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Reuters blog archive

from MacroScope:

Firing up Brazil’s economy

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A hot, dry spell in southeastern Brazil has pushed up energy prices, stretched government finances and raised the threat of water rationing in its largest city, Sao Paulo, just months before it hosts one of the world's largest sport events, the soccer World Cup.

It looks like the last thing Brazil needed as it scrambles to woo investors and avoid a credit downgrade.

But if the scattered rains that started to pour down over the past few days bring in continued relief through March, the heat could actually prove to be a much-needed boost for Brazil's economy, research firm LCA found.

The Sao Paulo-based firm calculated the net impact of above-average temperatures on gross domestic product. It found that the rush to buy air conditioners, combined with other reasons like the energy those air conditioners will consume, might push up Brazil's quarterly growth in the first three months of 2014 by half a point to 1.0 percent.

from The Great Debate:

America’s aging population undermines monetary policy

Last week the Fed announced it would keep buying assets, for now, to keep the economy afloat. But that raises the question: why haven’t all the Fed's efforts so far worked better?

One reason is that the economy constantly evolves and each recession is different; that alters the way monetary policy is supposed to work. The latest recession is notable for the way it destroyed households’ wealth. Median household net worth fell nearly 40 percent between 2007 and 2010. The severity of the recession also heightened awareness that the world is riskier than many people thought. Each of these factors make people want to save more. The Fed’s policy is to keep interest rates low to juice demand. But the state of household balance sheets going into the recession and the aging U.S. population may be why the Fed has not been more successful.

from Breakingviews:

China’s consumers aren’t living up to sales pitch

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By John Foley

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Consumer brands in China are finding their rewards aren’t quite as advertised. Growth in purchases of a wide range of goods has slowed sharply over the past year, and companies ranging from Samsonite to Apple are reporting disappointing Chinese sales figures. Consumers in the world’s second-largest economy will have their day, but the idea they alone can sustain growth looks threadbare.

from MacroScope:

Fed on guard over low U.S. savings rate

As Federal Reserve Chairman Ben Bernanke delivered what may have been his last testimony on monetary policy before Congress, most of the world’s attention was focused on what hints he might give about the timing of an eventual reduction in the pace of asset purchases.

Tucked in the actual semi-annual monetary policy report Bernanke delivered to lawmakers on Capitol Hill was a little-noticed reference to growing worries about the potential for an extended period of low savings, associated in part with long-stagnant wages, to thwart long-run economic progress.

from Breakingviews:

India in depth: Consumption bets will outperform

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Indian economy has at least another year of poor-quality GDP growth ahead of it, even if the pace of expansion is somewhat faster than the 5.5 percent expected for 2012.

from MacroScope:

Unsaving the U.S. economy

The U.S. savings rate sank last month to its lowest since November, official data showed this week, in a sour reminder of how the economy is still dangerously exposed to any financial downturn or other shocks like the fiscal cliff. Following are some facts about this usually overlooked indicator:

* The U.S. saving rate is basically the amount of dollars Americans are able to save from their wages after spending and paying taxes, as a percentage of income. In September the rate was at 3.3 percent, a drop from 3.7 percent the previous month and the lowest since 3.2 percent in November 2011.

from MacroScope:

China bear Pettis says world coming around to his view

Few mainstream economists have been quite as downbeat on China as Peking University professor and noted China watcher Michael Pettis. Pettis has long held that the world's No. 2 economy will grow at a maximum of 3.5 percent a year for the rest of the decade, well below a consensus call that appears to have settled into the 5-7 percent range. "And honestly, I think if I'm wrong, it will be to the downside rather than the upside," he told Reuters.

Lately, though, Pettis says that many people inside China and in some of the countries whose fortunes are tightly tied to its economy are starting to come around to his point of view. At a recent lunch with visiting European Union officials, Pettis said the mood among the attending Chinese economists, academics, think-tankers and policy advisors was universally gloomy. “I'm used to being the most pessimistic guy in the room, but in this case, they were much worse than I."

from MacroScope:

The iPod – the iCon of Chinese capitalism

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Walking past Apple's sleek shop along London's Regent Street on Sunday, my wife asked me what I wanted for Father's Day.

"An iPad?" I ventured, half-jokingly.

"Are you sure you want one? Don't you care how they're made?" came her disapproving reply.

from Reuters Investigates:

China’s rebalancing act puts consumer to the fore

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consumerWal-Mart, the world's largest retailer, now has 189 stories in China, according to its website. Soon it will have many more.  The U.S. chain has announced plans to open a series of "compact hypermarkets", using a bare-bones model developed in Latin America, the Financial Times said.

Wal-Mart stores are a bit different than the one's you might find in, say, Little Rock Arkansas. They sell live toads and turtles for one thing, The Economist reported. But they also sell the appliances, gadgets, and housewares that Wal-Mart stores merchandise everywhere.

from MacroScope:

Spend Save Man Woman

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Far from being lauded as a virtue, China's high savings rate has been blamed for the economic imbalances underlying the global financial crisis. The criticism being that the Chinese spend too little and rely too much on exporting to Western consumers.

The IMF and World Bank have long called for Beijing to ramp up social spending so its citizens will feel less need to save for a rainy day and instead consume more.

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