Weekly Indicators - Oct 4

Oct 4th 2007
From The Economist print edition

American manufacturing grew more slowly in September, according to the Institute for Supply Management. Its activity index slipped to 52 from 52.9 in August.

Consumer prices in the euro area rose by 2.1% in the year to September, according to a preliminary estimate, sharply faster than the 1.7% in the year to August. The currency zone's unemployment rate was 6.9% in August, unchanged from July.

Australia's central bank left its benchmark interest rate at 6.5% on October 2nd.

Manufacturers in Japan remain confident despite recent gyrations in financial markets, according to the central bank's quarterly Tankan survey. The percentage balance of large firms reporting “favourable” over “unfavourable” business conditions was 23, the same as in June.

Industrial production in South Korea rose by 11.2% in the year to August, thanks to strong global demand for its cars, semiconductors and machinery goods. Consumer prices rose by 2.3% in the year to September.

In Britain the number of loans approved for purchasing homes dropped to 109,000 in August from 115,000 in July.

The outlook for rich-world economies is gloomier, according to the The Economist's monthly poll of forecasters (see article). Forecasts for GDP growth in 2008 have been marked down in most countries. The one exception is Australia.

Estonia Annual Inflation Increases In September

Oct 5, 2007 - Estonia's consumer prices rose at a faster pace of 7.2% year-on-year in September compared to the 5.7% increase in August, the Statistics Estonia said Friday. On a monthly basis, the consumer price index climbed 1.1% in September, larger than the 0.1% growth in August.

The annual growth was fueled mainly by rise in housing prices and higher prices in hotels, café and restaurants. The monthly increase was driven by rise in the prices of dairy products; motor fuel and recreational services and the seasonal increase clothing prices.

Almost all the commodity groups experienced price increase, except charges of communications, which declined 0.5% year-on-year in September.

Philippines Annual Inflation Accelerates In September

Oct 5, 2007 - Philippines annual inflation accelerated to 2.7% in September from 2.4% in August, the National Statistics Office said Friday. Consumer prices rose more than the expected growth of 2.6%. However, inflation remained with in the central bank's expectations of 2.1% to 2.8%.

Core inflation, excluding food and energy items, eased to 2.7% in September from 2.9% recorded in the prior month.

On a monthly basis, consumer prices climbed 0.1% in September, the same rate registered in August. Inflation averaged 2.6% for the first nine months of the year.

Higher prices of food, beverages and tobacco and prices of services item contributed to annual increase in the inflation rate in September. Food, beverages and tobacco charges climbed at a faster pace of 3.5% and service charges were up 2.4%. Meanwhile, inflation for clothing eased to 2.0% and fuel, light and water prices slowed to 2.3%.

Compared to previous month, food, beverages and tobacco charges moved up 0.7%, while price increments in clothing decelerated to 0.1%. Prices of fuel, light and water fell 2.3% and housing and repair charges showed a zero growth rate.

The inflation numbers came a day after the central bank lowered the key overnight borrowing rate or Reverse Repo Rate, by 25 basis points to 5.75%. The overnight lending or repurchase rate, RP was also reduced by a similar margin to 7.75%. This was the second time that the policy rates were adjusted this year, after the central bank slashed the RRP rate by 150 basis points in July, while removing the tiering system.

Taiwan Sept CPI up 3.08 pct yr-on-yr vs revised 1.60 pct rise in Aug

Oct 5, 2007 - The consumer price index (CPI) in September was up 3.08 pct year-on-year and up a seasonally adjusted 0.78 pct month-on-month at 107.38, the Directorate General of Budget, Accounting and Statistics (DGBAS) said.

The calculation was made using the 2001 benchmark of 100, the DGBAS said.

Growth in September CPI compares with August's revised 1.60 pct year-on-year increase and seasonally adjusted 0.31 pct month-on-month rise.

The September core price index, which excludes prices of fresh vegetables and fruits, fishery products and energy, was up 1.94 pct from a year earlier and up 0.30 pct from August.

