John Butler of HSBC said the Bank had two battles on its hands: calming the household borrowing frenzy without hiking rates to the point that would send industry back into recession. The strong borrowing figures prompted a fresh rise in sterling to $1.8722, up a quarter of a percentage point from late New York levels on Friday. guardian.co.uk

To: gregor_us who wrote (993)	3/2/2004 9:49:43 AM
From: mishedlo	Respond to of 116555

UK Economists spooked over prospect of early rate rise FEARS are growing of an early rise in interest rates by the Bank of England, whose monetary policy committee (MPC) meets this week. Some analysts are warning that the Bank could surprise the markets by putting up rates on Thursday, after evidence of rising house prices and an upward revision to last year’s GDP growth from 2.1% to 2.3% that has reduced the economy’s spare capacity. "Had the last inflation report been delayed by a couple of weeks it would have shown stronger growth and higher inflation,” said Richard Jeffrey, head of research at Bridgewell Securities, a broker. “I think it likely that rates will rise this week, and that there will be some discussion of whether they should go up by a half-point.” That is a minority view. Most analysts expect the MPC to leave rates on hold, and the Bank usually tries not to surprise the markets. The Bank raised the base rate this month from 3.75% to 4%, the second increase in three months. Expectations for the next rate rise centre on May, when the Bank publishes its next inflation report. interest-rate nerves are growing. A survey by Ideaglobal.com, the financial-research firm, shows that analysts now expect rates to peak at 5%, higher than before. A report by the accountant BDO Stoy Hayward, to be published tomorrow, shows that price expectations are increasing as the economy strengthens. Its inflation index jumped sharply last month. The European Central Bank, which meets this week, is also in the spotlight. Rumours that the ECB could cut rates to dampen the euro’s rise sent it back below $1.25, ahead of a meeting on Friday between Gerhard Schröder and George Bush. Schröder said Bush had reaffirmed his belief in a strong-dollar policy. Despite this, analysts believe the American currency will resume its slide. They also think the ECB will leave rates on hold at 2% this week. business.timesonline.co.uk

To: gregor_us who wrote (993)	3/2/2004 9:58:32 AM
From: mishedlo	Respond to of 116555

Borrowing figures lead to new fears for economy By Philip Thornton, Economics Correspondent 02 March 2004 Consumer borrowing surged while manufacturing industry suffered a jolt last month, raising the spectre of an unbalanced economy just three days before the Bank of England has to set interest rates. Yesterday's data threw the monetary policy committee's dilemma into sharp focus, showing that recent rises in interest rates had done little to curb consumers' appetite for debt but hurt industry by pushing up the pound, analysts said. "Raising rates to cool the consumer threatens to drive up sterling and in the meantime blunt any recovery in the trading sector," said John Butler, an economist at HSBC. Total consumer borrowing rose by £10.64bn in January, the Bank said yesterday, the biggest increase since October and just a few hundred million pounds below September 2003's all-time record. Consumer credit - borrowing on plastic, overdrafts and unsecured loans - leapt by £1.9bn, dramatically ending the slowdown of the past three months. It was more than double December's £873m and greater than the City's forecast of £1.2bn. Mortgage lending also rose as homebuyers borrowed £8.71bn in January while December's figure was revised by £1bn to £8.35bn. But while consumers loaded up with debt, manufacturers drew in their horns, according to a snapshot survey of managers published yesterday. Activity in the sector slowed sharply with both output and new orders failing to keep pace with the rises seen in December and January, the Chartered Institute for Purchasing and Supply said. It said solid increases for firms making consumer and capital goods were more than offset by a sharp slowdown in output and a slump in new orders of intermediate goods - component parts. Roy Ayliffe, a director of Cips, said: "It is possibly a warning sign that this decline might feed through to other parts of the manufacturing side." He said it was too soon to tell, adding it might simply be a sign that makers of finished goods ran down their stock levels to cut costs in the face of rising raw materials prices. "If interest rates rise, especially relative to other areas, it will strengthen the pound more and that will hit manufacturing more and it will make life for more difficult for them," he said. news.independent.co.uk

To: gregor_us who wrote (993)	3/2/2004 10:03:34 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

$A is an asset play for US [Article on Australian $] finance.news.com.au

To: gregor_us who wrote (993)	3/2/2004 10:05:22 AM
From: mishedlo	Respond to of 116555

