Archive for December, 2013

A WHISPER of silk, a flutter of lace, a wisp of a garment that hides as much as it reveals: elegant lingerie is up there with the Eiffel Tower, the Impressionists and enviably thin women as part of the French mystique. A stroll down the rue St Honoré in central Paris takes the dedicated shopper past store fronts like jewel boxes, where deftly crafted bras from designers such as Chantal Thomass can easily fetch €160 ($218) and their matching knickers €90. In the less-rarefied atmosphere of a nearby Monoprix, office workers buy seductive and well-constructed undergarments in synthetic fabrics for a quarter of those prices. Lingerie has so far been more resilient than outerwear during the economic slowdown that has taken a heavy toll on consumption in France since 2007. Is it finally beginning to succumb?The French lingerie market is the biggest in Europe, according to beancounters at the Institut Français de la Mode, a fashion school, and France is also the biggest European exporter of bras, knickers and the like. French women spend more per head on their scanties than others, just beating the Germans and outdistancing the cheap and cheerful British by a country mile.Young women between 15 and 24 years old fork out the most, typically buying a lot of cheapish items as their shapes change. They are followed by women between 45 and 54, who after the long slog of active …

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World GDP

Posted: December 20, 2013 in economy
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Look back with angst

After appearing to be on a downward spiral, the world economy grew at its fastest rate in 18 months in the third quarter of 2013. According to calculations by The Economist which cover 90% of world GDP, output increased by 2.76% compared with the same period a year ago. The world remains dangerously dependent on China, however; it was responsible for nearly half of GDP growth (measured at purchasing-power parity). Since the recession ended, the emerging world has led the recovery, contributing four-fifths of global growth. But there are signs of change in the rich world: after five years of being weighed down by debt and deleveraging, it quickened its output in the third quarter.

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A creeping ascent
The year in nine charts

THE world economy continued to recover from the financial crisis in 2013, albeit wanly. This year’s assessment of global economics in nine charts is here.

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LAST December, the outlook seemed grim for the “Big Four” accountancy firms in Britain. Three out of the four, Ernst & Young, PwC and KPMG, announced they had cut pay for their British equity partners. KPMG was particularly badly hit—announcing job cuts at all pay levels. Neither had Deloitte, the fourth, completely escaped the slowdown in the audit and advisory business. The previous year it was forced to cut partner pay as well.  

But this year, business appears to have bounced back slightly. The four behemoths—which offer services to companies ranging from auditing to consultancy—increased their combined British revenues by 4.2% to just under £9 billion ($14 billion). Profits are also healthy. The job cuts and efficiency savings KPMG announced last year seem appear to have worked particularly well: profits in Britain rose 27% even though revenues only inched up by less than 1%.It seems that much of the slowdown in their British businesses was linked to Europe’s wider economic difficulties. A significant chunk of the four firms’ British audit and advisory fees came from FTSE100 and FTSE250 companies, most of which are multinationals with exposure to European markets. In 2011 all but one company in the FTSE100 was audited by one of the big four firms, as well as 239 out of those in the FTSE250, according to Hemscott, a research outfit.Accountants do best …

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AMERICA was in recession from the fourth quarter of 2007 to the third of 2009. Working hours fell by 10%. But output fell by 7%. In other words, worker productivity rose.A new NBER paper* tries to explain why. The authors have access to a big database—over 23,000 service-sector workers between 2006 and 2010. The workers were spread across the country, but had one common defining feature: a computer tracked their productivity. (The workers’ jobs include test-grading and insurance-claims-processing, where measuring productivity is quite straightforward). For these workers, overall productivity rose about 5% during the recession. Some suggest that labour productivity rises during downturns because bosses get rid of the weakest workers. After cutting away dead wood, average labour productivity rises. The authors, however, show that the exit of workers from firms during the recession was not related to their quality. Workforce cutbacks did not leave the most skilled workers behind. As a result, productivity improvements during the recession were not driven by “compositional effects”.  Productivity might also improve during a recession if investment in capital goods picks up. The authors do not spend much time testing this—but given the dearth of business investment during the recession, that explanation seems unlikely.  So what caused higher work …

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Something strange is going on in the San Francisco Bay Area, where the tech boom is helping lead the national economic recovery. The ultra-rich are getting richer as many other Silicon Valley residents are slipping into poverty.

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LAST week’s Free exchange column took a look at the ongoing economic discussion over “secular stagnation”, or the argument that a chronic shortfall of investment relative to saving might be shackling the rich world with weak demand.Before the financial crisis, excessive thrift in emerging economies may have played a role. In 2005 Ben Bernanke identified a “global saving glut” as the reason for low interest rates. Many emerging economies, particularly China, had rising current-account surpluses. They sent their surplus savings to the rich world, by building up large foreign-exchange reserves, mostly in the form of rich-world bonds. This drove up asset prices and fuelled housing bubbles. A new working paper from the National Bureau of Economic Research reckons that foreign capital flows to America drove down interest rates and accounted for as much as a third of the increase in house prices in the 2000s.But this explanation for economic stagnation in the rich world is difficult to square with today’s data. Global growth in foreign-exchange reserves slowed dramatically in 2013. Yet rich economies are still struggling while asset prices continue to soar.Another theory holds that high savings reflect a cramping of consumption due to rising inequality of incomes. The share of income earned by the top 1% began climbing in the early 1980s and now stands close to the record set in …

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