Changes in the September core price index compare with data in August showing a revised year-on-year increase of 1.60 pct and 0.15 pct month-on-month rise.

The wholesale price index (WPI) in September rose 4.63 pct year-on-year to 126.67 (also based on the 2001 benchmark of 100), which was up a seasonally adjusted 0.48 pct month-on-month, the DGBAS said.

Comparative data for August show the WPI rising by a revised 3.63 pct year-on-year and increasing by a seasonally adjusted 0.01 pct month-on-month.

Wu Chung-ming, a section chief at the DGBAS, said the CPI in September this year marks the largest year-on-year increase in two years, after a rise of 3.16 pct in September 2005, as prices of vegetables were inflated as a result of typhoons and torrential rains.

"There were three typhoons in August, causing higher prices of vegetables in September, considering the time required to grow them," Wu said.

The food sector contributed 2.08 percentage points to the growth figure of 3.08 pct in September CPI.

"Vegetable prices alone in September rose 32.63 pct from a year ago," Wu said.

In addition, the upswing in raw materials international prices were reflected in some of the food prices, helping push up the CPI as well, he said.

The increase of 1.94 pct in September core prices marks the highest since the 2.12 pct rise posted in February 2002.

"The core price index was boosted by price hikes in garment, Chinese medicines, tobacco, meat and dairy prices, which mirror the uptrend in global raw materials prices," Wu said.

The DGBAS forecast in August that CPI in full year 2007 would grow 1.48 pct. Against such forecast, CPI inflation in the first nine months of the year registered an average 0.90 pct rise.

"While the fourth-quarter CPI will be dictated by weather (influences) and the impact of international raw material prices, possible growth in CPI for the whole year is unlikely to surpass 2 pct," Wu added.

During the January-September period, the core price index inched up 1.00 pct, while the WPI grew 6.08 pct.

The DGBAS also said that in September, the import price index rose 7.69 pct year-on-year and was up 1.65 pct month-on-month in US dollar terms.

The September export price index rose 1.14 pct from the same month last year and increased 0.22 pct from August, also in US dollar terms, it said.

For the first nine months of the year, the import price index rose 6.12 pct year-on-year and the export price index grew 2.28 pct, it added.

Dutch Annual Inflation Accelerates In September

Oct 4, 2007 - Dutch annual inflation accelerated to 1.3% in September, the statistical office said Thursday. In August, consumer prices climbed 1.1% on an annual basis. Prices of gas, diesel and LPG were up 7.5%.

The Harmonized Index of Consumer Prices, or HICP, also rose 1.3% in September, larger than the 1.1% in August.

Philippine Central Bank Unexpectedly Cuts Key Rate

Oct 4, 2007 - The Philippine central bank unexpectedly cut its benchmark interest rate for the second time this year to stoke an economy growing at its fastest pace in two decades.

Bangko Sentral ng Pilipinas lowered its overnight borrowing rate by a quarter percentage point to 5.75 percent. Only three of 12 economists in a Bloomberg News survey expected a cut, while the others predicted no change. The benchmark is at its lowest level since 1992.

"Economic growth is rising, money supply growth has been slowing down, inflation is clearly under control," Jonathan Ravelas, an economist at BDO Unibank in Manila, said after today's announcement. "The rate cut clearly highlights that the central bank is very comfortable." Ravelas had expected the rate to be kept unchanged.

The central bank said inflation, close to a seven-year low, is unlikely to accelerate as gains in the peso hold down the cost of imports, including oil. The outlook for consumer price increases is 'benign' while the currency provides a 'buffer,' Bangko Sentral Governor Amando Tetangco said today.

The government forecasts the $117 billion Philippine economy will expand by as much as 6.7 percent this year, after growing at the fastest pace in two decades in the second quarter. Bangko Sentral unexpectedly reduced its benchmark to 6 percent in July.

