Housebuilders in America: Through the roof again?

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Issue: 

The march of protest

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Housebuilders in America

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America’s builders have responded cautiously to higher house prices. So far

Location: 

NEW YORK

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20130629_WBP004_0.jpg

THE stronger-than-expected 53% growth in quarterly sales reported on June 25th by Lennar, America’s biggest homebuilder by market capitalisation, is the latest evidence that the country’s housing market is recovering from its mid-decade meltdown. On the same day the Commerce Department reported that 476,000 new homes were sold nationwide in May, the third month in a row that sales have grown and the highest monthly total since July 2008. The S&P/Case-Shiller index of house prices in the 20 largest metropolitan areas beat expectations by rising by 1.7% (seasonally adjusted) in April and 12.1% year on year, the strongest annual growth since the market peaked in 2006.
Shares in the 12 largest …

via Economic Crisis http://www.economist.com/news/business/21580149-americas-builders-have-responded-cautiously-higher-house-prices-so-far-through-roof?fsrc=rss

Portugal and the euro: Floundering on

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Issue: 

The march of protest

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Portugal and the euro

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Despite a shrinking economy, the Portuguese want to keep the euro

Location: 

LISBON

IS PORTUGAL slowly drowning? Ever since the European Union and IMF rode to the rescue with a €78 billion ($111 billion) bail-out in 2011, the economy has shrunk, unemployment has soared and thousands of small firms have failed. Joblessness for under-25s is close to 43%, so the educated young are emigrating fast. Every forecast of what Pedro Passos Coelho, the prime minister, warned would be “two terrible years” has been too optimistic. The government has had to amend this year’s budget to hold down its deficit. And the OECD rich-country think-tank predicts further falls in GDP.
A decade of stagnation has turned into Portugal’s worst recession for two generations. Many fear that the growth promised in return for austerity and reform is out of reach. “Adjustment is just another way of saying impoverishment, …

via Economic Crisis http://www.economist.com/news/europe/21580178-despite-shrinking-economy-portuguese-want-keep-euro-floundering?fsrc=rss

Deflation: The other risk

WHILE many gold bugs fear that quantitative easing will eventually lead to hyperinflation, that is far from the only possibility. Japan has had poor demographics and a sluggish economy for 20 years and has suffered from persistent mild deflation. Central banks can expand the monetary base, but this may not lead to broad money accelerating. In Britain, M4 is hardly racing along at 4.8% year-on-year growth; exclude securitisations and it is actually down on the year. In the euro zone, where QE is not yet a policy, euro zone money supply growth decelerated to 2.9% in May from 3.2% in April and lending to the private sector was down 1.1% year-on-year. While central banks may be trying to create money, commercial banks are still shrinking their balance sheets; if you like, the central banks have turned on the tap but the commercial banks have pulled out the plug and the bath is not filling.

Albert Edwards of SocGen used this chart in his latest research note. The core PCE number is only 1% – a modern low – and the Dallas Fed, which uses a trimmed mean number (eliminating the outliers), actually recorded a small fall in the latest numbers (see the definition here). Given the fall in inflation, the puzzle is the recent reaction of the bond markets. Of course, it’s down to the Fed statement; perhaps a 1 percentage point rise in yields is the market’s best guess at the …

via Economic Crisis http://www.economist.com/blogs/buttonwood/2013/06/deflation?fsrc=rss

Focus: World GDP

FOUR years after the worst of the financial crisis and the world appears to be faltering again. According to The Economist’s calculations, world GDP grew by just 2.1% during the first quarter of 2013 compared with a year earlier. Just 12 months ago, output was growing at a reasonable clip of 3.1%. The European Union, the world’s second-largest economy, which welcomes its 28th member on July 1st, is back in recession. Meanwhile there are concerns about stumbling blocks as China seeks to rebalance toward a more consumption-oriented economy and more moderate growth rates. Long the mainstay of the world’s fortunes, China alone has been responsible for nearly half of all world economic growth since the end of 2009 when the world began growing again. Other big emerging markets, Turkey, Brazil and India, are struggling to quell social unrest over frustration with governments’ inability to deliver growth and make appropriate reforms.

via Economic Crisis http://www.economist.com/blogs/graphicdetail/2013/06/focus-7?fsrc=rss

The Number Of U.S. Children In Poverty Continues To Grow

According to the Annie E. Casey Foundation’s annual Kids Count survey, children in the U.S. are experiencing a setback in their economic well-being due to the lingering effects of the recession. However, there have been some improvements.

