Daily Archives: April 14, 2010

Simone Baribeau

It seems Canadians were boosting sales near the border in the New York and Minneapolis Federal Reserve districts, according to the Federal Reserve’s Beige book, a periodic anecdotal assessment of regional economies.

No surprise – the loonie is at par with the dollar – but just one vivid example of the benefits of the falling greenback.

Simone Baribeau

Homeprices resume their fall after recent gains after the tax credit was set to expire.

Ben Bernanke, Federal Reserve chairman, earlier today cited “residential and nonresidential construction” as a headwind to the “moderate” economic recovery. But he also said that consumer spending will be boosted by “a gradual pickup in jobs and earnings, the recovery in household wealth from recent lows, and some improvement in credit availability.”

Household wealth is, of course, comprised of many types of assets, including retirement portfolios and other equity and bond investment holdings. But one of its major components is home values.

So is that portion of household wealth likely to grow? See the somewhat downbeat graph. 

Alan Beattie

The latest of a stream of paper out of the IMF in the run-up to its meetings next week came out today: the analytical chapters (as opposed to the forecast) of the world economic outlook. Personally I’ve always thought they were more interesting than the forecast, since no-one is that good at macroeconomic forecasting and the Fund doesn’t have access to much more information than anyone else.

Anyway, this one is on economies that have exited from large current account surpluses and how they did it. Short of calling the chapter Memo To Beijing, it could scarcely be less explicit. No big surprise that they recommend an appreciating exchange rate. 

James Politi

Ben Bernanke, Federal Reserve chairman, has predicted that a “moderate economic recovery” would unfold in the US over the next several quarters on the back of stronger spending by businesses and consumers.

In testimony before the Joint Economic Committee in Congress, Mr Bernanke offered a slightly more upbeat outlook for the economy than he had in recent remarks, suggesting that the recovery is gaining traction. 

Not only is Greek and UK debt insurance justifiably pricey, it is adding to the cost of other sovereign debt insurance. This from a fascinating little paper from the Bank of Japan, released today.

Credit default swaps (CDS) offer a form of insurance to lenders against the risk of defaulting borrowers. The quantity of sovereign CDS has grown rapidly in the past year, increasing by 30.8 per cent year-on-year to February, compared with just 0.6 per cent for corporate CDS.

The chart above shows that Greek CDS prices are driven largely by idiosyncratic —i.e. Greek—factors, such as the fiscal deficit. The Portuguese chart, by contrast, is increasingly driven by “other” factors: these are defined as the “spillover effects of an idiosyncratic shock in other countries”. Here, I suspect, that means Greece. So where a chart has a lot of grey on it, that country is likely driving CDS prices for other sovereign debt, especially those that have a lot of light blue. And the main culprits (see other charts after jump): Greece, Japan and the UK. 

Chris Giles

The Liberal Democrats usually get away with little scrutiny of their specific policies because the party will not form the next government, even if it might be highly influential in the event of a hung parliament.

Without going through the 109 pages in detail, there is good, bad and downright ugly aspects to the LibDem claims and plans. 

Ralph Atkins

Eurozone industry, at least, is doing just nicely. Eurostat, the statistical agency, reports production rose 0.9 per cent in February, a much larger rise than expected. If March’s figures simply hold steady, the first quarter increase would be more than 3 per cent – the biggest quarter-on-quarter jump in the series’ history, according to BNP Paribas. True, after the dramatic slump at the start of last year, we’re only back at levels of production seen in 2001. But the recovery is clearly v-shaped.

Don’t expect first quarter gross domestic product figures to be as flattering, however. The bitter winter is likely to have had a significant dampening effect, particularly on construction, which is not covered in the latest figures. Last week the Organisation for Economic Cooperation and Development warned of a “double-dip” contraction in Germany, the eurozone’s largest economy. 

The Singaporean dollar will be allowed gradually to appreciate following a one-off strengthening today that a Bloomberg source estimates at about 0.6 per cent. At the same time, the Trade and Industry ministry raised its forecast for this year’s growth to 7-9 per cent, from 4.5-6.5 per cent.

The local dollar will trade in a new, stronger band, the midpoint of which is roughly the top of the previous band. There will be no change to the width of the band. The dollar is measured against a trade-weighted index of large international currencies, in proprortions held secret by the country’s Monetary Authority.