Peso Gains

The peso has climbed 9 percent against the dollar this year, the second-biggest gain among actively traded currencies tracked by Bloomberg in Asia, and is poised for its biggest annual gain against the U.S. currency since 1994. The peso rose 0.4 percent to 44.96 per dollar today, according to Tullett Prebon Plc.

Inflation in 2007 will fall below Bangko Sentral's 4 percent to 5 percent target, the bank said today. The consumer price index rose to 2.6 percent from a year earlier in September after increasing 2.4 percent in August, according to the median estimate of 13 economists surveyed by Bloomberg News. The National Statistics Office report is scheduled for release at 9 a.m. tomorrow in Manila.

"We continue to believe that inflation is likely to accelerate, potentially restricting the central bank's ability to loosen policy significantly," Frederic Neumann, a Hong Kong- based economist wrote in a note to investors after today's cut. Neumann, who predicted today's reduction, said any further lowering would depend on monetary policy in the U.S.

Central bank Governor Amando Tetangco on Sept. 19 said there was 'room to maneuver' interest rates after the U.S. Federal Reserve lowered borrowing costs a day earlier.

Bangko Sentral will also lower the rate it pays for funds in its special deposit accounts, with payments for amounts held for six-months dropping to 6.25 percent from 6.5 percent, an official said after today's announcement.

The central bank in May extended access to the higher- interest deposit accounts to slow money-supply growth, which eased to the slowest pace in 11 months in August after surging by a record in April.

Malaysian Trade Surplus Posts Year's Record High in Aug

Oct 4, 2007 - Malaysian exports rose 6.1% to 53.61 billion ringgit in August from the previous month, driven mainly by a 10.9% increase in exports of electrical and electronic products, the Statistics department said Thursday. However, on a yearly basis, exports edged up 0.3% in August.

Imports amounted to 44.61 billion ringgit in August, up 4.9% from July and 2.9% from a year ago.

The overall trade value showed increases of 5.6% from the prior month and 1.5% from a year earlier. Trade surplus widened 12.7% monthly to this year's high of 8.99 billion ringgit, marking consecutive monthly increase since November 1997.

In July, Malaysia's trade surplus stood at 8.0 billion ringgit, as total exports and imports were valued at 50.5 billion ringgit and 42.5 billion ringgit respectively.

In the first eight months, exports reached 387.24 billion ringgits, an increase of 2.0% from last year, while imports expanded 3.3% to 326.59 billion ringgit. The cumulative trade surplus amounted to RM60.65 billion during the period.

Electrical and electronic products group was the main driver of growth in exports in August. The value of electrical and electronic products grossed 24.24 billion ringgit during the month, accounting for 45.2% of the total exports.

Palm oil, chemicals and chemical products crude petroleum, liquefied natural gas refined petroleum products, machinery, appliances and parts occupied remaining space with significant contributions.

ASEAN, US, EU, China, Japan, Hong Kong and West Asia were the top export markets, which accounted for 80.4% of Malaysia's total exports in August.

Reserve Bank Of Australia Leaves Cash Rate Unchanged At 6.5%

Oct 3, 2007 - The Reserve Bank of Australia has left its key cash rate unchanged at 6.5 percent.

The stable rate comes as widely expected by economists. The cash rate is the interest rate charged to the overnight money market.

Economists expect the central bank keep rates unchanged until its November board meeting when it will have September-quarter inflation figures to take into consideration.

The Reserve Bank will publish its own underlying inflation figures on October 24, which most accurately reflect whether inflation is within its target range of 2-3 per cent.

If inflation exceeds the top end of the target, the central bank is expected to change rates in November, regardless of the federal election, which generally expected to be held next month.

Hong Kong August retail sales rise faster on stock market, tourism

Oct 2, 2007 - Hong Kong retail sales growth accelerated in August from the previous month, lifted by rising incomes, tourist spending and improved job prospects, the government said Tuesday.

