Archive for July, 2013

A COUPLE of straws in the wind today which ought to be interesting for bond investors. Core inflation in the euro zone dropped from 1.2% to 1.1% and Jonathan Loynes of Capital Economics points out that core goods inflation is 0.4%. In Britain, shop prices fell 0.5% year-on-year, the third consecutive annual decline; clothing was the biggest faller but furniture, DIY and electricals all showed declines.Bond yields, however, remain well above their lows for the year. Clearly, this has been driven by fears of Fed tapering but with inflation so weak (the US core rate is 1.6%), it is hard to see that central banks will be racing to turn off the monetary taps. All along, it is hard to tell how the debt crisis will end – inflate, stagnate or default have been the three options. Governments could still inflate their way out of the debt eventually but QE has not yet resulted in the inflation many would have expected; broad money supply growth in the UK is just 4.7% on the latest numbers. In the euro zone, bank lending to the private sector was down 0.9% in June, its biggest annaul fall. To the extent that central banks have turned on the taps, commercial banks have pulled out the plug.It all looks a bit Japanese to me. Yes, European growth numbers have looked a bit better recently. But a long-term stagnation forecast does not mean one cannot have short-term periods of growth; …

via Economic Crisis http://www.economist.com/blogs/buttonwood/2013/07/economics-and-investing?fsrc=rss

THE high concrete containing walls along the recently remodelled railway cutting are tastefully stamped with the scallop shell, the symbol carried by Roman Catholic pilgrims heading towards the nearby shrine of St James. The smart new cable posts are painted an elegant dark green. This stretch of railway track on the outskirts of Santiago de Compostela is another of those shiny examples of public transport infrastructure that so amaze visitors to Spain from north America and elsewhere.But when one of Spain’s new Alvia trains took the curve too fast on July 24th, spun off the rails and smashed into the wall, it became the tragic site of one of Europe’s worst rail accidents in recent decades. Of the 218 passengers on board, 78 died. A further 81 are still in hospital.Spaniards reacted in the admirable way that they always respond to great tragedies. Neighbours rushed to the scene, pulling survivors out of the wreckage. Hundreds of people formed queues to donate blood at local hospitals. And, as Spain went into official mourning for the dead for three days, the country showed its solidarity with the families and friends who had anxiously gathered in the city to discover the fate of loved ones.As Spain grieves with dignity, it is already clear that much of the blame lies with the driver, who took the curve at what experts say is more than twice the mandated speed. The driver …

via Economic Crisis http://www.economist.com/blogs/charlemagne/2013/07/spains-rail-crash?fsrc=rss

UK Only Article: 
standard article

Issue: 

The Great Deceleration

Fly Title: 

Poland’s government

Rubric: 

After sailing through its first six years in power, Donald Tusk’s centre-right government has hit trouble

Location: 

WARSAW

Main image: 

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DONALD TUSK is Poland’s most successful prime minister since the fall of communism. Under his leadership his country has become the rising star of the European Union, and he has managed to build a close and cordial relationship with Germany, Poland’s most important trading partner and the EU’s power centre. He has maintained a reputation for personal integrity and even managed to keep his party, the centre-right Civic Platform (PO), away from the corruption scandals that are the scourge of many central and eastern European countries.

Yet since the beginning of the year Mr Tusk’s star has started to wane, as Poles have become worried about a slowing economy and …

via Economic Crisis http://www.economist.com/news/europe/21582312-after-sailing-through-its-first-six-years-power-donald-tusks-centre-right-government-has-hit?fsrc=rss

UK Only Article: 
standard article

Issue: 

The Great Deceleration

Fly Title: 

Emerging economies

Rubric: 

The most dramatic, and disruptive, period of emerging-market growth the world has ever seen is coming to its close

Main image: 

20130727_FBP001_0.jpg

THIS year will be the first in which emerging markets account for more than half of world GDP on the basis of purchasing power, according to the International Monetary Fund (IMF). In 1990 they accounted for less than a third of a much smaller total. From 2003 to 2011 the share of world output provided by the emerging economies grew at more than a percentage point a year (see chart 1). The remarkably rapid growth the world has seen in these two decades marks the biggest economic transformation in modern history. Its like will probably never be seen again.

According to a recent study by Arvind Subramanian and Martin Kessler, of the Peterson Institute, a think-tank, from 1960 to the late 1990s just 30% of countries in the developing world for …

via Economic Crisis http://www.economist.com/news/briefing/21582257-most-dramatic-and-disruptive-period-emerging-market-growth-world-has-ever-seen?fsrc=rss

FIGURES released today show that the British economy grew by 0.6% in the last quarter, twice as fast as in the previous quarter. According to a poll conducted on behalf of The Economist by Ipsos-MORI, the economy remains the main topic of concern—over half of respondents cited it as one of the important “issues facing Britain”. But consumer confidence is up again: the firm’s index of economic optimism is now positive for the first time since the second quarter of 2010.The question is whether this recovery will last. Ed Balls, the shadow chancellor, points out that GDP is still 3.3% below its 2008 peak; unemployment is still 7.8%, sharply higher than it was before the crisis. There have been false dawns before and this may prove to be another.

via Economic Crisis http://www.economist.com/blogs/blighty/2013/07/economistipsos-mori-issues-index?fsrc=rss

CRIME has plummeted in the rich world, even amid the recession

via Economic Crisis http://www.economist.com/blogs/graphicdetail/2013/07/daily-chart-17?fsrc=rss

Is Britain well on its way to ecoomic recovery or stuck in the doldrums? We are inviting experts in the field to comment on the recovery. Yesterday, Kevin Daly, UK economist for Goldman Sachs, argued for stronger forward guidance from the Bank of England. Today John Van Reenen of the London School of Economics asks whether the recovery is sustainable. Mr Van Reenen is head of the LSE’s Centre for Economic Performance and an expert on research and development, and innovation. His bio is here. A long march to the Sunny Uplands?IN THE last few weeks Britain has enjoyed some much-desired warm weather and some much-needed signs of an economic upturn. This has lifted the mood of the nation as well as the tenants of Downing Street. The Chancellor described the UK economy as a “patient coming out of intensive care”, presumably thanks to the skilful care of Dr. Osborne, who is proud to have his performance recorded on the new NHS database of economic surgeons.It feels curmudgeonly to pour cold water on this sunny disposition. Unfortunately, the IMF’s recent uprating of Britain’s predicted growth in 2013 was only from a miserly 0.7% to a meagre 0.9%. The excitement over NIESR’s 0.6% 2013Q2 GDP growth prediction shows our lack of ambition. The average growth rate over the last couple of centuries has averaged over 2%, so this is not a standard “recovery” where we expect growth to …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/07/britains-recovery-0?fsrc=rss