* Consumer credit grows in the US
* German economic activity remains resilient
* Japan part-nationalises nuclear operator Tepco
* Non-manufacturing sectors in China continues to witness robust growth
* Several companies report strong growth in business from the Asia-Pacific region
UK manufacturing output rises, but housing remains a cause for concern
The latest economic news from the UK remained somewhat mixed. The Office of National Statistics (ONS) noted that manufacturing output increased by 0.9% in the month of March, having fallen by 1.1% in February. This was driven by an increase in production across a number of industries, including transport equipment, chemicals and electronics and optical products. The ONS said that industrial production in the first three months of 2012 was 0.4% lower compared to the same period 12 months previous. The latest trade statistics indicate that the UK is benefiting to some degree from the relative economic strength of the US and the Asia-Pacific region. Exports to countries outside the European Union (EU) in March amounted to £13.5bn, 16.0% more than in March 2011. Imports from non-EU countries rose by 8.0% to £1.3bn.
The latest survey of the residential property market by the Royal Institution of Chartered Surveyors (RICS) indicated that housing prices stopped rising in April. Indeed, the number of chartered surveyors reporting falls in prices exceeded the number reporting rises by 19%. Moreover, a net balance of 17% of surveyors are looking for housing prices to fall further. Once again, London was the only part of the country where surveyors reported an increase in prices. RICS spokesman Peter Bolton King said that the housing market had been hindered by the lack of affordable mortgage finance and the widespread talk of a ‘double dip’ recession for the UK.
The Bank of England’s Monetary Policy Committee voted to keep interest rates unchanged at 0.5% and to keep its Asset Purchase Program at £325m.
Consumer credit grows in the US
Data published by the Federal Reserve showed that the amount of consumer credit outstanding in the US rose by US$21.4bn to US$2,542.3bn in March. This was the largest one month gain since November 2001. The increase was driven by a US$16.2bn rise in non-revolving debt, including car loans and student loans, and indicates improving consumer confidence.
The Labor Department said that initial jobless claims fell by 1,000 to 367,000 in the week to 5 May, an outcome which was in line with analysts’ expectations and which points to stability in the US labour market. The US Census Bureau and the Bureau of Economic Analysis said that exports and imports in the month of March amounted to US$186.8bn and US$238.6bn respectively: this means that the trade deficit rose from US$45.4bn in February to US$51.8bn last month. Relative to March 2011, exports and imports had risen by 7.3% and 8.4% respectively.
In a speech at the 48th Annual Conference on Bank Structure and Competition, Federal Reserve President Ben Bernanke highlighted how the general condition of the US banking system had been strengthened over recent years. ‘Credit conditions in the US have improved significantly in a number of areas. Many – though certainly not all – businesses and households are finding it easier to borrow than they did a few years ago, in part because of better conditions in financial markets.’
German economic activity remains resilient
Markit’s EU Productivity Purchasing Manager’s Index (PMI) fell from 50.6 in March to 49.2 in April (a figure below 50 represents a decline in activity). This suggests that productivity across the EU slipped slightly last month, having increased consistently through the first quarter of the year. Labour productivity fell in Italy at the sharpest rate for three years. However, the news was more positive elsewhere as nine of the 23 industries surveyed reported that productivity actually increased last month.
Meanwhile, various data releases indicated that Germany’s economy remains resilient. The Economy Ministry said that industrial production rose by 2.8% in March, which was more than analysts had expected and compared favourably with the decline in February. The Ministry noted separately that manufacturing orders grew by 2.2% in March: this was largely due to export orders from outside the euro area. Markit’s PMI for the country’s construction sector fell from an 11-month high in March to 49.8 in April. This suggests that building activity was broadly unchanged last month.
However, Markit found that job creation in the sector ‘remains strong amid expectations for growth.’ Markit also observed that cost pressures are slowly subsiding, although respondents did report that the prices of bitumen, energy and a number of raw materials had risen over the month.
Japan part-nationalises nuclear operator Tepco
Trade and Industry Minister Yukio Edano said that the government had reached an agreement with Tokyo Electric Power Company (Tepco), the operator of the Fukushima Dai-Ichi nuclear power station that was destroyed as a result of the earthquake and tsunami in March last year, to provide ¥1,000bn (US$12.5bn) in financial assistance to the troubled company. In return, the government will obtain voting rights in relation to over 50% of Tepco’s stock for the next ten years. The government’s stake may rise to two-thirds if Tepco fails to meet agreed goals in relation to cost cutting and compensation payments. Tepco has indicated that it is looking to increase charges that are paid for power by households and businesses.
Elsewhere in Japan, there were few surprises in the minutes of the meeting of the Policy Board of the Bank of Japan of 9-10 April, which had resolved to keep interest rates unchanged at 0-0.10%. The Board noted that exports, public investment, business fixed income and employment/ incomes, consumption, housing investment and production were all gradually improving.
Emerging market news
China’s General Administration of Customs said that exports in April totalled US$163.3bn, a 4.9% rise compared to the same period 12 months previous. Imports rose by 0.3% to US$144.8bn. The resulting trade surplus of US$18.4bn was larger than expectated and was seen as a sign that domestic demand may be moderating slightly.
However, other indicators pointed to the continued resilience of the Chinese economy. The National Bureau of Statistics (NBS) said that its non-manufacturing PMI, which measures the health of the services sector in China, fell from 58.0 in March to 56.1 in May: this means that activity in the sector continues to expand, and is growing about as strongly as it was through the third quarter of last year.
HSBC said that its manufacturing PMI for Vietnam slipped marginally from 50.0 in March to 49.5 in April, a level that points to a slight contraction in activity. Trinh Nguyen, Asia Economist at HSBC, said that ‘while external demand has shown some improvement as demand from China and Japan accelerates, sluggish domestic demand has caused manufacturers to be cautious about accumulating inventories.’ It is expected that the State Bank of Vietnam will move to cut interest rates over the coming months. In Eastern Europe, the Monetary Policy Council of the National Bank of Poland (NBP) increased interest rates by
0.25% to 4.75%. The comments that accompanied the announcement of the decision highlighted the strength of Poland’s economy.
Company news
Toyota Motor Corp. indicated that its net income for the March 2013 fiscal year may rise by over 100% to ¥760bn (US$9.5bn). Performance in the last year had been constrained by the strength of the yen and disruption arising from the floods in Thailand. Global sales in the current year are expected to rise by 18% to 8.7m vehicles: sales in Asia outside Japan are anticipated to rise by 34%.
Danish brewing giant Carlsberg said that it achieved growth of 14% in beer sales in Asia, which accounts for about one quarter of the company’s overall business. The company noted that …’Asia is a main contributor behind the growth of the Carlsberg brand, which grew by double-digit percentages in the region, with good performance in China and Malaysia.’
The Asia-Pacific region was also a major area of growth for UK retailing group Marks & Spencer. The company reported strong growth in international markets such as India and China, although activity in Europe remains subdued.
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