Retail sales by value increased 15 percent to 20.6 billion Hong Kong dollars, faster than July's revised 14.3 percent gain. The figure, however, was less than the 15.5 percent forecast of economists polled by Thomson IFR.

"The trend of higher retail sales will continue in coming months, especially in the last quarter because of the Christmas season," said Daniel Chan, senior investment strategist at DBS Bank in Hong Kong. "The main driving force continues to be domestic consumption and tourism."

Faster growth along with a booming stock market resulted in higher incomes for most of Hong Kong's nearly 7 million-strong population and boosted demand for computers, televisions, cameras and other electronic goods. The economy expanded 6.3 percent in the first half of the year, faster than the government's estimate.

The stock market reached record levels in August, propelled by China's announcement on the 20th that it would allow individual investors to trade Hong Kong stocks directly. The loosening of China's investment rules helped the Hang Seng Index recover from a slump that was caused by the subprime mortgage crisis that began in the US.

The key stock index rose 3.4 percent in end-August to a record 23,984 points from end-July, according to data provided by Chan.

"The overall thriving stock market in August despite some market volatilities arising from the US sub-prime mortgage turbulence, together with the further expansion in inbound tourism, also helped'' push retail sales, the government said in a statement.

Electronic goods and photo equipment, jewelry and watches rose the most during the period, it said Sales of electronic items jumped 37.7 percent, while those of jewelry and watches gained 31.8 percent. Sales of footwear and clothing accessories increased 19.5 percent, and those of motor vehicles and auto parts were up 15.7 percent.

Tourist arrivals rose 16.9 percent in August to a 2.8 million, the highest single month on record, according to the Hong Kong Tourism Board. Tourists from China, who comprised over 60 percent of the total, grew 23.5 percent.

"The trend of mainland tourists will continue to boost Hong Kong retail sales, despite the competition posed by Macau," Chan said.

Retail sales account for about a third of private consumption, one of the key drivers of Hong Kong's gross domestic product.

For the whole year, retail sales may grow between 10 to 15 percent , said Frances Cheung, an economist at Standard Chartered Bank in Hong Kong.

"The favorable employment outlook, wage increases and vibrant stock market will result in a double-digit growth for retail sales in the last quarter of this year," Cheung said.

Hong Kong's jobless rate hovered at a nine-year low in June to August, with the number of employed persons reaching a record 3.5 million.

Mainland Chinese are flocking to Hong Kong to shop "because they are assured of the quality of the merchandise here," Cheung said.

Retail sales by volume grew 12.5 percent in August from a year ago, less than the 12.9 percent estimate of economists but higher than July's 12.1 percent increase.

(1 US dollar = 7.80 Hong Kong dollars)

European Producer-Price Inflation Eases to 3-Year Low

Oct 2, 2007 - European producer-price inflation eased in August to the lowest rate in more than three years, reflecting a drop in energy costs.

Factory-gate prices in the euro region rose 1.7 percent from the year-earlier month, down from a 1.8 percent increase in July, the European Union's statistics office in Luxembourg said today. That is the lowest reading since April 2004. Unemployment in the 13 nations that use the euro remained at a record low in August, according to a separate report.

The easing in inflation may be temporary after prices for commodities including oil and wheat reached records last month. While the European Central Bank in September stepped back from a planned interest-rate increase after turmoil in the credit markets pushed up borrowing costs, policy makers have so far refused to shift their focus from fighting inflation.

"Excluding energy and food, there are some signs of pipeline pressures for core inflation," said Luigi Speranza, an economist at BNP Paribas in London. "We see a very moderate upturn in prices, nothing to threaten the price stability."

The producer-price inflation rate for August was lower than the 1.8 percent median forecast of 27 economists surveyed by Bloomberg News. Prices rose 0.1 percent in the month, compared with a 0.3 percent increase in July.

Inflation pressure may be curbed as the pace of euro-area economic growth eases, according to BNP, which forecasts that the ECB will leave its benchmark interest rate at 4 percent through 2008.