Greenspan says protectionism is no solution to US account deficit Protectionism is not a solution to the United States huge current account deficit, US Federal Reserve chairman Alan Greenspan said. "Creeping protectionism must be thwarted and reversed," Greenspan said in a letter made public Tuesday. "Probably the most serious long-term costs that could arise from the US current account deficit would come if we followed policies aimed at reducing this deficit that are inconsistent with our fundamental policy objectives, in particular protectionist trade polices that interfere with the degree of flexibility that has been so positive a force for US economic performance in recent years," Greenspan said. sg.biz.yahoo.com

To: gregor_us who wrote (993)	3/2/2004 10:09:06 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Bank of Canada Cuts Borrowing Costs a Quarter Point The Bank of Canada reduced its benchmark interest rate for the fourth time since July, cutting borrowing costs a quarter point to encourage domestic spending as a higher currency hampers exports. The decrease takes the target rate for overnight loans between commercial banks to 2.25 percent. All 27 economists surveyed by Bloomberg News expected a rate cut. ``Today's decision to provide some additional monetary stimulus was taken to support aggregate demand and to return inflation to the (2 percent) target by the end of 2005,'' the central bank said in a statement in Ottawa. The Bank of Canada said it hasn't changed its forecasts for the world's eighth- largest economy, which it expects to grow 2.75 percent in 2004. Domestic consumer and business spending must fill a void left by a three-year export slump, Governor David Dodge has said in speeches this year. There are signs consumers need help to keep buying after powering economic growth for three years with record home and automobile purchases. For instance, Statistics Canada reported Friday that household spending was ``flat'' in the fourth quarter. ``I am concerned with some of our major Canadian customers because they export a large percentage of their products,'' said Daryl Friesen, chief executive of Flexxaire Manufacturing Inc. of Edmonton, Alberta, which makes large fans used in construction and transportation equipment and natural-gas compressor stations. ``Our U.S. sales increased last year, but not as much as they should have'' because of the dollar's rise, he said. Dollar Falls The rate cut slimmed the premium over U.S. rates, prompting a drop in the dollar. The Federal Reserve's comparable federal funds rate is 1 percent. The Canadian dollar fell to 74.424 U.S. cents at 9:40 a.m. Toronto time from 74.77 cents yesterday. It has risen from about 64 cents at the start of last year, making exports more expensive and cutting profits at companies such as Abitibi-Consolidated Inc., the world's biggest newsprint maker, and furniture manufacturer Dorel Industries Inc. Exports are worth 40 percent of Canada's C$1.1 trillion annual output, making the country the most dependent on trade in the Group of Seven industrialized nations. ``While external demand has been slightly stronger and final domestic demand in Canada slightly weaker than expected, the Bank's outlook remains, on balance, unchanged'' from January, the central bank said. The Bank of Canada forecast in January that the economy will grow 2.75 percent this year, less than the 3 percent pace it says is needed for inflation to pick up. Consumer prices rose 1.2 percent in January from a year ago, the slowest pace in 20 months. The central bank's mandate is to keep the economy growing and inflation running at around 2 percent a year. Lower Prime Royal Bank of Canada, the country's biggest bank, followed the rate cut by decreasing borrowing costs for consumer and business customers. Royal Bank changed its prime rate, the pattern-setting rate charged to top customers, to 4 percent starting tomorrow from 4.25 percent, where it's been since the Bank of Canada's last quarter-point rate decrease on Jan. 20. Other commercial lenders usually follow suit. Cheaper loans ``should bolster consumer demand'' Royal Bank Chief Financial Officer Peter Currie said in an interview last week. The average rate on a five-year mortgage from one of Canada's big banks was 5.8 percent Wednesday. That matches a 48- year low set in June, according to Bank of Canada figures. Strong job creation may also help consumer spending this year. Employers hired 270,800 people last year, raising the share of the working-age population with a job to a record 62.7 percent, and another 14,900 staff in January. `Good Barometer' The Bank of Canada's next scheduled rate announcement is April 13, and it presents an updated economic forecast two days later. Some investors expect another rate cut later this year, trading in interest-rate futures suggests. The yield on the bankers acceptance contract due in June was 2.09 percent on the Montreal Exchange. ``Low interest rates are good barometer of things to come,'' Retail Council of Canada Chief Executive Officers Diane Brisebois said in an interview. The group represents 9,000 companies including the Canadian units of Home Depot Inc. and Wal-Mart Stores Inc. ``If you have continued low interest rates, Canadians tend to spend on big ticket items.'' quote.bloomberg.com