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via Economy http://www.npr.org/2013/06/24/195225991/the-number-of-u-s-children-in-poverty-continues-to-grow?ft=1&f=1017

The Number Of U.S. Children In Poverty Continues To Grow

According to the Annie E. Casey Foundation’s annual Kids Count survey, children in the U.S. are experiencing a setback in their economic well-being due to the lingering effects of the recession. However, there have been some improvements.

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via Economy http://www.npr.org/templates/story/story.php?storyId=195225991&ft=1&f=1017

Recommended economics writing: Link exchange

TODAY’S recommended economics writing:• It’s about the calendar (Tim Duy)• Bank of Japan divided over inflation target (Real Time Economics)• The African growth miracle (A Fine Theorem)• Persistence of high income inequality and banking crises (Giorgio Bellettini and Flavio Delbono)

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/06/recommended-economics-writing-6?fsrc=rss

The Russian economy: Sputtering

UK Only Article: 
standard article

Issue: 

Can Iran be stopped?

Fly Title: 

The Russian economy

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Slowing growth reflects structural failings that the Kremlin is not tackling

Location: 

MOSCOW

AT ONE time, Vladimir Putin gloated about Russia’s economic resilience. With most of Europe in recession, Russian growth was the envy of many. It may not have been booming by 7% a year, as in the mid-2000s, but GDP grew by 3.6% in 2012. Yet in the first quarter it rose at an annual rate of just 1.6%, the slowest since 2009. Economists have long warned about falling oil prices and European recession. Oil and gas prices look likelier to fall than to rise; the euro zone remains in trouble. Even so, unlike the drop in 2009 after the financial crisis, the latest slowdown is driven by internal factors.

The Kremlin cannot just wait for a global upturn and no obvious fixes are to hand at home. In the 2000s the lingering effects of the 1998 devaluation made Russian goods attractive at home, and unused capacity …

via Economic Crisis http://www.economist.com/news/europe/21579877-slowing-growth-reflects-structural-failings-kremlin-not-tackling-sputtering?fsrc=rss

The euro crisis: The ECB is not breaching the law

Last July Mario Draghi, president of the European Central Bank, spoke of the ECB’s intent to do “whatever it takes” to hold the euro area together. In the months after his comment, the ECB unveiled its Outright Monetary Transactions programme, in which it pledged to make unlimited purchases of troubled government bonds under certain conditions. No policy has been as important in bringing down government borrowing costs around the periphery. OMT now faces scrutiny in Germany’s constitutional court. We have invited Holger Schmieding, chief economist at Berenberg Bank, to discuss the legality of the ECB’s actions.LIFE is full of ironies. In the great financial crisis, all the major central banks of the western world had to intervene heavily in markets to prevent an even bigger calamity. But the one central bank which allowed the crisis to temporarily spiral out of control by doing far too little for far too long now finds itself in court—for allegedly doing too much.In the wake of the post-Lehman recession, the Federal Reserve and the Bank of England have bought bonds worth 19% and 25% of their country’s GDP, respectively. Asset purchases by the European Central Bank stand at a mere 3% of GDP. If the ECB had intervened as eagerly as the BoE, it would have acquired sovereign debt worth the entire outstanding amount of Italian and Spanish public bonds. A more activist ECB …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/06/euro-crisis-1?fsrc=rss

Spanish companies: An ill wind

UK Only Article: 
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Issue: 

Secrets, lies and America’s spies

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Spanish companies

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For all the hardship it is inflicting, the crisis is helping many firms sharpen up

Location: 

AGUILAR DE CAMPOO

Main image: 

Baking biscuits round the clock

Baking biscuits round the clock

IN A windswept Castilian town 300km (190 miles) north of Madrid, Europe’s largest biscuit plant is churning out digestives, wafers and crackers around the clock. The economic crisis has not really hurt Galletas Gullón, a family-owned firm that dates back to the 19th century: its products are staples in Spanish households and its newer range of “healthy” biscuits created the market sector they dominate.
In fact, the crisis may even have helped, by forcing Gullón to look harder for growing markets outside Spain. Sales rose by 10% to around €216m ($277m) in 2012, says Juan Miguel Martínez Gabaldón, Gullón’s boss, but exports grew by …

via Economic Crisis http://www.economist.com/news/business/21579467-all-hardship-it-inflicting-crisis-helping-many-firms-sharpen-up-ill-wind?fsrc=rss