Unemployment

Unemployment in the 13-nation euro area remained at 6.9 percent in August, the lowest since the data series began in 1993. The rate is down from 7.8 percent a year earlier.

Energy prices at the producer level fell 0.7 percent in August from the previous month and were down 2.2 percent from a year earlier, according to today's report.

Oil prices have jumped 31 percent since the beginning of the year and reached a record $83.90 a barrel on Sept. 20. Wheat prices have almost doubled this year, touching a record $9.6175 last week.

ECB policy makers, who hold their next meeting in Vienna Oct. 4, remain concerned about inflation, which they aim to keep at or below 2 percent. Consumer-price growth in the euro area accelerated last month to a 13-month high of 2.1 percent.

"The monetary-policy stance is still on the accommodative side," ECB Vice President Lucas Papademos said on Sept. 28. "At the same time, given the increase in uncertainty surrounding the economic outlook, it is prudent and appropriate to wait and gather additional information before drawing any firm conclusions for monetary policy."

Swiss Inflation Accelerates on Higher Energy Prices

Oct 2, 2007 - Swiss inflation accelerated in September, led by higher costs for heating oil.

Consumer prices rose 0.7 percent from a year earlier after increasing an annual 0.4 percent the previous month, the Federal Statistics Office in Neuchatel said today. Economists expected an inflation rate of 0.8 percent, according to the median forecast of 18 economists surveyed by Bloomberg News.

The Swiss central bank raised its key interest rate on Sept. 13 even as defaults on U.S. subprime mortgages pushed up the cost of credit and clouded the global growth outlook. The Swiss National Bank said rising energy prices and a declining currency may push up import prices and stoke inflation.

"Switzerland still has a low-inflation environment," said Jan Amrit Poser, chief economist at Bank Sarasin in Zurich. "We've had some inflationary pressure from petrol, but the core price index is not signaling danger in any way."

The Swiss economy will probably grow 2.5 percent this year after expanding 3.2 percent in 2006, the fastest pace since 2000, according to the central bank. The SNB forecasts inflation will average 0.6 percent this year and 1.5 percent in 2008.

Energy and housing costs gained 2.4 percent in the year because of higher heating-oil prices, today's report showed. Alcoholic-beverage and tobacco prices advanced 2.9 percent from a year earlier, while the cost of clothing and shoes increased 3.2 percent from a year earlier and was unchanged in the month, according to the statistics office.

S. Korea Sep CPI rise 2.3% from year ago

Oct 2, 2007 - South Korean consumer prices in September rose 2.3 per cent from a year earlier, data showed on Tuesday, accelerating from August but slightly missing expectations ahead of a central bank policy review next week.

The median forecast in a Reuters poll was for the CPI to rise 2.4 per cent from a year earlier, accelerating sharply from growth of 2.0 per cent in August.

Annual inflation has held at or below the low end of the Bank of Korea's 2.5-3.5 per cent target range after it averaged 2.2per cent in 2006.

The consumer price index rose a non-seasonally adjusted 0.6 per cent in September from August, picking up from a monthly gain of 0.1 per cent in August, the data from the National Statistical Office showed.

The annual rate of core inflation, which strips out volatile food and fuel prices, held steady at 2.3 per cent in September.

The Bank of Korea held interest rates steady in Septemberafter raising them by a quarter percentage point each in August and July to a six-year high of 5.0 per cent.

The Bank of Korea reviews interest rates on Oct 11.

S Korea's Aug current account surplus widens

Oct 2, 2007 - South Korea's current account surplus widened to a seasonally-adjusted US$1.83 billion in August from a revised US$1.69 billion surplus in July, central bank data showed on Tuesday.

For the first eight months of the year, South Korea's current account produced a seasonally-adjusted surplus of US$4.85 billion, compared with a US$1.52 billion surplus for the same period in 2006, the Bank of Korea data showed.

The data also showed that South Korea's overseas borrowing rose by a net US$7.85 billion in August after a net gain of US$6.00 billion in July.