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from Breakingviews:

Review: An American-Chinese morality tale

By Edward Hadas

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

The subtitle of Stephen Roach's new book has an arresting image. "Unbalanced: the Codependency of America and China" describes two economies with mutually reinforcing dysfunctions. This approach is sometimes helpful, but the book's strongest argument concerns the retired Morgan Stanley economist's homeland. He makes a persuasive case that "most of America's deep-seated economic problems...are of its own making."

Roach, who is now teaching at Yale, is well aware that his model does not describe all the differences between the two countries. China is growing fast from wretched poverty while the United States still enjoys one of the highest standards of living in the world. The political and social positions are quite different. Meanwhile, China and America's geopolitical concerns are more hostile than dependent.

The unhealthy mutual support system is found in consumption, production, trade and finance. American consumers depend too much on cheap Chinese imports. The U.S. financial system depends too much on the dollars that China collects from the excess of its exports over imports. On the other side, China depends on American consumers to buy its goods and help develop its industrial production.

from MacroScope:

Drop in German investor morale may have called the peak in growth

A BMW employee assembles a BMW motorcycle at the company's factory in BerlinEurope's growth engine may be on the verge of gearing down, according to an indicator of German investor morale that recorded its biggest drop in one and a half years on Tuesday.

For a euro zone economy that is broadening, but still relying heavily on Germany for growth, as well as inflation that is dangerously low and well below target, that may add another line to the European Central Bank's worry sheet.

from Breakingviews:

Review: Dissecting America’s manufacturing retreat

By Kevin Allison

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

Those who believe that making physical things is a superior vocation will find themselves nodding through much of Vaclav Smil’s “Made in the USA”. Smil, a prolific Canadian academic, challenges the widespread view that in mature economies a shrinking factory footprint is inevitable - or even desirable. He blames short-termism and bad policy choices, not just changing economic tides, for the retreat of U.S. manufacturing. The book’s call for smarter industrial policy is appealing, but Smil comes too close to advocating protectionism.

from Global Investing:

The hit from China’s growth slowdown

China's slowing economy is raising concern about the potential spillovers beyond its shores, in particular the impact on other emerging markets. Because developing countries have over the past decade significantly boosted exports to China to offset slow growth in the West and Japan, these countries are unquestionably vulnerable to a Chinese slowdown. But how big will the hit be?

Goldman Sachs analysts have crunched the numbers to show which markets and regions could be hardest hit. On the face of it non-Japan Asia should be most worried -- exports to China account for almost 3 percent of GDP while in Latin America it is 2 percent and in emerging Europe, Middle East and Africa (CEEMEA) it is just 1.1 percent, their data shows.

from MacroScope:

India is in a cloud of economic optimism but its industrial data are in a permanent fog

Optimism the Indian economy will soon recover, despite no sign that it is anywhere near doing so, has increasingly led forecasters to overestimate industrial production growth.

Incessant official revisions to the data, after initial forecasts are proved wrong, also mean investors and companies don't have a clear and timely view.

from MacroScope:

Brazilian industrial rebound: wishful thinking?

2012 has been a year to forget for Brazil's struggling industry – just like the year before. But a weekly central bank survey of around 90 financial institutions says that will all change next year and industry will grow at healthy 4 percent pace.

Will it?  One year ago, the same survey predicted 4.1 percent growth for 2012. Despite massive stimulus by President Dilma Rousseff's government, including record-low interest rates and billions of dollars in tax cuts that were off everyone’s radar, industrial output in Latin America's largest economy is set to fall by 2.3 percent.

from Global Investing:

Three snapshots for Monday

The yield on 10-year  U.S. Treasuries, fell to their lowest levels since early October today, breaking decisively below 1.80 percent. That compares to the dividend yield on the S&P 500 of 2.28%.

The European Central Bank kept its government bond-buy programme in hibernation for the ninth week in a row last week. The ECB may come under pressure to act as  yields on Spanish 10-year government bonds rose further above 6% today.

from MacroScope:

Baltic shipping index getting drier

An obscure gauge of shipping costs rose to prominence in geeky macro circles during the financial crisis because its plunge provided a telling lead on the economic crash that unfolded in 2008 and 2009. Now, the Baltic Dry Index has again taken a nosedive, falling to its lowest level in more than two decades.

This time, analysts are explaining it away as a reflection of an increased number of carriers at sea.

from MacroScope:

Industry bounce soothes but does not cure

Phew. Industrial production rose 0.9% in July, the fastest in seven months. For the moment, that appeared to forestall fears that another U.S. recession  might be imminent, even if stocks were down on worries about weak economic growth in Germany. Harm Bandholz at Unicredit saw the figures as a bright spot:

Today’s report, in combination with the recent improvements in initial jobless claims and retail sales, corroborates our view that GDP growth in the second half of the year is likely to accelerate to (a still low) 2%-2¼% from less than 1% in the first half.

from Breakingviews:

Beijing’s great power comes with little foresight

Just two years after Beijing started throwing incentives at green technology manufacturers, it has now decided to starve them of financing. This stop-start approach shows that, while Beijing may have more levers at its disposal when stimulating industries, it also has a bigger risk of run-away supply growth.

On Monday, China launched the latest in a series of attempts to rein in industrial overcapacity to balance its economy and prevent investment from going to waste. Most of the sectors suffering from overcapacity are old-economy heavy industries like steel and cement. But Beijing's targets also include green industries such as polysilicon, used to make solar panels, and wind power equipment.

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