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from MuniLand:
America should focus on rebuilding manufacturing
President Obama shut down his infamous “jobs council” at the end of January after very desultory efforts and no substantive outcomes. Reuters reports on what comes next:
In place of the jobs council, the administration said it will begin an expanded effort to work with the business community and other groups to boost economic growth, cut debt and fix a broken immigration system.
"It's a broad engagement strategy to make sure the president's message is getting out to the American people, because with their voices involved we think that we can still do big things," Obama adviser Valerie Jarrett, his point person on working with business, told Reuters in a recent interview.
This sounds like political flim flam to me. President Obama’s team should look to Australia for example and focus on rebuilding and strengthening America’s manufacturing core. This is not an easy task, but manufacturing was the nation's economic engine for 100 years, and it has been left to languish and be exported offshore.
from Global Investing:
Korean exporters’ yen nightmare (corrected)
(corrects name of hedge fund in para 3 to Symphony Financial Partners)
Any doubt about the importance of a weaker yen in thawing the frozen Japanese economy will have been dispelled by the Nikkei's surge to 32-month highs this week. Since early December, when it became clear an incoming Shinzo Abe administration would do its best to weaken the yen, the equity index has surged as the yen has fallen.
Those moves are giving sleepless nights to Japan's neighbours who are watching their own currencies appreciate versus the yen. South Korean companies, in particular, from auto to electronics manufacturers, must be especially worried. They had a fine time in recent years as the yen's strength since 2008 allowed them to gain market share overseas. But since mid-2012, the won has appreciated 22 percent versus the yen. In this period, MSCI Korea has lagged the performance of MSCI Japan by 20 percent. Check out the following graphic from my colleague Vincent Flasseur (@ReutersFlasseur)
from The Great Debate:
Creating an upscale service economy
The American economy is irrevocably shifting from manufacturing to services. Our workforce has gone from 28 percent factory workers and 72 percent service workers in 1978 to 14 percent factory workers and 86 percent service workers today.
But the service sector encompasses tens of millions of “bad” jobs that are unstable and offer low pay with few benefits – routine clerical work, for example, or retail sales, fast food or low-end human services such as nurse’s aides – alongside a relatively small number of well-compensated professional positions, including doctors, lawyers and scientists, as well as astronomically rich investors and plutocrats in the financial sector.
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 MacroScope:
Weak manufacturing orders tend to precede U.S. recessions
U.S. manufacturing activity shrank for a second straight month in July as recent economic weakness spilled into the third quarter, according to the Institute for Supply Management's closely watched index. But that wasn't the worst of it: new orders, a gauge of future business activity, also shrank for a second month, albeit at a slightly slower pace.
Tom Porcelli at RBC explains why the status quo may not be good enough to keep the economy expanding:
from MacroScope:
U.S. manufacturing shrinks for second month
The closely watched Institute of Supply Management's nationwide manufacturing index showed contraction in manufacturing for the second month in a row in July and Bradley Holcomb, chairman of the ISM's business survey committee, sounded equally subdued in a morning teleconference.
An overall softening and flattening is going on. It's a reflection of the overall state of the global economy.
from Global Investing:
Power failures shine light on India’s woes
Half of India's 1.2 billion people have been without power today, bringing transport, factories and offices to a grinding halt for the second day in a row and sparking rage amongst the sweltering population. That's embarrassing enough for a country that prides itself as a member of the BRIC quartet of big emerging powerhouses along with Brazil, Russia and China. But the outages will also hit economic growth which is already at 10-year lows. And the power failures, highlighting India's woeful infrastructure, bode poorly for the government's plans to step up manufacturing and lure more foreign companies to the factory sector.
India urgently needs to increase production and exports of manufactured goods. After all, software or pharma exports do not create jobs for a huge and largely unskilled population. India should be making and selling toys, clothes, shoes –- the things that helped lift hundreds of millions of Chinese, Taiwanese and Koreans out of poverty and fuelled the current account surpluses in these countries. At present, manufacturing provides less than 16 percent of India's gross domestic product (30 percent in China, 25 percent in South Korea and Taiwan) but the government wants to raise that to 26 percent by 2022. Trade minister Anand Sharma, in London last week, for a pre-Olympics conference, was eloquent on the plan to boost manufacturing exports to plug the current account gap:
from MacroScope:
Fed doves ‘will not be patient’
Ellen Freilich contributed to this post
The Fed did the twist. Will it shout as well? There has been some debate among economists about whether the U.S. central bank might launch a third round of outright bond buys or QE3 given that it just prolonged Operation Twist.
But a truly grim report on the U.S. manufacturing sector from the Institute for Supply Management, if coupled with further evidence of a deteriorating labor market, could certainly induce policymakers to press their foot to the monetary accelerator.
from Global Investing:
Three snapshots for Wednesday
Euro zone factories sank further into decline last month but manufacturers in Asia upped their tempo to meet growing demand from the United States and China, exposing a widening gulf between Europe and the rest of the world.
Unemployment in the euro zone rose to a 15-year high of 10.9 percent in March - as this chart shows the level of youth unemployment paints a worrying picture:
from Global Investing:
Where will the FDI flow?
For years the four mighty BRIC nations have grabbed increasing shares of world investment flows. But the coming years may not be so kind. These countries bring up the bottom of the Economic Freedom Index (EFI) for 2012. Compiled by Washington D.C.-based think-tank The Heritage Foundation the EFI measures 10 freedoms -- from property rights to entrepreneurship -- and according to a note out today from RBS economists, there is a strong positive link between a country's EFI score and the amount of FDI (foreign direct investment) it can secure. So the more "free" a country, the more FDI inflows it can expect to receive -- that's what an RBS analysis of 2002-2008 investment flows shows.
So back to the BRICs. Or BRICS if you add in South Africa (part of the political grouping though not yet included in the BRIC investment concept used by fund managers). The following graphic shows Russia languishing at the bottom of the EFI, China just above Russia and India third from bottom. Brazil is sixth from bottom while South Africa ranks two places higher.
